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October 17, 2018 |
SEC Warns Public Companies on Cyber-Fraud Controls

Click for PDF On October 16, 2018, the Securities and Exchange Commission issued a report warning public companies about the importance of internal controls to prevent cyber fraud.  The report described the SEC Division of Enforcement’s investigation of multiple public companies which had collectively lost nearly $100 million in a range of cyber-scams typically involving phony emails requesting payments to vendors or corporate executives.[1] Although these types of cyber-crimes are common, the Enforcement Division notably investigated whether the failure of the companies’ internal accounting controls to prevent unauthorized payments violated the federal securities laws.  The SEC ultimately declined to pursue enforcement actions, but nonetheless issued a report cautioning public companies about the importance of devising and maintaining a system of internal accounting controls sufficient to protect company assets. While the SEC has previously addressed the need for public companies to promptly disclose cybersecurity incidents, the new report sees the agency wading into corporate controls designed to mitigate such risks.  The report encourages companies to calibrate existing internal controls, and related personnel training, to ensure they are responsive to emerging cyber threats.  The report (issued to coincide with National Cybersecurity Awareness Month) clearly intends to warn public companies that future investigations may result in enforcement action. The Report of Investigation Section 21(a) of the Securities Exchange Act of 1934 empowers the SEC to issue a public Report of Investigation where deemed appropriate.  While SEC investigations are confidential unless and until the SEC files an enforcement action alleging that an individual or entity has violated the federal securities laws, Section 21(a) reports provide a vehicle to publicize investigative findings even where no enforcement action is pursued.  Such reports are used sparingly, perhaps every few years, typically to address emerging issues where the interpretation of the federal securities laws may be uncertain.  (For instance, recent Section 21(a) reports have addressed the treatment of digital tokens as securities and the use of social media to disseminate material corporate information.) The October 16 report details the Enforcement Division’s investigations into the internal accounting controls of nine issuers, across multiple industries, that were victims of cyber-scams. The Division identified two specific types of cyber-fraud – typically referred to as business email compromises or “BECs” – that had been perpetrated.  The first involved emails from persons claiming to be unaffiliated corporate executives, typically sent to finance personnel directing them to wire large sums of money to a foreign bank account for time-sensitive deals. These were often unsophisticated operations, textbook fakes that included urgent, secret requests, unusual foreign transactions, and spelling and grammatical errors. The second type of business email compromises were harder to detect. Perpetrators hacked real vendors’ accounts and sent invoices and requests for payments that appeared to be for otherwise legitimate transactions. As a result, issuers made payments on outstanding invoices to foreign accounts controlled by impersonators rather than their real vendors, often learning of the scam only when the legitimate vendor inquired into delinquent bills. According to the SEC, both types of frauds often succeeded, at least in part, because responsible personnel failed to understand their company’s existing cybersecurity controls or to appropriately question the veracity of the emails.  The SEC explained that the frauds themselves were not sophisticated in design or in their use of technology; rather, they relied on “weaknesses in policies and procedures and human vulnerabilities that rendered the control environment ineffective.” SEC Cyber-Fraud Guidance Cybersecurity has been a high priority for the SEC dating back several years. The SEC has pursued a number of enforcement actions against registered securities firms arising out of data breaches or deficient controls.  For example, just last month the SEC brought a settled action against a broker-dealer/investment-adviser which suffered a cyber-intrusion that had allegedly compromised the personal information of thousands of customers.  The SEC alleged that the firm had failed to comply with securities regulations governing the safeguarding of customer information, including the Identity Theft Red Flags Rule.[2] The SEC has been less aggressive in pursuing cybersecurity-related actions against public companies.  However, earlier this year, the SEC brought its first enforcement action against a public company for alleged delays in its disclosure of a large-scale data breach.[3] But such enforcement actions put the SEC in the difficult position of weighing charges against companies which are themselves victims of a crime.  The SEC has thus tried to be measured in its approach to such actions, turning to speeches and public guidance rather than a large number of enforcement actions.  (Indeed, the SEC has had to make the embarrassing disclosure that its own EDGAR online filing system had been hacked and sensitive information compromised.[4]) Hence, in February 2018, the SEC issued interpretive guidance for public companies regarding the disclosure of cybersecurity risks and incidents.[5]  Among other things, the guidance counseled the timely public disclosure of material data breaches, recognizing that such disclosures need not compromise the company’s cybersecurity efforts.  The guidance further discussed the need to maintain effective disclosure controls and procedures.  However, the February guidance did not address specific controls to prevent cyber incidents in the first place. The new Report of Investigation takes the additional step of addressing not just corporate disclosures of cyber incidents, but the procedures companies are expected to maintain in order to prevent these breaches from occurring.  The SEC noted that the internal controls provisions of the federal securities laws are not new, and based its report largely on the controls set forth in Section 13(b)(2)(B) of the Exchange Act.  But the SEC emphasized that such controls must be “attuned to this kind of cyber-related fraud, as well as the critical role training plays in implementing controls that serve their purpose and protect assets in compliance with the federal securities laws.”  The report noted that the issuers under investigation had procedures in place to authorize and process payment requests, yet were still victimized, at least in part “because the responsible personnel did not sufficiently understand the company’s existing controls or did not recognize indications in the emailed instructions that those communications lacked reliability.” The SEC concluded that public companies’ “internal accounting controls may need to be reassessed in light of emerging risks, including risks arising from cyber-related frauds” and “must calibrate their internal accounting controls to the current risk environment.” Unfortunately, the vagueness of such guidance leaves the burden on companies to determine how best to address emerging risks.  Whether a company’s controls are adequate may be judged in hindsight by the Enforcement Division; not surprisingly, companies and individuals under investigation often find the staff asserting that, if the controls did not prevent the misconduct, they were by definition inadequate.  Here, the SEC took a cautious approach in issuing a Section 21(a) report highlighting the risk rather than publicly identifying and penalizing the companies which had already been victimized by these scams. However, companies and their advisors should assume that, with this warning shot across the bow, the next investigation of a similar incident may result in more serious action.  Persons responsible for designing and maintaining the company’s internal controls should consider whether improvements (such as enhanced trainings) are warranted; having now spoken on the issue, the Enforcement Division is likely to view corporate inaction as a factor in how it assesses the company’s liability for future data breaches and cyber-frauds.    [1]   SEC Press Release (Oct. 16, 2018), available at www.sec.gov/news/press-release/2018-236; the underlying report may be found at www.sec.gov/litigation/investreport/34-84429.pdf.    [2]   SEC Press Release (Sept. 16, 2018), available at www.sec.gov/news/press-release/2018-213.  This enforcement action was particularly notable as the first occasion the SEC relied upon the rules requiring financial advisory firms to maintain a robust program for preventing identify theft, thus emphasizing the significance of those rules.    [3]   SEC Press Release (Apr. 24, 2018), available at www.sec.gov/news/press-release/2018-71.    [4]   SEC Press Release (Oct. 2, 2017), available at www.sec.gov/news/press-release/2017-186.    [5]   SEC Press Release (Feb. 21, 2018), available at www.sec.gov/news/press-release/2018-22; the guidance itself can be found at www.sec.gov/rules/interp/2018/33-10459.pdf.  The SEC provided in-depth guidance in this release on disclosure processes and considerations related to cybersecurity risks and incidents, and complements some of the points highlighted in the Section 21A report. Gibson Dunn’s lawyers are available to assist with any questions you may have regarding these issues.  For further information, please contact the Gibson Dunn lawyer with whom you usually work in the firm’s Securities Enforcement or Privacy, Cybersecurity and Consumer Protection practice groups, or the following authors: Marc J. Fagel – San Francisco (+1 415-393-8332, mfagel@gibsondunn.com) Alexander H. Southwell – New York (+1 212-351-3981, asouthwell@gibsondunn.com) Please also feel free to contact the following practice leaders and members: Securities Enforcement Group: New York Barry R. Goldsmith – Co-Chair (+1 212-351-2440, bgoldsmith@gibsondunn.com) Mark K. Schonfeld – Co-Chair (+1 212-351-2433, mschonfeld@gibsondunn.com) Reed Brodsky (+1 212-351-5334, rbrodsky@gibsondunn.com) Joel M. Cohen (+1 212-351-2664, jcohen@gibsondunn.com) Lee G. Dunst (+1 212-351-3824, ldunst@gibsondunn.com) Laura Kathryn O’Boyle (+1 212-351-2304, loboyle@gibsondunn.com) Alexander H. Southwell (+1 212-351-3981, asouthwell@gibsondunn.com) Avi Weitzman (+1 212-351-2465, aweitzman@gibsondunn.com) Lawrence J. Zweifach (+1 212-351-2625, lzweifach@gibsondunn.com) Washington, D.C. Richard W. Grime – Co-Chair (+1 202-955-8219, rgrime@gibsondunn.com) Stephanie L. Brooker  (+1 202-887-3502, sbrooker@gibsondunn.com) Daniel P. Chung (+1 202-887-3729, dchung@gibsondunn.com) Stuart F. Delery (+1 202-887-3650, sdelery@gibsondunn.com) Patrick F. Stokes (+1 202-955-8504, pstokes@gibsondunn.com) F. Joseph Warin (+1 202-887-3609, fwarin@gibsondunn.com) San Francisco Marc J. Fagel – Co-Chair (+1 415-393-8332, mfagel@gibsondunn.com) Winston Y. Chan (+1 415-393-8362, wchan@gibsondunn.com) Thad A. Davis (+1 415-393-8251, tdavis@gibsondunn.com) Charles J. Stevens (+1 415-393-8391, cstevens@gibsondunn.com) Michael Li-Ming Wong (+1 415-393-8234, mwong@gibsondunn.com) Palo Alto Paul J. Collins (+1 650-849-5309, pcollins@gibsondunn.com) Benjamin B. Wagner (+1 650-849-5395, bwagner@gibsondunn.com) Denver Robert C. Blume (+1 303-298-5758, rblume@gibsondunn.com) Monica K. Loseman (+1 303-298-5784, mloseman@gibsondunn.com) Los Angeles Michael M. Farhang (+1 213-229-7005, mfarhang@gibsondunn.com) Douglas M. Fuchs (+1 213-229-7605, dfuchs@gibsondunn.com) Privacy, Cybersecurity and Consumer Protection Group: Alexander H. Southwell – Co-Chair, New York (+1 212-351-3981, asouthwell@gibsondunn.com) M. Sean Royall – Dallas (+1 214-698-3256, sroyall@gibsondunn.com) Debra Wong Yang – Los Angeles (+1 213-229-7472, dwongyang@gibsondunn.com) Christopher Chorba – Los Angeles (+1 213-229-7396, cchorba@gibsondunn.com) Richard H. Cunningham – Denver (+1 303-298-5752, rhcunningham@gibsondunn.com) Howard S. Hogan – Washington, D.C. (+1 202-887-3640, hhogan@gibsondunn.com) Joshua A. Jessen – Orange County/Palo Alto (+1 949-451-4114/+1 650-849-5375, jjessen@gibsondunn.com) Kristin A. Linsley – San Francisco (+1 415-393-8395, klinsley@gibsondunn.com) H. Mark Lyon – Palo Alto (+1 650-849-5307, mlyon@gibsondunn.com) Shaalu Mehra – Palo Alto (+1 650-849-5282, smehra@gibsondunn.com) Karl G. Nelson – Dallas (+1 214-698-3203, knelson@gibsondunn.com) Eric D. Vandevelde – Los Angeles (+1 213-229-7186, evandevelde@gibsondunn.com) Benjamin B. Wagner – Palo Alto (+1 650-849-5395, bwagner@gibsondunn.com) Michael Li-Ming Wong – San Francisco/Palo Alto (+1 415-393-8333/+1 650-849-5393, mwong@gibsondunn.com) Ryan T. Bergsieker – Denver (+1 303-298-5774, rbergsieker@gibsondunn.com) © 2018 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

October 10, 2018 |
Artificial Intelligence and Autonomous Systems Legal Update (3Q18)

Click for PDF We are pleased to provide the following update on recent legal developments in the areas of artificial intelligence, machine learning, and autonomous systems (or “AI” for short), and their implications for companies developing or using products based on these technologies.  As the spread of AI rapidly increases, legal scrutiny in the U.S. of the potential uses and effects of these technologies (both beneficial and harmful) has also been increasing.  While we have chosen to highlight below several governmental and legislative actions from the past quarter, the area is rapidly evolving and we will continue to monitor further actions in these and related areas to provide future updates of potential interest on a regular basis. I.       Increasing Federal Government Interest in AI Technologies The Trump Administration and Congress have recently taken a number of steps aimed at pushing AI forward on the U.S. agenda, while also treating with caution foreign involvement in U.S.-based AI technologies.  Some of these actions may mean additional hurdles for cross-border transactions involving AI technology.  On the other hand, there may also be opportunities for companies engaged in the pursuit of AI technologies to influence the direction of future legislation at an early stage. A.       White House Studies AI In May, the Trump Administration kicked off what is becoming an active year in AI for the federal government by hosting an “Artificial Intelligence for American Industry” summit as part of its designation of AI as an “Administration R&D priority.”[1] During the summit, the White House also announced the establishment of a “Select Committee on Artificial Intelligence” to advise the President on research and development priorities and explore partnerships within the government and with industry.[2]  This Select Committee is housed within the National Science and Technology Council, and is chaired by Office of Science and Technology Policy leadership. Administration officials have said that a focus of the Select Committee will be to look at opportunities for increasing federal funds into AI research in the private sector, to ensure that the U.S. has (or maintains) a technological advantage in AI over other countries.  In addition, the Committee is to look at possible uses of the government’s vast store of taxpayer-funded data to promote the development of advanced AI technologies, without compromising security or individual privacy.  While it is believed that there will be opportunities for private stakeholders to have input into the Select Committee’s deliberations, the inaugural meeting of the Committee, which occurred in late June, was not open to the public for input. B.       AI in the NDAA for 2019 More recently, on August 13th, President Trump signed into law the John S. McCain National Defense Authorization Act (NDAA) for 2019,[3] which specifically authorizes the Department of Defense to appoint a senior official to coordinate activities relating to the development of AI technologies for the military, as well as to create a strategic plan for incorporating a number of AI technologies into its defense arsenal.  In addition, the NDAA includes the Foreign Investment Risk Review Modernization Act (FIRRMA)[4] and the Export Control Reform Act (ECRA),[5] both of which require the government to scrutinize cross-border transactions involving certain new technologies, likely including AI-related technologies. FIRRMA modifies the review process currently used by the Committee on Foreign Investment in the United States (CFIUS), an interagency committee that reviews the national security implications of investments by foreign entities in the United States.  With FIRRMA’s enactment, the scope of the transactions that CFIUS can review is expanded to include those involving “emerging and foundational technologies,” defined as those that are critical for maintaining the national security technological advantage of the United States.  While the changes to the CFIUS process are still fresh and untested, increased scrutiny under FIRRMA will likely have an impact on available foreign investment in the development and use of AI, at least where the AI technology involved is deemed such a critical technology and is sought to be purchased or licensed by foreign investors. Similarly, ECRA requires the President to establish an interagency review process with various agencies including the Departments of Defense, Energy, State and the head of other agencies “as appropriate,” to identify emerging and foundational technologies essential to national security in order to impose appropriate export controls.  Export licenses are to be denied if the proposed export would have a “significant negative impact” on the U.S. defense industrial base.  The terms “emerging and foundational technologies” are not expressly defined, but it is likely that AI technologies, which are of course “emerging,” would receive a close look under ECRA and that ECRA might also curtail whether certain AI technologies can be sold or licensed to foreign entities. The NDAA also established a National Security Commission on Artificial Intelligence “to review advances in artificial intelligence, related machine learning developments, and associated technologies.”  The Commission, made up of certain senior members of Congress as well as the Secretaries of Defense and Commerce, will function independently from other such panels established by the Trump Administration and will review developments in AI along with assessing risks related to AI and related technologies to consider how those methods relate to the national security and defense needs of the United States.  The Commission will focus on technologies that provide the U.S. with a competitive AI advantage, and will look at the need for AI research and investment as well as consider the legal and ethical risks associated with the use of AI.  Members are to be appointed within 90 days of the Commission being established and an initial report to the President and Congress is to be submitted by early February 2019. C.       Additional Congressional Interest in AI/Automation While a number of existing bills with potential impacts on the development of AI technologies remain stalled in Congress,[6] two more recently-introduced pieces of legislation are also worth monitoring as they progress through the legislative process. In late June, Senator Feinstein (D-CA) sponsored the “Bot Disclosure and Accountability Act of 2018,” which is intended to address  some of the concerns over the use of automated systems for distributing content through social media.[7] As introduced, the bill seeks to prohibit certain types of bot or other automated activity directed to political advertising, at least where such automated activity appears to impersonate human activity.  The bill would also require the Federal Trade Commission to establish and enforce regulations to require public disclosure of the use of bots, defined as any “automated software program or process intended to impersonate or replicate human activity online.”  The bill provides that any such regulations are to be aimed at the “social media provider,” and would place the burden of compliance on such providers of social media websites and other outlets.  Specifically, the FTC is to promulgate regulations requiring the provider to take steps to ensure that any users of a social media website owned or operated by the provider would receive “clear and conspicuous notice” of the use of bots and similar automated systems.  FTC regulations would also require social media providers to police their systems, removing non-compliant postings and/or taking other actions (including suspension or removal) against users that violate such regulations.  While there are significant differences, the Feinstein bill is nevertheless similar in many ways to California’s recently-enacted Bot disclosure law (S.B. 1001), discussed more fully in our previous client alert located here.[8] Also of note, on September 26th, a bipartisan group of Senators introduced the “Artificial Intelligence in Government Act,” which seeks to provide the federal government with additional resources to incorporate AI technologies in the government’s operations.[9] As written, this new bill would require the General Services Administration to bring on technical experts to advise other government agencies, conduct research into future federal AI policy, and promote inter-agency cooperation with regard to AI technologies.  The bill would also create yet another federal advisory board to advise government agencies on AI policy opportunities and concerns.  In addition, the newly-introduced legislation seeks to require the Office of Management and Budget to identify ways for the federal government to invest in and utilize AI technologies and tasks the Office of Personal Management with anticipating and providing training for the skills and competencies the government requires going-forward for incorporating AI into its overall data strategy. II.       Potential Impact on AI Technology of Recent California Privacy Legislation Interestingly, in the related area of data privacy regulation, the federal government has been slower to respond, and it is the state legislatures that are leading the charge.[10] Most machine learning algorithms depend on the availability of large data sets for purpose of training, testing, and refinement.  Typically, the larger and more complete the datasets available, the better.  However, these datasets often include highly personal information about consumers, patients, or others of interest—data that can sometimes be used to predict information specific to a particular person even if attempts are made to keep the source of such data anonymous. The European Union’s General Data Protection Regulation, or GDPR, which went into force on May 25, 2018, has deservedly garnered a great deal of press as one of the first, most comprehensive collections of data privacy protections. While we’re only months into its effective period, the full impact and enforcement of the GDPR’s provisions have yet to be felt.  Still, many U.S. companies, forced to take steps to comply with the provisions of GDPR at least with regard to EU citizens, have opted to take many of those same steps here in the U.S., despite the fact that no direct U.S. federal analogue to the GDPR yet exists.[11] Rather than wait for the federal government to act, several states have opted to follow the lead of the GDPR and enact their own versions of comprehensive data privacy laws.  Perhaps the most significant of these state-legislated omnibus privacy laws is the California Consumer Privacy Act (“CCPA”), signed into law on June 28, 2108, and slated to take effect on January 1, 2020.[12]  The CCPA is not identical to the GDPR, differing in a number of key respects.  However there are many similarities, in that the CCPA also has broadly defined definitions of personal information/data, and seeks to provide a right to notice of data collection, a right of access to and correction of collected data, a right to be forgotten, and a right to data portability.  But how do the CCPA’s requirements differ from the GDPR for companies engaged in the development and use of AI technologies?  While there are many issues to consider, below we examine several of the key differences of the CCPA and their impact on machine learning and other AI-based processing of collected data. A.       Inferences Drawn from Personal Information The GDPR defines personal data as “any information relating to an identified or identifiable natural person,” such as “a name, an identification number, location data, an online identifier or to one or more factors specific to the physical, physiological, genetic, mental, economic, cultural or social identify of that nature person.”[13]  Under the GDPR, personal data has implications in the AI space beyond just the data that is actually collected from an individual.  AI technology can be and often is used to generate additional information about a person from collected data, e.g., spending habits, facial features, risk of disease, or other inferences that can be made from the collected data.  Such inferences, or derivative data, may well constitute “personal data” under a broad view of the GDPR, although there is no specific mention of derivative data in the definition. By contrast, the CCPA goes farther and specifically includes “inferences drawn from any of the information identified in this subdivision to create a profile about a consumer reflecting the consumer’s preferences, characteristics, psychological trends, preferences, predispositions, behavior, attitudes, intelligence, abilities and aptitudes.”[14]  An “inference” is defined as “the derivation of information, data, assumptions, or conclusions from evidence, or another source of information or data.”[15] Arguably the primary purpose of many AI systems is to draw inferences from a user’s information, by mining data, looking for patterns, and generating analysis.  Although the CCPA does limit inferences to those drawn “to create a profile about a consumer,” the term “profile” is not defined in the CCPA.  However, the use of consumer information that is “deidentified” or “aggregated” is permitted by the CCPA.  Thus, one possible solution may be to take steps to “anonymize” any personal data used to derive any inferences.  As a result, when looking to CCPA compliance, companies may want to carefully consider the derivative/processed data that they are storing about a user, and consider additional steps that may be required for CCPA compliance. B.       Identifying Categories of Personal Information The CCPA also requires disclosures of the categories of personal information being collected, the categories of sources from which personal information is collected, the purpose for collecting and selling personal information, and the categories of third parties with whom the business shares personal information. [16]  Although these categories are likely known and definable for static data collection, it may be more difficult to specifically disclose the purpose and categories for certain information when dynamic machine learning algorithms are used.  This is particularly true when, as discussed above, inferences about a user are included as personal information.  In order to meet these disclosure requirements, companies may need to carefully consider how they will define all of the categories of personal information collected or the purposes of use of that information, particularly when machine learning algorithms are used to generate additional inferences from, or derivatives of, personal data. C.       Personal Data Includes Households The CCPA’s definition of “personal data” also includes information pertaining to non-individuals, such as “households” – a term that the CCPA does not further define.[17]  In the absence of an explicit definition, the term “household” would seem to target information collected about a home and its inhabits through smart home devices, such as thermostats, cameras, lights, TVs, and so on.  When looking to the types of personal data being collected, the CCPA may also encompass information about each of these smart home devices, such as name, location, usage, and special instructions (e.g., temperature controls, light timers, and motion sensing).  Furthermore, any inferences or derivative information generated by AI algorithms from the information collected from these smart home devices may also be covered as personal information.  Arguably, this could include information such as conversations with voice assistants or even information about when people are likely to be home determined via cameras or motion sensors.  Companies developing smart home, or other Internet of Things, devices thus should carefully consider whether the scope and use they make of any information collected from “households” falls under the CCPA requirements for disclosure or other restrictions. III.       Continuing Efforts to Regulate Autonomous Vehicles Much like the potential for a comprehensive U.S. data privacy law, and despite a flurry of legislative activity in Congress in 2017 and early 2018 towards such a national regulatory framework, autonomous vehicles continue to operate under a complex patchwork of state and local rules with limited federal oversight.  We previously provided an update (located here)[18] discussing the Safely Ensuring Lives Future Deployment and Research In Vehicle Evolution (SELF DRIVE) Act[19], which passed the U.S. House of Representatives by voice vote in September 2017 and its companion bill (the American Vision for Safer Transportation through Advancement of Revolutionary Technologies (AV START) Act).[20]  Both bills have since stalled in the Senate, and with them the anticipated implementation of a uniform regulatory framework for the development, testing and deployment of autonomous vehicles. As the two bills languish in Congress, ‘chaperoned’ autonomous vehicles have already begun coexisting on roads alongside human drivers.  The accelerating pace of policy proposals—and debate surrounding them—looks set to continue in late 2018 as virtually every major automaker is placing more autonomous vehicles on the road for testing and some manufacturers prepare to launch commercial services such as self-driving taxi ride-shares[21] into a national regulatory vacuum. A.       “Light-touch” Regulation The delineation of federal and state regulatory authority has emerged as a key issue because autonomous vehicles do not fit neatly into the existing regulatory structure.  One of the key aspects of the proposed federal legislation is that it empowers the National Highway Traffic Safety Administration (NHTSA) with the oversight of manufacturers of self-driving cars through enactment of future rules and regulations that will set the standards for safety and govern areas of privacy and cybersecurity relating to such vehicles.  The intention is to have a single body (the NHTSA) develop a consistent set of rules and regulations for manufacturers, rather than continuing to allow the states to adopt a web of potentially widely differing rules and regulations that may ultimately inhibit development and deployment of autonomous vehicles.  This approach was echoed by safety guidelines released by the Department of Transportation (DoT) for autonomous vehicles.  Through the guidelines (“a nonregulatory approach to automated vehicle technology safety”),[22] the DoT avoids any compliance requirement or enforcement mechanism, at least for the time being, as the scope of the guidance is expressly to support the industry as it develops best practices in the design, development, testing, and deployment of automated vehicle technologies. Under the proposed federal legislation, the states can still regulate autonomous vehicles, but the guidance encourages states not to pass laws that would “place unnecessary burdens on competition and innovation by limiting [autonomous vehicle] testing or deployment to motor vehicle manufacturers only.”[23]  The third iteration of the DoT’s federal guidance, published on October 4, 2018, builds upon—but does not replace—the existing guidance, and reiterates that the federal government is placing the onus for safety on companies developing the technologies rather than on government regulation. [24]  The guidelines, which now include buses, transit and trucks in addition to cars, remain voluntary. B.       Safety Much of the delay in enacting a regulatory framework is a result of policymakers’ struggle to balance the industry’s desire to speed both the development and deployment of autonomous vehicle technologies with the safety and security concerns of consumer advocates. The AV START bill requires that NHTSA must construct comprehensive safety regulations for AVs with a mandated, accelerated timeline for rulemaking, and the bill puts in place an interim regulatory framework that requires manufacturers to submit a Safety Evaluation Report addressing a range of key areas at least 90 days before testing, selling, or commercialization of an driverless cars.  But some lawmakers and consumer advocates remain skeptical in the wake of highly publicized setbacks in autonomous vehicle testing.[25]  Although the National Safety Transportation Board (NSTB) has authority to investigate auto accidents, there is still no federal regulatory framework governing liability for individuals and states.[26]  There are also ongoing concerns over cybersecurity risks[27], the use of forced arbitration clauses by autonomous vehicle manufacturers,[28] and miscellaneous engineering problems that revolve around the way in which autonomous vehicles interact with obstacles commonly faced by human drivers, such as emergency vehicles,[29] graffiti on road signs or even raindrops and tree shadows.[30] In August 2018, the Governors Highway Safety Association (GHSA) published a report outlining the key questions that manufacturers should urgently address.[31]  The report suggested that states seek to encourage “responsible” autonomous car testing and deployment while protecting public safety and that lawmakers “review all traffic laws.”  The report also notes that public debate often blurs the boundaries between the different levels of automation the NHTSA has defined (ranging from level 0 (no automation) to level 5 (fully self-driving without the need for human occupants)), remarking that “most AVs for the foreseeable future will be Levels 2 through 4.  Perhaps they should be called ‘occasionally self-driving.'”[32] C.       State Laws Currently, 21 states and the District of Columbia have passed laws regulating the deployment and testing of self-driving cars, and governors in 10 states have issued executive orders related to them.[33]  For example, California expanded its testing rules in April 2018 to allow for remote monitoring instead of a safety driver inside the vehicle.[34]  However, state laws differ on basic terminology, such as the definition of “vehicle operator.” Tennessee SB 151[35] points to the autonomous driving system (ADS) while Texas SB 2205[36] designates a “natural person” riding in the vehicle.  Meanwhile, Georgia SB 219[37] identifies the operator as the person who causes the ADS to engage, which might happen remotely in a vehicle fleet. These distinctions will affect how states license both human drivers and autonomous vehicles going forward.  Companies operating in this space accordingly need to stay abreast of legal developments in states in which they are developing or testing autonomous vehicles, while understanding that any new federal regulations may ultimately preempt those states’ authorities to determine, for example, crash protocols or how they handle their passengers’ data. D.       ‘Rest of the World’ While the U.S. was the first country to legislate for the testing of automated vehicles on public roads, the absence of a national regulatory framework risks impeding innovation and development.  In the meantime, other countries are vying for pole position among manufacturers looking to test vehicles on roads.[38]  KPMG’s 2018 Autonomous Vehicles Readiness Index ranks 20 countries’ preparedness for an autonomous vehicle future. The Netherlands took the top spot, outperforming the U.S. (3rd) and China (16th).[39]  Japan and Australia plan to have self-driving cars on public roads by 2020.[40]  The U.K. government has announced that it expects to see fully autonomous vehicles on U.K. roads by 2021, and is introducing legislation—the Automated and Electric Vehicles Act 2018—which installs an insurance framework addressing product liability issues arising out of accidents involving autonomous cars, including those wholly caused by an autonomous vehicle “when driving itself.”[41] E.       Looking Ahead While autonomous vehicles operating on public roads are likely to remain subject to both federal and state regulation, the federal government is facing increasing pressure to adopt a federal regulatory scheme for autonomous vehicles in 2018.[42]  Almost exactly one year after the House passed the SELF DRIVE Act, House Energy and Commerce Committee leaders called on the Senate to advance automated vehicle legislation, stating that “[a]fter a year of delays, forcing automakers and innovators to develop in a state-by-state patchwork of rules, the Senate must act to support this critical safety innovation and secure America’s place as a global leader in technology.”[43]  The continued absence of federal regulation renders the DoT’s informal guidance increasingly important.  The DoT has indicated that it will enact “flexible and technology-neutral” policies—rather than prescriptive performance-based standards—to encourage regulatory harmony and consistency as well as competition and innovation.[44]  Companies searching for more tangible guidance on safety standards at federal level may find it useful to review the recent guidance issued alongside the DoT’s announcement that it is developing (and seeking public input into) a pilot program for ‘highly or fully’ autonomous vehicles on U.S. roads.[45]  The safety standards being considered include technology disabling the vehicle if a sensor fails or barring vehicles from traveling above safe speeds, as well as a requirement that NHTSA be notified of any accident within 24 hours. [1] See https://www.whitehouse.gov/wp-content/uploads/2018/05/Summary-Report-of-White-House-AI-Summit.pdf; note also that the Trump Administration’s efforts in studying AI technologies follow, but appear largely separate from, several workshops on AI held by the Obama Administration in 2016, which resulted in two reports issued in late 2016 (see Preparing for the Future of Artificial Intelligence, and Artificial Intelligence, Automation, and the Economy). [2] Id. at Appendix A. [3] See https://www.mccain.senate.gov/public/index.cfm/2018/8/senate-passes-the-john-s-mccain-national-defense-authorization-act-for-fiscal-year-2019.  The full text of the NDAA is available at https://www.congress.gov/bill/115th-congress/house-bill/5515/text.  For additional information on CFIUS reform implemented by the NDAA, please see Gibson Dunn’s previous client update at https://www.gibsondunn.com/cfius-reform-our-analysis/. [4] See id.; see also https://www.treasury.gov/resource-center/international/Documents/FIRRMA-FAQs.pdf. [5] See https://foreignaffairs.house.gov/wp-content/uploads/2018/02/HR-5040-Section-by-Section.pdf.   [6] See, e.g. infra., Section III discussion of SELF DRIVE and AV START Acts, among others. [7] S.3127, 115th Congress (2018). [8] https://www.gibsondunn.com/new-california-security-of-connected-devices-law-and-ccpa-amendments/. [9] S.3502, 115th Congress (2018). [10] See also, infra., Section III for more discussion of specific regulatory efforts for autonomous vehicles. [11] However, as 2018 has already seen a fair number of hearings before Congress relating to digital data privacy issues, including appearances by key executives from many major tech companies, it seems likely that it may not be long before we see the introduction of a “GDPR-like” comprehensive data privacy bill.  Whether any resulting federal legislation would actually pre-empt state-enacted privacy laws to establish a unified federal framework is itself a hotly-contested issue, and remains to be seen. [12] AB 375 (2018); Cal. Civ. Code §1798.100, et seq. [13] Regulation (EU) 2016/679 (General Data Protection Regulation), Article 4 (1). [14] Cal. Civ. Code §1798.140(o)(1)(K). [15] Id.. at §1798.140(m). [16] Id. at §1798.110(c). [17] Id. at §1798.140(o)(1). [18] https://www.gibsondunn.com/accelerating-progress-toward-a-long-awaited-federal-regulatory-framework-for-autonomous-vehicles-in-the-united-states/. [19]   H.R. 3388, 115th Cong. (2017). [20]   U.S. Senate Committee on Commerce, Science and Transportation, Press Release, Oct. 24, 2017, available at https://www.commerce.senate.gov/public/index.cfm/pressreleases?ID=BA5E2D29-2BF3-4FC7-A79D-58B9E186412C. [21]   Sean O’Kane, Mercedes-Benz Self-Driving Taxi Pilot Coming to Silicon Valley in 2019, The Verge, Jul. 11, 2018, available at https://www.theverge.com/2018/7/11/17555274/mercedes-benz-self-driving-taxi-pilot-silicon-valley-2019. [22]   U.S. Dept. of Transp., Automated Driving Systems 2.0: A Vision for Safety 2.0, Sept. 2017, https://www.nhtsa.gov/sites/nhtsa.dot.gov/files/documents/13069a-ads2.0_090617_v9a_tag.pdf. [23]   Id., at para 2. [24]   U.S. DEPT. OF TRANSP., Preparing for the Future of Transportation: Automated Vehicles 3.0, Oct. 4, 2018, https://www.transportation.gov/sites/dot.gov/files/docs/policy-initiatives/automated-vehicles/320711/preparing-future-transportation-automated-vehicle-30.pdf. [25]   Sasha Lekach, Waymo’s Self-Driving Taxi Service Could Have Some Major Issues, Mashable, Aug. 28, 2018, available at https://mashable.com/2018/08/28/waymo-self-driving-taxi-problems/#dWzwp.UAEsqM. [26]   Robert L. Rabin, Uber Self-Driving Cars, Liability, and Regulation, Stanford Law School Blog, Mar. 20, 2018, available at https://law.stanford.edu/2018/03/20/uber-self-driving-cars-liability-regulation/. [27]   David Shephardson, U.S. Regulators Grappling with Self-Driving Vehicle Security, Reuters. Jul. 10, 2018, available at https://www.reuters.com/article/us-autos-selfdriving/us-regulators-grappling-with-self-driving-vehicle-security-idUSKBN1K02OD. [28]   Richard Blumenthal, Press Release, Ten Senators Seek Information from Autonomous Vehicle Manufacturers on Their Use of Forced Arbitration Clauses, Mar. 23, 2018, available at https://www.blumenthal.senate.gov/newsroom/press/release/ten-senators-seek-information-from-autonomous-vehicle-manufacturers-on-their-use-of-forced-arbitration-clauses. [29]   Kevin Krewell, How Will Autonomous Cars Respond to Emergency Vehicles, Forbes, Jul. 31, 2018, available at https://www.forbes.com/sites/tiriasresearch/2018/07/31/how-will-autonomous-cars-respond-to-emergency-vehicles/#3eed571627ef. [30]   Michael J. Coren, All The Things That Still Baffle Self-Driving Cars, Starting With Seagulls, Quartz, Sept. 23, 2018, available at https://qz.com/1397504/all-the-things-that-still-baffle-self-driving-cars-starting-with-seagulls/. [31]   ghsa, Preparing For Automated Vehicles: Traffic Safety Issues For States, Aug. 2018, available at https://www.ghsa.org/sites/default/files/2018-08/Final_AVs2018.pdf. [32]   Id., at 7. [33]   Brookings, The State of Self-Driving Car Laws Across the U.S., May 1, 2018, available at https://www.brookings.edu/blog/techtank/2018/05/01/the-state-of-self-driving-car-laws-across-the-u-s/. [34]   Aarian Marshall, Fully Self-Driving Cars Are Really Truly Coming to California, Wired, Feb. 26, 2018, available at, https://www.wired.com/story/california-self-driving-car-laws/; State of California, Department of Motor Vehicles, Autonomous Vehicles in California, available at https://www.dmv.ca.gov/portal/dmv/detail/vr/autonomous/bkgd. [35]   SB 151, available at http://www.capitol.tn.gov/Bills/110/Bill/SB0151.pdf. [36]   SB 2205, available at https://legiscan.com/TX/text/SB2205/2017. [37]   SB 219, available at http://www.legis.ga.gov/Legislation/en-US/display/20172018/SB/219. [38]   Tony Peng & Michael Sarazen, Global Survey of Autonomous Vehicle Regulations, Medium, Mar. 15, 2018, available at https://medium.com/syncedreview/global-survey-of-autonomous-vehicle-regulations-6b8608f205f9. [39]   KPMG, Autonomous Vehicles Readiness Index: Assessing Countries’ Openness and Preparedness for Autonomous Vehicles, 2018, (“The US has a highly innovative but largely disparate environment with little predictability regarding the uniform adoption of national standards for AVs. Therefore the prospect of  widespread driverless vehicles is unlikely in the near future. However, federal policy and regulatory guidance could certainly accelerate early adoption . . .”), p. 17, available at https://assets.kpmg.com/content/dam/kpmg/nl/pdf/2018/sector/automotive/autonomous-vehicles-readiness-index.pdf. [40]   Stanley White, Japan Looks to Launch Autonomous Car System in Tokyo by 2020, Automotive News, Jun. 4, 2018, available at http://www.autonews.com/article/20180604/MOBILITY/180609906/japan-self-driving-car; National Transport Commission Australia, Automated vehicles in Australia, available at https://www.ntc.gov.au/roads/technology/automated-vehicles-in-australia/. [41]   The Automated and Electric Vehicles Act 2018, available at http://www.legislation.gov.uk/ukpga/2018/18/contents/enacted; Lexology, Muddy Road Ahead Part II: Liability Legislation for Autonomous Vehicles in the United Kingdom, Sept. 21, 2018,  https://www.lexology.com/library/detail.aspx?g=89029292-ad7b-4c89-8ac9-eedec3d9113a; see further Anne Perkins, Government to Review Law Before Self-Driving Cars Arrive on UK Roads, The Guardian, Mar. 6, 2018, available at https://www.theguardian.com/technology/2018/mar/06/self-driving-cars-in-uk-riding-on-legal-review. [42]   Michaela Ross, Code & Conduit Podcast: Rep. Bob Latta Eyes Self-Driving Car Compromise This Year, Bloomberg Law, Jul. 26, 2018, available at https://www.bna.com/code-conduit-podcast-b73014481132/. [43]   Freight Waves, House Committee Urges Senate to Advance Self-Driving Vehicle Legislation, Sept. 10, 2018, available at https://www.freightwaves.com/news/house-committee-urges-senate-to-advance-self-driving-vehicle-legislation; House Energy and Commerce Committee, Press Release, Sept. 5, 2018, available at https://energycommerce.house.gov/news/press-release/media-advisory-walden-ec-leaders-to-call-on-senate-to-pass-self-driving-car-legislation/. [44]   See supra n. 24, U.S. DEPT. OF TRANSP., Preparing for the Future of Transportation: Automated Vehicles 3.0, Oct. 4, 2018, iv. [45]   David Shephardson, Self-driving cars may hit U.S. roads in pilot program, NHTSA says, Automotive News, Oct. 9, 2018, available at http://www.autonews.com/article/20181009/MOBILITY/181009630/self-driving-cars-may-hit-u.s.-roads-in-pilot-program-nhtsa-says. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments.  Please contact the Gibson Dunn lawyer with whom you usually work, or the authors: H. Mark Lyon – Palo Alto (+1 650-849-5307, mlyon@gibsondunn.com) Claudia M. Barrett – Washington, D.C. (+1 202-887-3642, cbarrett@gibsondunn.com) Frances Annika Smithson – Los Angeles (+1 213-229-7914, fsmithson@gibsondunn.com) Ryan K. Iwahashi – Palo Alto (+1 650-849-5367, riwahashi@gibsondunn.com) Please also feel free to contact any of the following: Automotive/Transportation: Theodore J. Boutrous, Jr. – Los Angeles (+1 213-229-7000, tboutrous@gibsondunn.com) Christopher Chorba – Los Angeles (+1 213-229-7396, cchorba@gibsondunn.com) Theane Evangelis – Los Angeles (+1 213-229-7726, tevangelis@gibsondunn.com) Privacy, Cybersecurity and Consumer Protection: Alexander H. Southwell – New York (+1 212-351-3981, asouthwell@gibsondunn.com) Public Policy: Michael D. Bopp – Washington, D.C. (+1 202-955-8256, mbopp@gibsondunn.com) Mylan L. Denerstein – New York (+1 212-351-3850, mdenerstein@gibsondunn.com) © 2018 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

August 8, 2018 |
Media, Entertainment and Technology Group – 2018 Mid-Year Update

Click for PDF For our latest semi-annual update, Gibson Dunn’s Media, Entertainment and Technology practice group is taking stock of another active period of deals, regulatory developments, and litigation. The first half of 2018 has been marked by landmark M&A, esports growth, precedent-setting copyright cases, an end to the “Blurred Lines” saga, and some clarity from California and New York courts in anticipated right of publicity cases. And we have seen courts wrestling with twenty-first century legal issues raised by terms like geoblocking, top-level domains, Simpsonizing, and embedded Tweets. Here, then, is our latest round-up to bring you current on the deals and decisions that will hold lessons for the months and years to come. I.    Transaction Overview A.    M&A 1.    AT&T and Time Warner Prevail in Antitrust Suit and Complete Merger On June 12, 2018, in a 172-page decision following a six-week trial, U.S. District Judge Richard J. Leon denied the government’s request to enjoin the proposed merger between AT&T and Time Warner, and the companies completed the merger two days later, bringing together the content produced by Warner Bros., HBO and Turner with AT&T’s mobile, broadband, video and other communications services.[1] “Our merger brings together the elements to fulfill our vision for the future of media and entertainment,” AT&T said in a press release.[2] On July 12, the government filed a notice of appeal.[3] (Disclosure: Gibson Dunn represents AT&T and DirecTV in the case.) 2.    Comcast Ends Pursuit of 21st Century Fox, Clearing Path for Disney The back-and-forth bidding between The Walt Disney Company and Comcast for Twenty-First Century Fox, Inc. appears to have ended, as on July 19, 2018, Comcast announced it would not pursue the acquisition any further, paving the way for Disney to close the deal.[4] Previously, on June 20, 2018, Disney and Fox announced that they had entered into an amended and restated merger agreement, providing for Disney’s acquisition of Fox’s film and television businesses for more than $71.3 billion in cash and stock, surpassing Disney’s original offer of $52.4 billion in Disney stock and made one week after Comcast’s unsolicited offer of approximately $65 billion in cash.[5] Under the amended and restated agreement, Fox’s shareholders can elect to receive their consideration in the form of cash or Disney stock, subject to 50/50 proration.[6] On June 27, 2018, Disney announced that the Antitrust Division of the Department of Justice had entered into a consent decree with Disney and Fox, clearing the way for the pending acquisition to close.[7] The consent decree requires the sale of the Fox Sports Regional Networks within 90 days of closing the Fox acquisition, subject to possible extension by the DOJ, and is subject to court approval.[8] On July 27, 2018, Disney’s and Fox’s shareholders voted to approve the acquisition.[9] 3.    Suitors Continue to Vie for Sky In abandoning its bid for Disney, Comcast turned its focus to acquiring Sky PLC, but Disney has its sights set on the European broadcaster as well.[10] At the moment, Comcast has the higher offer, currently valued at $34 billion, 5% higher than the latest bid from Fox, which owns 39% of Sky (a stake that will be sold to Disney as part of the Fox acquisition). Disney may then decide to pursue the remainder of Sky by topping Comcast’s bid or may look to sell Fox’s stake.[11] These latest developments follow Fox’s year-long battle with U.K. regulators regarding its proposed acquisition of Sky. The U.K. culture secretary, Matt Hancock, announced that the most recent terms offered by Fox are likely sufficient to allay concerns over media plurality.[12] Fox’s proposed acquisition, which we previously reported has been the subject of British antitrust regulatory scrutiny, caused the U.K.’s Office of Communications to raise red flags, which led to the U.K.’s Competition and Markets Authority to oppose the transaction, noting the proposal would give Rupert Murdoch’s family too much control over U.K. media.[13] Mr. Hancock noted that a sale of Sky News, the news outlet controlled by Sky PLC, to a suitable third party such as Disney (in connection with Disney’s proposal to acquire Twenty-First Century Fox) could alleviate regulatory concerns associated with the deal. Comcast’s bid for Sky was also given the green light by U.K. regulators.[14] 4.    CBS Fights for Control in Midst of Viacom Merger Negotiations Following months during which Shari Redstone, the controlling shareholder of both CBS and Viacom, actively participated in discussions between the companies regarding a potential merger,[15] tension regarding control came to a head on May 14, 2018 when CBS’s board of directors, led by CBS Chairman-CEO Leslie Moonves, sued to dilute Redstone’s preferred shares and those of her holding company National Amusements to prevent her from replacing board members to complete the deal.[16] Redstone and National Amusements returned suit on May 29, 2018, alleging that CBS’s board was overstepping its authority by attempting to dilute her preferred shares.[17] Two days later, a group of CBS’s non-voting Class B shareholders also filed suit against Redstone and National Amusements, claiming Redstone had improperly amended the bylaws to require a 90% board approval for special dividends that would give Class B stockholders the right to vote on the potential merger.[18] 5.    The Weinstein Company’s Bankruptcy Sale In the wake of the sexual assault accusations against Harvey Weinstein, his eponymous production company, The Weinstein Company, filed for bankruptcy in March 2018, listing between $500 million and $1 billion in assets and the same amount in total liabilities. Lantern Capital purchased the production company in the bankruptcy sale for $289 million.[19] On July 16, 2018, The Yucaipa Companies brought suit against Lantern Capital (its former partner in a bid to buy The Weinstein Company), alleging that Lantern failed to reimburse Yucaipa for costs related to the sale and a related purchase fee.[20] B.    SVOD Update 1.    Netflix, Hulu, and Amazon Each Ink High-Profile Creative Deals Netflix has continued to balance both its retention of creative talent and attraction of new talent. The company closed out December 2017 by entering into a four-year, seven-figure overall deal with Stranger Things producer Shawn Levy and his production company 21 Lapps Entertainment.[21] And on February 13, 2018, Netflix announced a five-year overall deal with Ryan Murphy, moving the showrunner and producer from his longtime home of Twentieth Century Fox TV.[22] Under the deal, valued between $250 million and $300 million, Murphy will produce new series and films exclusively for Netflix.[23] Less than a week after releasing the second season of its critically acclaimed original series The Handmaid’s Tale, Hulu announced an overall deal with its showrunner Bruce Miller, on April 30, 2018.[24] Under the deal, made in conjunction with The Handmaid’s Tale producer MGM Television, Miller will create and develop new projects for both Hulu and MGM Television.[25] Amazon has also continued to pursue lucrative creative deals, and on June 5, 2018, it announced that it signed a first-look deal with Jordan Peele, writer and director of the film Get Out, and his production company Monkeypaw Productions.[26] 2.    WndrCo Raises $1 Billion for NewTV WndrCo announced on August 7, 2018, that it had closed a $1 billion funding round for a project with the working title “NewTV”, a mobile-first media platform, led by Meg Whitman and Jeffrey Katzenberg.[27] The initial raise included investments by all of the major Hollywood studios, a number of independent television studios, and major technology companies. The round was led by Madrone Capital. Incubated at WndrCo, NewTV aims to build a user-friendly mobile platform to deliver short-form premium content, allowing users to make the most of every moment of their day. (Disclosure: Gibson Dunn represents WndrCo and NewTV.) 3.    Streaming Industry Expands Through Strategic Partnerships Through the first half of 2018, Netflix has continued to push for partnerships with U.S. cable companies, entering into a partnership with Altice USA, on January 31, 2018, under which Netflix is made available to Altice customers directly through Altice One,[28] and expanding its existing partnership with Comcast to provide Comcast the ability to include a Netflix subscription in new and existing Xfinity packages.[29] In early 2018, YouTube TV entered into strategic partnerships with several sports leagues in an effort to expand its reach, including with MLB and the NBA to become the presenting sponsor of the 2018 World Series and the 2018 NBA Finals, respectively.[30] Despite experiencing a service outage during a World Cup semifinal match,[31] YouTube TV stands to see further expansion in the sports league space throughout the remainder of 2018. On January 5, 2018, CBS became the first Amazon partner to offer a live stream of local broadcast TV by entering into a partnership that allows Amazon Prime U.S. members to access CBS All-Access as an add-on channel.[32] Amazon has increasingly stepped into the role of distributor and portal for companies with over-the-top streaming channels such as CBS, and Amazon’s Prime Video Channels program also has add-ons for programmers such as HBO, Showtime, and Starz.[33] 4.    Chinese Streaming Companies Go Public Often called the “Netflix of China,” iQiyi Inc. in mid-March 2018 launched an estimated $2.3 billion initial public offering.[34] iQiyi intends to use the IPO proceeds to extend its reach into China’s online entertainment industry and continue to provide “blockbuster original content” through its collaborations with Hollywood and Netflix.[35] Not long after, Bilibili Inc., a Chinese online platform used to primarily stream Japanese animation, launched its own IPO, priced at $438 million.[36] In its registration statement, Bilibili noted that it “believe[s] China will become the world’s largest online entertainment market in the future and [its] brand recognition and market leadership among the young generations in China position[s it] well to capture the significant opportunities.”[37] C.    China Partnerships 1.    Blumhouse and Tang Media Partners Partner to Bring Horror Films to China In June 2018, it was announced that Blumhouse Productions, known for its horror movies, partnered with Tang Media Partners, the Shanghai and Los Angeles-based entertainment company, to co-develop and co-finance a slate of Chinese language horror and thriller films.[38] Blumhouse Productions only recently had released its first movie in China in February with Happy Death Day.[39] One possible motivation for this partnership is the booming box office in China, which surpassed the U.S. in the first three months of this year.[40] In the first quarter of 2018, China’s box office took in $3.17 billion in revenues, compared to $2.85 billion in the United States.[41] As the Chinese box office continues to grow, it remains an attractive and unique opportunity for Hollywood and the U.S. entertainment industry. 2.    The Wanda Group Sees New Investments and Consolidation On January 29, 2018, Wanda revealed that Tencent Holdings entered into an agreement to purchase $5.4 billion worth of shares in Dalian Wanda Commercial Management, equaling a 14% interest in the company.[42] Days later on February 5, 2018, it was announced that Alibaba Group Holding Ltd. and Beijing Cultural Investment Holdings, a Chinese government-backed company, agreed to purchase a $1.2 billion stake in Wanda Film Holding Co., The Wanda Group’s domestic film and movie division, which includes the group’s Chinese movie theater.[43] As of the transaction, Alibaba became the second biggest shareholder in Wanda Film Holding Co., with a 7.66% holding.[44] These investments by China’s largest and well-known tech companies came at a time when The Wanda Group was under scrutiny by the Chinese government for its overseas investments and was in the process of selling off its overseas real estate assets to reduce its debt.[45] Then, on June 25, 2018, Wanda Film Holding Co. unveiled plans to acquire a 96.8% stake in Wanda Media (the group’s content-production business), in order to strengthen and consolidate the business’s film and entertainment divisions beyond its cinema division (Wanda Film), with a price tag of $1.78 billion to be paid via cash and equity.[46] The proposed deal would increase content production and afford The Wanda Group the opportunity to produce, distribute and exhibit its content under one roof.[47] AMC Entertainment and Legendary Entertainment—U.S. companies acquired by Wanda in 2016—are not included in the proposed restructuring.[48] The deal is pending authorization by the Shenzhen Stock Exchange.[49] D.    Esports 1.    Fortnite Brings Esports to Center Stage Fortnite, developed and published by Epic Games, has quickly become a phenomenon, and in doing so has helped propel domestic esports—the fast-growing industry of competitive spectator video-gaming—into the mainstream quicker than any game in recent memory. A testament to the game’s widespread adoption, a Fortnite Celebrity Pro-Am charity tournament was recently held at the Banc of California Stadium in Los Angeles during the annual E3 Expo. The tournament played host to 50 celebrities and 50 professional gamers competing for a $3 million cash prize pool.[50] Aside from the Pro-Am tournament, celebrities such as Drake and Travis Scott have taken part in livestreamed gameplay with professional gamers, including the famous Tyler “Ninja” Blevins, with some streams attracting more than 500,000 simultaneous live viewers.[51] Like other game developers, including League of Legends developer Riot Games and Overwatch developer Activision Blizzard, Epic Games has announced its first venture into organized esports via the Fortnite World Cup, which will take place in 2019 with a $100 million total cash purse for winners.[52] However, unlike Riot’s and Activision Blizzard’s esports leagues, which require that teams buy into the league (which generally restricts admission to franchises), Epic has opted for strictly merit-based qualifiers with no spots reserved for organized teams or franchises.[53] Fortnite’s success and the potential for its esports league have also garnered the interest of investors. Tencent, which currently owns 40% of Epic Games, has doubled down on its investment by contributing an additional ¥100 million, half of which will be used to support game development and video content creators, and the other half being used to bring Fortnite to China and develop it as a Chinese esport.[54] 2.    ICM Inks Joint Venture with Esports Agency Evolved ICM Partners and esports talent agency Evolved have announced a joint venture that will give Evolved’s roster of professional gamers, live streamers and internet personalities access to ICM’s full-service offerings.[55] The joint venture will be supervised by ICM’s Bennett Sherman and Peter Trinh, reporting directly to Managing Director Chris Silbermann, who sees esports as a growth opportunity for ICM Partners.[56] 3.    High School Esports Is on Its Way Los Angeles-based startup PlayVS recently closed a $15 million Series A funding round led by New Enterprise Associates with participation from the San Francisco 49ers, Science, CrossCut Ventures, Coatue Management, Cross Culture Ventures, rapper Nas, Dollar Shave Club founder Michael Dubin, and Twitch Cofounder Kevin Lin, among others.[57] PlayVS has worked closely with the NFHS, the high school equivalent of the NCAA, to develop an infrastructure for esports competition at the high school level.[58] PlayVS will be launching its first season in October 2018, bringing esports play to 5,000 high schools.[59]   II.    Regulatory Updates A.    FCC Repeals “Net Neutrality” Rules, Congressional Efforts Stall, and Attention Turns to Litigation and Statehouses In June 2018, the Federal Communications Commission (“FCC”) formally repealed rules concerning the regulation of internet service providers (“ISPs”) (popularly known as “net neutrality”) and no longer considers broadband service a “utility” under Title II of the Communications Act.[60] The FCC erased rules mandating that ISPs treat all web traffic equally and overturned prohibitions on blocking, throttling, and paid prioritization. The agency also included language meant to prevent states from enacting their own consumer protection laws concerning ISPs. Weeks prior to this repeal, the Senate approved a resolution with a 52-47 vote to nullify the FCC’s rollback, but the effort stalled in the House of Representatives.[61] Months before the repeal was enacted, 21 states and the District of Columbia filed suit against the FCC, alleging violation of the Administrative Procedure Act in repealing the “net neutrality” rules.[62] These cases were assigned to the Ninth Circuit via a judicial lottery. In March 2018, the Ninth Circuit granted petitioners’ unopposed request to move the suits to the D.C. Circuit given the court’s experience in presiding over net neutrality cases.[63] The first briefs are due on August 20, 2018, and we anticipate that this litigation will be closely watched over the next year. In addition, a number of states have seen bills introduced (California) or enacted (Washington) to provide net neutrality-type protections.[64] Such bills are sure to be the subject of upcoming challenges and litigation. B.    The European Union’s General Data Protection Regulation Goes into Effect The European Union (“EU”) enacted the General Data Protection Regulation (“GDPR”) in 2016 to unify the patchwork of data privacy laws across all EU member countries into one regulation.[65] The GDPR strengthens the protection of personal data by making clear that location data and online identifiers, such as IP addresses, are considered personal data. European authorities already had taken a more stringent view than U.S. regulators as to what constitutes personally identifiable information subject to protection, including emails and contact information. The GDPR also prohibits the use of lengthy terms and conditions seeking consent; instead, any request for consent must be presented clearly and concisely, and without ambiguity of meaning. The GDPR further provides individuals with the right to, in certain circumstances, require that a business erase personal data about them, obtain a restriction on the processing of personal data, and receive a copy of the personal data provided to the business. It permits individuals to file a class-action style complaint for any breach of personal data. The regulation went into effect on May 25, 2018, and will be applicable to every citizen of the EU and any business entity that transacts with them, regardless of the location of business. Penalties for violating the GDPR are severe. Liable parties could be fined up to four percent of annual global turnover or 20 million Euros, whichever is greater. While many businesses who transact in the EU have updated their privacy policies in light of the GDPR, we strongly urge those who have not done so to review their policies and update them to reflect the new regulation. One immediate consequence of the GDPR has been that ICANN, the not-for-profit company that manages domain names, has already begun removing from its public “WhoIs” database the contact information for domain name registrants in the EU.[66] We are also watching to see whether privacy groups file lawsuits on behalf of groups of individuals seeking to enforce provisions of the GDPR. C.    Hollywood Dealmakers Can No Longer Inquire About Salary History Effective January 1, 2018, California joined a growing number of states, including New York, that restrict an employer’s inquiries into an applicant’s salary history. Under California Labor Code Section 432.3, employers in the state will be prohibited from asking about an applicant’s prior compensation and benefits. The law was enacted to help remedy the gender pay gap. The new law is likely to have a significant impact on how deals are made in the entertainment industry. Going forward, when studios negotiate salaries for talent with agents, they will not be allowed to ask agents for recent quotes unless the talent provides written consent.[67] If consent is provided, agents can volunteer salary history, but studio executives are prohibited from asking for it or using other methods, like calling business affairs executives at previous places of employment to verify it. Should an employer violate this statute, the penalties could be more severe than the $250,000 fine under comparable New York law. In California, applicants will be able to file a lawsuit alleging damages, and remedies may include California’s Private Attorney General Act.[68] III.    Recent Litigation Highlights A.    Antitrust Litigation 1.    Ozzy Osbourne Challenging AEG over Tying Arrangement Regarding Los Angeles and London Venues On March 21, 2018, entertainer Ozzy Osbourne filed a federal antitrust suit in Los Angeles against live entertainment promoter AEG and its subsidiaries and affiliates.[69] The putative class action alleges that AEG is violating the Sherman Act by enforcing an anticompetitive tying arrangement purportedly barring musicians from playing the O2 Arena—”London’s most essential large concert venue”—unless they agree to play Staples Center on the Los Angeles leg of their tour.[70] According to the complaint, AEG—which owns the O2 Arena and Staples Center—effectively forces artists playing the O2 to forego playing certain venues in Los Angeles, like the Forum.[71] Osbourne claims this “Staples Center Commitment” deprives artists like Osbourne from “enjoy[ing] the benefits of competition between Staples and the Forum,” which recently underwent a $100 million renovation.[72] Osbourne seeks an injunction to prohibit AEG from imposing the alleged “illegal tying practice” on him and other musicians.[73] In a recently filed motion to dismiss, AEG argues the lawsuit “is a poorly-disguised attempt by Ozzy’s promoter, Live Nation (represented by the same lawyers), to pressure Defendants to abandon their lawful efforts to compete for bookings in Los Angeles and counteract Live Nation’s tactics to steer business away from venues that AEG owns.”[74] According to AEG, the lawsuit is flawed because the agreement Osbourne seeks to strike down is between AEG and Live Nation, and does not prevent Osbourne from playing at the Forum.[75] Rather, it merely prevents Live Nation from promoting Osbourne’s Los Angeles shows.[76] On August 1, 2018, Judge Dale S. Fischer denied AEG’s motion to dismiss. 2.    Coachella Owner AEG Faces Antitrust Suit over Restrictions on Musicians’ Ability to Play Competing Events On April 9, 2018, Portland music festival promoter Soul’d Out Productions filed suit in federal court in U.S. District Court for the District of Oregon against AEG, owner of the Coachella Valley Music and Arts Festival, accusing it of anticompetitive behavior by barring Coachella musicians from playing other events within 1,300 miles in the months surrounding the festival.[77] According to the complaint, AEG’s invocation of a “radius clause” in its contracts blocks competition in ways that violate federal antitrust laws as well as Oregon and California state laws.[78] Specifically, the suit alleges that AEG and its co-defendants use their “substantial market power” to “coerce artists into agreeing to these unlawful restrictions on trade.”[79] The plaintiff asserts that AEG’s purported “strong-arming and leveraging tactics” have had “an anticompetitive effect on the consumer, music venues and festivals on the West Coast, and promoters of such events.”[80] The suit accordingly seeks treble damages, a declaration that the “radius clause” is unenforceable, and injunctive relief.[81] AEG’s motion to dismiss the suit is currently pending. B.    Profit Participation Suits 1.    Disney to Face Trial in Turner & Hooch Royalty Fraud Claim Disney has been unable to chase off a lawsuit contending it concealed profits from the 1989 Tom Hanks comedy Turner & Hooch.[82] The suit, filed by Christine Wagner, whose late husband, Raymond Wagner, produced the film, alleges that Turner & Hooch, which grossed $71 million at the box office and more than $167 million in worldwide gross receipts, was profitable as early as 1991, but that “Disney reported that the film is not in profits” and sent no statement of accounting in the years since the film was made.[83] Wagner asserts she should be seeing more royalties.[84] In a decision in early May that sets the stage for a trial, a Los Angeles state court judge ruled that Wagner’s fraud claim can move forward.[85] The court found that Disney had presented no evidence on summary adjudication to counter Wagner’s assertion that it was Disney’s misrepresentations—in royalty statements indicating there were no profits to share—that kept the producer or his wife from discovering they had a claim.[86] Therefore, the court found that as it relates to the statute of limitations, Disney may not limit the royalties at issue to only the four years prior to the filing of the 2015 suit.[87] 2.    No, CBS Isn’t Paying Judge Judy Too Much In April 2018, a Los Angeles judge dismissed a claim that Judy Sheindlin’s (pka Judge Judy) compensation was purposely structured to wipe out profits on the hit television show.[88] Talent agency Rebel Entertainment Partners had filed a lawsuit in March 2016 against CBS and Big Ticket Television, alleging that it was entitled to a five percent share of net profits, but that the show had been running a deficit since February 2010 because Sheindlin’s massive salary was deducted as an expense.[89] CBS argued in response that the salary was a necessary expense to keep Judge Judy on the air.[90] In its ruling, the court accepted CBS’s determination that it was doing what it considered to be best for the show, and, moreover, that plaintiffs had not presented sufficient evidence that Sheindlin’s salary ran counter to industry custom.[91] Rather, the court found that “[h]er present salary was the result of arms-length negotiation and Sheindlin’s final ‘take-it-or-leave-it offer.'”[92] 3.    Columbo Producers File Claim Against TV Studio, 45 Years After Show Airs In February 2018, a Los Angeles Superior Court judge held that the creators of the 1970s show Columbo can proceed with their contract and fraud claims against Universal City Studios.[93] Producers William Link and the heirs of Richard Levinson claim that Universal never issued a profit participation statement to them.[94] They alleged that shortly after filing their complaint in November 2017, an accounting statement arrived with a check for $2.3 million.[95] Universal City Studios moved to dismiss the claim, arguing that plaintiffs “lacked specificity” on how they were allegedly underpaid, but the judge has allowed the case to proceed past demurrer.[96] C.    Copyright Litigation 1.    Embedding Tweets Violates the Exclusive Display Right In February 2018, U.S. District Judge Katherine B. Forrest determined on summary judgment that embedding a photo on a social media platform constitutes a “display” of work under Section 106(5) of the Copyright Act of 1976.[97] The plaintiff snapped a candid photo of Tom Brady, the Patriots’ quarterback, and Danny Ainge, the Boston Celtics’ general manager, walking in the Hamptons that quickly went viral, “rapidly moving from Snapchat to Reddit to Twitter—and finally . . . onto the websites of the defendants, who embedded the Tweet alongside articles they wrote about Tom Brady actively helping the Boston Celtics recruit basketball player Kevin Durant.”[98] The court noted that copyright law has “developed in response to significant changes in technology,”[99] and that Congress “cast a very wide net” in considering the display right.[100] Congress did “not intend to freeze the scope of copyrightable subject matter at the present stage of communications technology” when it passed the Copyright Act, and that its drafters intended it to broadly encompass new, not yet developed, technologies.[101] After framing the case as requiring the “the Court [to] construe how images shown on one website but stored on another website’s server implicate an owner’s exclusive display right,”[102] the court rejected application of and criticized the “Server Test,” a test deployed by the Ninth Circuit in Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146 (2007), noting that it has not been widely used outside of the Ninth Circuit.[103] The Court noted that under the Server Test, direct liability for infringement turns “entirely on whether the image is hosted on the publisher’s own server, or is embedded or linked from a third-party server.”[104] Here, however, the court focused on the fact that the defendants “actively took steps to ‘display’ the image.”[105] The court found support in the Supreme Court’s decision in American Broadcasting Cos., Inc. v. Aereo Inc. for the proposition that “liability should not hinge on invisible, technical processes imperceptible to the viewer.”[106] But, the case isn’t over yet. The court explained: In this case, there are genuine questions about whether plaintiff effectively released his image into the public domain when he posted it to his Snapchat account. Indeed, in many cases there are likely to be factual questions as to licensing and authorization. There is also a very serious and strong fair use defense, a defense under the Digital Millennium and Copyright Act, and limitations on damages from innocent infringement.[107] Following its ruling, and recognizing that this is a “high-profile, high-impact copyright case” with possible precedential effects, Judge Forrest certified the ruling for interlocutory appeal to the Second Circuit.[108] However, on July 17, 2018, the Second Circuit denied defendants’ request to take up the ruling.[109] 2.    TVEyes Video Clip Search Engine Is Not Fair Use In February 2018, the Second Circuit held that TVEyes’s service could not be justified as fair use, reversing a summary judgment ruling.[110] As we wrote in our 2016 Mid-Year Update reporting on the summary judgment rulings, TVEyes provides a service that continuously records television programming and indexes it into a text-searchable database, “allowing its clients to search for and watch (up to) ten-minute video clips that mention terms of interest to the clients.”[111] The district court had issued two summary judgment rulings, deeming a fair use TVEyes’s “functions enabling clients of TVEyes to search for videos by term, to watch the resulting videos, and to archive the videos on the TVEyes servers” a fair use, but holding that functions “enabling TVEyes’s clients to download videos to their computers, to freely e-mail videos to others, or to watch videos after searching for them by date, time, and channel (rather than by keyword)” were not fair use.[112] While the Second Circuit found that TVEyes’s service served a modest transformative purpose, isolating relevant television programing and allowing it to be accessed in a convenient manner, it further found that the fact that the service makes available, in its original form, almost all of Fox’s content undermines its transformative value.[113] The court also found that TVEyes’s service deprives Fox of licensing revenues and/or an ability to exploit the market itself.[114] On balance, therefore, the court concluded that “TVEyes’s service is not justifiable as a fair use” because “[a]t bottom, TVEyes is unlawfully profiting off the work of others by commercially re-distributing all of that work that a viewer wishes to use, without payment of license.”[115] On May 14, 2018, the Second Circuit denied TVEyes’s petition for rehearing en banc.[116] 3.    In Suit for Infringement Based on Foreign Broadcast, Geoblocking Thwarts Personal Jurisdiction In November, The Carsey-Werner Company filed a lawsuit in a California federal court against the British Broadcasting Company (“BBC”) and Sugar Films, alleging copyright infringement for the use and airing on the BBC of The Cosby Show clips in a documentary entitled Bill Cosby: Fall of an American Icon.[117] BBC moved for dismissal, arguing that no actionable infringement took place within a California federal court’s jurisdiction, as the documentary was only broadcast in the United Kingdom.[118] Afterward, it was available for 30 days on BBC’s iPlayer website, which, because of geoblocking, meant that the program was only available to those located in the United Kingdom.[119] However, unauthorized viewers could access the content by using virtual private networks (“VPNs”) and proxy servers.[120] Judge Percy Anderson held that “[u]nauthorized viewers outside of the United Kingdom do not provide a basis for personal jurisdiction; rather, Defendant’s relationship with California must arise out of contacts that they themselves created with the state.”[121] The court therefore held it lacked specific jurisdiction over BBC and Sugar Films.[122] 4.    Who Owns VFX Software Output? As we first wrote in our 2017 Year-End Update, in July 2017, Rearden LLC, a computer-generated imagery (CGI) software company, accused The Walt Disney Co., Marvel Studios, Paramount, and Fox of using without a license its intellectual property to animate characters in some of its highest-grossing productions of the last few years, as well as to advertise and promote the films.[123] Rearden alleged trademark, copyright, and patent infringement claims relating to Oscar-winning visual effects technology called MOVA Contour Reality Capture (“MOVA”). Rearden claims that Disney knowingly contracted with parties who stole and falsely claimed ownership of the MOVA system and related IP assets to create film productions such as Beauty and the Beast and Guardians of the Galaxy. Rearden separately pursued relief against the company providing these services, a Chinese company called Shenzhenshi Haitiecheng Science and Technology. In the lawsuits against Disney and the other studios, Rearden claims the studios knowingly used an unauthorized version of the MOVA software. With respect to the copyright claims, Rearden initially asserted a novel theory of copyright infringement, arguing that because its software program performs the “lion’s share” of the creativity involved in the computer art program, the end user fails to meet the minimum threshold for originality, and therefore Rearden, not the end user, should be deemed the legal author of the final product of the program.[124] The defendants moved to dismiss, pointing to film directors and other artists as indispensable creative elements to the artistic expression embodied in the files output by the program.[125] In February, the court sided with the defendants and rejected Rearden’s copyright claims, explaining that “[t]he Court does not find it plausible that the MOVA Contour output is created by the program without any substantial contribution by the actors or directors.”[126] The court thus dismissed the copyright claims without prejudice, and Rearden subsequently amended its complaint to allege copyright claims under a new contributory theory of infringement.[127] This time, Rearden argues that MOVA is an original literary work of authorship fixed in a tangible medium of expression when stored on computer hard drives. When the program is run, Rearden claims that the temporary copies that are made in the random access memory of the end user’s computer violate its copyright. The defendants again moved to dismiss Rearden’s copyright claims.[128] On June 19, 2018, the court denied defendants’ motion to dismiss, holding that Rearden plausibly alleged the defendants either induced or materially contributed to infringing conduct.[129] In light of this ruling, Rearden’s copyright claims will proceed against the studios. 5.    Disney and Redbox Tussle over Resale Rights On November 30, 2017, Disney, Lucasfilm, and Marvel filed suit in the District Court for the Central District of California, arguing that Redbox’s practice of reselling the digital download codes packaged with plaintiffs’ movie “Combo Packs” violates the user license terms and constitutes copyright infringement.[130] Disney moved for a preliminary injunction, which the court denied, finding that the license restriction constituted copyright misuse.[131] Specifically, licensing language on the website where Disney’s digital movie downloads are redeemed states that the downloader must be the owner of “the physical product that accompanied the digital code at the time of purchase.”[132] According to Judge Pregerson, this constitutes an “improper leveraging of Disney’s copyright” and “conflicts with public policy enshrined in the Copyright Act” because it forces users to “forego their statutorily-guaranteed right to distribute their physical copies of that same movie as they see fit.”[133] Disney subsequently updated the license terms, amended its complaint, and renewed its motion for a preliminary injunction.[134] Disney asserts that the new language, which instead requires the digital downloader to have received the code as part of the Combo Pack, rather than to be the current owner of the physical copies, satisfies the court’s concerns regarding copyright misuse.[135] Redbox counters that this change does not cure the misuse because it forces the preceding owner of the Combo pack to “forgo[] the first sale rights associated with the DVD and Blu-ray discs” or otherwise render the digital code “worthless.”[136] A hearing for the preliminary injunction motion was held on June 27, 2018, and Redbox filed a supplemental opposition brief on July 11, 2018, addressing additional changes to Disney’s licensing language.[137] 6.    Playboy’s Centerfold Copyright Suit Folds In February 2018, a District Judge in Los Angeles dismissed with leave to amend Playboy’s copyright infringement suit against the owner of the website BoingBoing.[138] Back in November 2017, Playboy had accused Happy Mutants, LLC—the owner of BoingBoing—of using the magazine’s centerfold photos without permission. The lawsuit pointed to a February 2016 post by BoingBoing that contained a link that directed viewers to a slideshow on a photo website that, at the time, contained the centerfold photos (it has since been taken down). BoingBoing responded that it did not create the offending content, and did not control the images or contribute to the infringement, and that if anything, its link constituted non-infringing fair use. Playboy responded that BoingBoing should not be permitted to knowingly link to copyright-infringing materials.[139] In his decision, the Judge Olguin stated that he was “skeptical” that Playboy had alleged facts to support its inducement or material contribution theories of copyright infringement, and cited the Ninth Circuit’s inducement theory as set forth in Perfect 10, Inc. v. Giganews, Inc.[140] The judge noted that BoingBoing’s fair use argument was premature at this early stage.[141] Rather than amend their complaint, in early March 2018, Playboy voluntarily dismissed its claim without prejudice.[142] D.    DMCA Developments 1.    Safe Harbor from Unfair Competition Claims In March 2018, the District Court for the Southern District of New York dismissed most of Capital Records’ state-law unfair competition claims against video-hosting website Vimeo, claims based on users’ posts to Vimeo’s site that are alleged to infringe pre-1972 copyrighted works. Previously, in June 2016, on an interlocutory appeal from a summary judgment order in the Southern District of New York, the Second Circuit held that the safe harbor provisions of the DMCA protect internet service providers from claims of infringement when users post works protected by state copyright law.[143] After the Supreme Court denied plaintiffs’ petition for a writ of certiorari in March 2017,[144] the district court considered Vimeo’s motion to dismiss and found that Capital Records’ unfair competition claims, which are based on Vimeo’s alleged infringement, were also foreclosed by the safe harbor of the DMCA.[145] The court reasoned that “[a]pplying the DMCA safe harbor to unfair-competition claims founded on copyright infringement ensures that service providers are aware of the infringing activity that forms the basis for the claims brought against them.”[146] The court denied the motion to dismiss as to the instances in which Capital Records alleges that Vimeo had “red-flag knowledge” of the underlying infringement that would negate the protections of the DMCA safe harbor.[147] Motions for summary judgement are still pending. 2.    DMCA May Protect ISPs Without a Written Takedown Policy In March 2018, a Ninth Circuit panel ruled that a website hosting user-uploaded pornography was protected by the Digital Millennium Copyright Act’s safe harbor provisions, even though it lacked a written policy to terminate users who repeatedly infringed copyrights.[148] Back in 2011, pornography producer Ventura Content sued Motherless, alleging claims of direct, vicarious and contributory copyright infringement and of unlawful, unfair and fraudulent business practices in violation of California Business and Professions Code for allowing its users to upload clips of movies that Ventura Content had created and had not licensed to Motherless.[149] In response, Motherless claimed that it qualified for protection under the DMCA’s § 512 safe harbor provision, even though it did not have a written policy to terminate users who repeatedly infringed copyrights.[150] Motherless is owned and operated by a single person who reviewed videos individually for infringement, and described his policy as a “gut decision.”[151] The divided panel found that Motherless did adhere to a policy, even if it was unwritten, to get rid of users who repeatedly uploaded infringing copyright of porn producers, and therefore qualified for the safe harbor provision of the DMCA.[152] Ventura has sought rehearing en banc.[153] E.    First Amendment 1.    Right of Publicity a.    Court of Appeals Resolves Legal Feud in FX’s Favor On March 26, 2018, a California appeals court ruled that Olivia de Havilland’s suit against FX Network and co-defendants is barred by the First Amendment.[154] In March 2017, FX aired a docudrama, Feud: Bette and Joan, in which Catherine Zeta-Jones portrays de Havilland.[155] De Havilland sued FX in June 2017, alleging misappropriation, violation of her right of publicity, false light invasion of privacy, and “unjust enrichment.”[156] In September 2017, the trial court denied FX’s anti-SLAPP motion, and FX (supported by a number of media organizations) appealed. Now, the appeal court has reversed the lower court’s order on the motion to strike.[157] Applying the anti-SLAPP law’s two-step test, the Court of Appeal reversed, finding that the now-102-year-old de Havilland failed to present evidence to establish that she is likely to prevail on her claims at trial.[158] The court explained that the First Amendment protects expressive works, regardless of whether they are fact, fiction, or a combination thereof.[159] The court concluded that Feud‘s portrayal of de Havilland was transformative because its “‘marketability and economic value’ does not ‘derive primarily from [de Havilland’s] fame’ but rather ‘comes principally from . . . the creativity, skill, and reputation’ of Feud‘s creators and actors.”[160] The court also rejected de Havilland’s false light and unjust enrichment claims.[161] On July 11, 2018, the California Supreme Court denied de Havilland’s petition for review; the docket entry noted that Justice Cuéllar would have granted the petition. b.    Lohan v. Take-Two Interactive Software In March 2018, the Court of Appeals of New York affirmed the dismissal of a lawsuit filed by Lindsay Lohan, claiming that Take-Two violated her right of privacy by featuring a “look-a-like” character in Grand Theft Auto without her permission.[162] The court concluded that while an avatar may be a “portrait” for purposes of New York’s right of publicity statute, the avatar featured in Grand Theft Auto was not recognizable as Lohan.[163] In doing so, the court sidestepped larger First Amendment issues, including whether or not individuals featured in video games are subject to the state’s right of publicity law, which “makes it a misdemeanor to use a living person’s name, portrait or picture for advertising or trade purposes . . .”[164] The intermediate appellate court had confronted that issue, in 2016, finding that works of fiction or satire (like the video game) are not of “advertising” or “trade,” in the language of the statute.[165] But the state’s high court specifically declined to address the issue, ruling for Take-Two on the narrower ground that the woman in the video game was simply not recognizable as Lohan. c.    “Simpsonized” Character Is Not Actionable In February 2018, a California appeals court affirmed the dismissal of a lawsuit filed by Frank Sivero against Twentieth Century Fox for misappropriation of his name and likeness in The Simpsons.[166] On October 21, 2014, Sivero filed the complaint, alleging common law infringement of right of publicity, misappropriation of name and likeness, misappropriation of ideas, interference with prospective economic advantage, and unjust enrichment.[167] Fox moved to strike the complaint under California’s anti-SLAPP statute.[168] The appeals court found that the cause of action arose from protected activity within the meaning of the anti-SLAPP statute, and that Sivero then failed to carry his burden to prove the merits of his claim.[169] Here, the court found that Sivero’s character had been “Simpsonized,” and thus contained “significant transformative content,” insulating it against a right of publicity claim[170] The court explained: Louie, the alleged look-a-like, “is a cartoon character with yellow skin, a large overbite, no chin, and no eyebrows. Louie has a distinctive high-pitched voice which, as the trial court pointed out, has ‘no points of resemblance to [Sivero].'”[171] The court concluded that this was not a “trivial variation,” but rather, the creators had created something “recognizably [their] own.”[172] Like in Lohan’s case, the California court gave weight to the difference between the depicted character and the plaintiff alleging misappropriation. 2.    Defamation a.    HBO & John Oliver Prevail over Coal CEO In June 2017, coal CEO Robert Murray brought suit against John Oliver, Partially Important Productions, HBO, and Time Warner claiming that on Oliver’s show “Last Week Tonight,” the comedian defamed the coal magnate by depicting a “villainous” portrait of him.[173] The segment at issue was critical of the coal industry, referring to Murray as a “geriatric Dr. Evil.”[174] Oliver’s segment stated that a mining accident that killed nine people was at least partially the result of improper mining practices rather than an earthquake, as Murray’s company had claimed.[175] Murray filed the suit for defamation, false light invasion of privacy, and intentional infliction of emotional distress. Following remand, and in a single-page order, West Virginia state judge Jeffrey Cramer dismissed the action, agreeing entirely with HBO’s argument that Murray failed to state a claim for defamation.[176] The critical portions of Oliver’s segment that alleged facts were based on judicial opinions and government reports. Oliver’s more “personal” jabs at Murray—including the Austin Powers-inspired name-calling—qualified as satire protected under the First Amendment.[177] b.    Did Cosby’s Lawyer’s Statements Defame Accuser? Even after his criminal trial ended in a conviction in April 2018, Bill Cosby’s reckoning with the #metoo movement continues in the courts. The actor is defending a defamation action arising from his alleged sexual misconduct with the former supermodel Janice Dickinson, one of several women who has accused Cosby of drugging and raping her in the 1980s. Dickinson alleges that a 2014 press statement by Cosby’s former attorney calling her story “fabricated” and “an outrageous lie,” constitutes defamation.[178] In November 2017, a California appeals court allowed Dickinson’s suit to move forward, rejecting Cosby’s contention that his attorney’s statement was non-actionable opinion.[179] The court held that based on the totality of the circumstances, “a reasonable fact finder could conclude that the demand letter states or implies a provably false assertion of fact—specifically, that Cosby did not rape Dickinson, and she is lying when she said that he did.”[180] However, several courts examined nearly the same factual claims in other actions to reach different results. The First[181] and Third Circuits[182] dismissed actions brought by two other Cosby accusers on the grounds that Cosby’s lawyer’s statements constituted non-actionable opinions protected by the First Amendment. On July 12, 2018, in considering Cosby’s and Singer’s anti-SLAPP motions to strike following remand, Los Angeles Superior Court Judge Randolf Hammock dismissed the defamation claims against Singer, holding that actual malice could not be established regarding Singer’s statements without invading the attorney-client privilege.[183] That same day, Cosby filed his petition for writ of certiorari with the U.S. Supreme Court, asking the high court to determine whether Singer’s statement qualifies as an opinion under the Supreme Court’s 1990 holding in Milkovich v. Lorain Journal Co., 497 U.S. 1 (1990).[184] 3.    Public Fora in the 21st Century a.    @RealDonaldTrump Ruled a Public Forum President Trump’s use of Twitter as his favored communication platform is well known, and his tweets invariably lead to strong and diverse responses from other Twitter users. In a May 2018 ruling in Knight First Amendment Institute v. Trump, U.S. District Judge Naomi Reice Buchwald examined whether Trump’s and several of Trump’s close aides’ use of Twitter’s “blocking” feature—which prevents blocked users from viewing or replying to the blocker’s Tweets—violated the First Amendment rights of the seven plaintiffs, all of whom had been blocked by the President’s @realDonaldTrump’s account. The court ruled in plaintiffs’ favor, finding that the President’s account is a “designated” public forum operated by the government.[185] Thus, the President is prohibited from blocking other users because of their viewpoints—namely, in this case, for their criticisms of him. The decision does not hold, contrary to the criticisms leveled against it, that Twitter is public property or that a user violates the First Amendment every time he or she blocks a “troll” on the platform. Rather, commentators observed that “Twitter is how the president speaks to the people; replies on Twitter are how the people speak to each other, in a ‘place’ the government uses for expression and has opened to the public for expression as well,”[186] adapting First Amendment precedent to the political and technological realities of 2018. The 75-page ruling rejected the Justice Department’s argument that Trump was largely acting in a personal capacity and thus as a private individual, much like, as the DOJ argued, “giving a toast at a wedding or giving a speech at a fundraiser.”[187] In contrast, Judge Buchwald reasoned, through his Twitter “bio” and his use of the medium to comment on public policy, Trump portrays his account as presidential “and, more importantly, uses the account to take actions that can be taken only by the President as President,” referring to his use of the platform to propagate executive-order like decrees.[188] Furthermore, Buchwald said, the space below Trump’s tweets that show the public’s replies is a public forum, because it is “generally accessible to the public” and anyone with a Twitter account is able to view those responses, assuming that the user has not been blocked.[189] b.    Conservative Institution’s Lawsuit Against YouTube Fails In March 2018, U.S. District Judge Lucy Koh dismissed a censorship claim against YouTube and its parent company, Google, ruling that the online video-sharing platform is not a public forum subject to the First Amendment.[190] Plaintiff Prager University, a conservative media company owned by Dennis Prager, claimed that YouTube’s restricted mode, which filters out inappropriate content to protect young or sensitive viewers, was restricting access to Prager University videos about topics such as gun control and Islam while permitting access to left-leaning videos by liberal commentators like Bill Maher on the same topics.[191] Amongst other claims, PragerU’s complaint alleged that Google and YouTube’s practice of selectively restricting PragerU’s videos—and thus the group’s speech—violates the U.S. and California constitutions. In response, Google claimed its own First Amendment protection, arguing that because YouTube is a private company, it is not subject to laws prohibiting governmental restrictions on free speech. In dismissing the case, Judge Koh ruled that YouTube is not a “state actor” required to provide free speech protection merely because the company operates its private property as a forum for expression of diverse perspectives. Rather, “[Google and YouTube] are private entities who created their own video-sharing social media website and make decisions about whether and how to regulate content that has been uploaded on that website.”[192] Additionally, Plaintiff failed to show “that defendants have engaged in one of the very few public functions that were traditionally exclusively reserved to the state.”[193] 4.    California’s IMDB-Targeted Age Discrimination Law Declared Unconstitutional In February 2017, Judge Chhabria of the Northern District of California issued a preliminary injunction enjoining California from enforcing AB 1687—a law enacted to address age discrimination in Hollywood that would have prevented in certain instances the popular industry website IMDB.com from posting actors’ ages—writing that “it’s difficult to imagine how AB 1687 could not violate the First Amendment.”[194] In February 2018, Judge Chhabria made the injunction permanent.[195] The court held that the law “singles out specific, non-commercial—age-related information—for differential treatment.”[196] Applying strict scrutiny, the court held that California did not prove that the measure was “actually necessary” to combat age discrimination.[197] Judge Chhabria noted that “the record provides no evidence that California explored less-speech-restrictive alternatives,” such as better enforcement of preexisting anti-discrimination laws.[198] He also explained that the law was both under- and over-inclusive, and therefore not narrowly tailored.[199] The law only bans one speaker from sharing age-related information and only requires IMDb to remove some age-related information.[200] Moreover, the law is not restricted to age-related information of those individuals protected by age discrimination laws.[201] F.    Trademark Litigation 1.    No TRO Against Movie Trailer for The Happytime Murders Sesame Workshop, the makers of Sesame Street, brought suit in the Southern District of New York against STX Entertainment over its upcoming film The Happytime Murders. The film, a raunchy comedy starring Melissa McCarthy, follows two detectives—McCarthy and her partner, a puppet named Phil Phillips—as they work to solve the murders of the former cast of a classic puppet television show. Sesame Workshop sued the film’s backers, seeking a restraining order to block the production companies from using the phrase “No Sesame, All Street” in trailers and promotions for the film, alleging that the tagline seeded “confusion in the mind of the public as to the association between the movie, Sesame Street, and its beloved Muppets.”[202] STX Entertainment responded that the phrase “No Sesame, All Street” actually distinguished its film from Sesame Street. The court sided with STX Entertainment, denying Sesame Workshop’s bid for a restraining order on May 31, 2018.[203] Sesame Workshop dismissed the suit shortly thereafter. 2.     Generic TDLs Receive Protection After All? In August 2017, a federal district court in Virginia reversed a decision of the Trademark Trial and Appeal Board (“TTAB”) that “Booking.com” could not be registered as a trademark, ruling that the addition of “.com” to a generic term makes it potentially protectable under the Lanham Act.[204] The ruling specifically split from precedents in the Federal Circuit that have found the addition of a top-level domain to a generic word does not render it protectable, including the domain names Mattress.com and Hotels.com, finding that precedent unpersuasive.[205] Even though it was successful in that TTAB appeal, the court ordered Booking.com to pay the U.S. Patent and Trademark Office $76,000 in attorneys’ fees under the PTO’s new legal interpretation that the agency must be reimbursed such fees after certain types of patent and trademark appeals, regardless of the outcome. On April 11, 2018, Booking.com asked the Fourth Circuit to strike down that new policy, arguing that it violates the First Amendment right to “petition the government for redress of grievances.”[206] A separate case challenging the same PTO policy is currently pending en banc before the Federal Circuit. As of the date of this writing, neither the Fourth Circuit nor the Federal Circuit has ruled on this issue. 3.    Suit Over Seussian Trekkie Book Dismissed ComicMix LLC created a book entitled Oh, the Places You’ll Boldly Go! that combines creative elements from the Star Trek science fiction franchise with the underlying Dr. Seuss classic Oh, the Places You’ll Go! (“OTPYG“). Dr. Seuss Enterprises brought a trademark, copyright infringement, and unfair competition action against ComicMix for the unauthorized exploitation of Dr. Seuss’s works. Dr. Seuss Enterprises alleges that the new book misappropriates key protected elements of OTPYG, including its trademarks. On December 7, 2017, the district court denied ComicMix’s motion to dismiss the amended complaint on the basis that the book is protected by fair use and nominative fair use doctrines. But on May 21, 2018, the court granted ComicMix’s motion for judgment on the pleadings with respect to the trademark claims.[207] ComicMix had argued that its work merited First Amendment protection under Rogers v. Grimaldi, which tasks judges with determining whether the use of a mark has artistic relevance, and if so, whether the work is explicitly misleading.[208] Previously, the court had held that a potential exception to the First Amendment protection provided in Rogers for misleading titles that are confusingly similar to other titles perhaps applied to ComicMix’s work. But in light of the Ninth Circuit’s recent decision in the Empire case, which treated the Rogers test similarly to the likelihood-of-confusion test, the court held that this exception from Rogers did not apply, dismissing Dr. Seuss Enterprises’ trademark claims.[209] G.    Music 1.    “Blurred Lines” and a Narrow Ruling at 9th Circuit In March 2018, in a hotly awaited decision, the Ninth Circuit upheld on narrow grounds a 2015 jury’s finding that Robin Thicke and Pharrell Williams’s song “Blurred Lines” infringed the copyright of Marvin Gaye’s “Got to Give It Up.”[210] In the appeals court’s 2-1 decision, the majority focused largely on questions of procedure and trial strategy in declining to review a summary judgment motion, noting a full jury trial had taken place and Thicke and Williams’ lawyers had not preserved the issue by filing a motion.[211] The majority explained that after a jury trial, a court must measure the verdict against the weight of the evidence and such verdict may only be overturned in “an absolute absence of evidence supporting the jury’s verdict.”[212] With this, the majority upheld the damages award of $5.3 million. In dissent, Judge Jacqueline Nguyen sharply criticized the majority and did not hesitate to engage with the substantive legal issues and industry concerns that the trial court result created, writing that, “[t]he majority allows the Gayes to accomplish what no one else has before: copyright a musical style.”[213] In doing so, she wrote, “[t]he majority establishes a dangerous precedent that strikes a devastating blow to future musicians and composers everywhere.”[214] Judge Nguyen concluded that the two songs differ in melody, harmony, and rhythm, and Gaye’s expert witness “. . . identified four similar elements, none of which is protectable: (a) each phrase begins with repeated notes; (b) the phrases have three identical pitches in a row in the first measure and two in the second measure; (c) each phrase begins with the same rhythm; and (d) each phrase ends on a melisma (one word sung over multiple pitches).”[215] She would have concluded that such evidence is not appropriate to support an infringement verdict.[216] Nguyen seemed to encourage courts to appoint their own experts when the parties’ experts seem to have “starkly different” assessments of the works’ similarity.[217] The majority, in rebutting Nguyen’s dissent, stated that “[t]he dissent’s position violates every controlling procedural rule involved in this case” and “improperly tries, after a full jury trial has concluded, to act as judge, jury and executioner.”[218] On July 11, the Ninth Circuit declined to rehear the case en banc and issued an amended opinion.[219] 2.    Wolfgang’s Vault Found Liable for Streaming Recordings of Live Performances In April 2018, U.S. District Judge Edgardo Ramos found that Wolfgang’s Vault, a collection of thousands of live concert performances, and its owners had committed a large-scale copyright infringement by streaming its collection to the public, but stopped short of issuing an injunction, finding that the availability of the recordings is in the public interest, while suggesting a licensing deal could remedy the injury to plaintiffs.[220] In 2015, plaintiffs (music publishers and other rights holders) alleged that Wolfgang’s Vault lacked the requisite mechanical licenses to stream a collection of works.[221] Judge Ramos held that Defendants had failed to properly license 206 concert videos, pursuant to Section 115 of the U.S. Copyright Act.[222] Judge Ramos rejected the Defendants’ argument that certain contracts entered into with three major record labels were proof of the necessary consent needed.[223] To this same point, Judge Ramos underscored the fact that Defendants could not produce a single performance agreement.[224] A pending trial will explore whether the copyright infringement was willful, meaning that Plaintiffs could be entitled to statutory damages of up to $150,000 per work.[225] 3.    No Moral Rights for Foreign “Big Pimpin” Sample Holder On May 31, 2018, after years of legal action regarding Jay-Z’s 1999 hit, “Big Pimpin,” the Ninth Circuit Court of Appeals affirmed a win for Shawn “Jay-Z” Carter and other defendants by refusing to allow the Egyptian plaintiff the ability to enforce moral rights over a sample used in the song.[226] Judge Bea wrote that “[s]ince our federal law does not accord protection of moral rights to American copyright holders as to non-visual art, neither does it recognize [Plaintiff’s] claim to moral rights,” and “[t]hat [Plaintiff] retains moral rights in Egypt does him no good here.”[227] The case involved the hook of “Big Pimpin,” which came from a song titled “Khosara Khosara,” composed by Baligh Hamday for a 1960 Egyptian film.[228] Shortly after Jay-Z’s song came out in 1999, its producer, Timbaland paid EMI for a license to use the song.[229] Plaintiff, an heir of the composer Hamday, sought to enforce moral rights by alleging his uncle’s song had been “mutilated” (a term of art that moral rights, common in foreign countries, may protect against). The District Court first found the suit barred due to delay, but the case was revived following the Supreme Court’s Petrella decision and went to trial in 2015—with the main issue being whether Hamday’s heirs retained an inalienable moral right under Egyptian law—although District Judge Christina Snyder cut the suit short, granting Jay-Z’s motion for a judgment as a matter of law.[230] Judge Snyder held that Plaintiff lacked standing to pursue the copyright infringement claim. The Ninth Circuit upheld that ruling and further held that the foreign plaintiff’s moral rights are not enforceable in the United States.       [1]        United States v. AT&T Inc., No. CV 17-2511 (RJL), 2018 WL 2930849 (D.D.C. June 12, 2018); Press Release, AT&T Inc., AT&T Completes Acquisition of Time Warner Inc. (June 14, 2018), http://about.att.com/story/att_completes_acquisition_of_time_warner_inc.html.       [2]        Press Release, AT&T Inc., AT&T Debuts “WatchTV” With 2 New Unlimited Wireless Plans (June 21, 2018), http://about.att.com/newsroom/watchtv_app_with_unlimited_wireless.html.       [3]        Brent Kendall & Drew FitzGerald, Justice Department Appeals Ruling Allowing AT&T-Time Warner Merger, The Wall Street Journal (July 12, 2018), https://www.wsj.com/articles/justice-department-to-appeal-court-ruling-allowing-at-t-time-warner-merger-1531427031.       [4]        Liz Moyer, Comcast drops pursuit of 21st Century Fox assets, ending bidding war with Disney, CNBC (July 19, 2018), https://www.cnbc.com/2018/07/18/comcast-drops-pursuit-of-its-bid-for-21st-century-fox-assets.html.       [5]        Keach Hagey and Erich Schwartzel, 21st Century Fox Agrees to Higher Offer from Disney, The Wall Street Journal (June 20, 2018), https://www.wsj.com/articles/fox-disney-announce-new-deal-1529496937.       [6]        Id.       [7]        Press Release, The Walt Disney Company, U.S. Department of Justice Clears Disney Acquisition of 21st Century Fox (June 27, 2018), https://www.wsj.com/articles/PR-CO-20180627-911016.       [8]        Id.       [9]        Edmund Lee and Brooks Barnes, Disney and Fox Shareholders Approve Deal, Ending Corporate Duel, N.Y. Times (July 27, 2018), https://www.nytimes.com/2018/07/27/business/media/disney-fox-merger-vote.html.      [10]        Shalini Ramachandran, Comcast Drops Bid for Fox Assets, Will Focus on Pursuit of Sky, The Wall Street Journal (July 19, 2018), https://www.wsj.com/articles/comcast-drops-bid-for-fox-assets-will-pursue-sky-1532004447/.      [11]        Id.      [12]        Andria Calatayud, Fox’s Sky News Plan Meets Criteria: U.K. Official, Marketwatch (June 19, 2018), https://www.marketwatch.com/story/foxs-sky-news-plan-meets-criteria-uk-official-2018-06-19.      [13]        Adam Rhodes, Sky Brushes Off Fox As $41B Comcast Offer Rolls In, Law360 (Apr. 25, 2018), https://www.law360.com/media/articles/1037029/sky-brushes-off-fox-as-41b-comcast-offer-rolls-in.      [14]        Calatayud, supra note 12.      [15]        Jessica Toonkel, Viacom, CBS CEOs discuss potential merger – sources, Reuters (Jan. 25, 2018), https://ca.reuters.com/article/businessNews/idCAKBN1FE2XT-OCABS; Cynthia Littleton, CBS and Viacom Merger Discussions Set to Accelerate, but Valuation Remains a Big Hurdle, Variety (Mar. 23 2018), Variety (May 14, 2018), https://variety.com/2018/tv/news/cbs-viacom-merger-talks-deal-1202735168/.      [16]        Cynthia Littleton, CBS Sues Share Redstone and National Amusements in Bid to Block Viacom Merger, Variety (May 14, 2018), https://variety.com/2018/biz/news/cbs-sues-shari-redstone-national-amusements-in-bid-to-block-viacom-merger-1202809526/.      [17]        Meg James, Shari Redstone sues CBS, taking aim at Leslie Moonves, L.A. Times (May 29, 2018), http://www.latimes.com/business/hollywood/la-fi-ct-nai-redstone-sues-cbs-20180529-story.html.      [18]        Meg James, CBS shareholders sue Shari Redstone, National Amusements, L.A. Times (May 31, 2018), http://www.latimes.com/business/hollywood/la-fi-ct-redstone-shareholder-lawsuit-20180531-story.html.      [19]        Gene Maddaus, Ron Burkle Sues Lantern Capital Over Weinstein Co. Costs, Variety (July 16, 2018), https://variety.com/2018/biz/news/ron-burkle-lantern-suit-1202874814/.      [20]        Id.      [21]        Elise Sandberg, ‘Stranger Things’ Producer Inks Massive Overall Deal With Netflix, Hollywood Reporter (Dec. 6, 2017), https://www.hollywoodreporter.com/live-feed/netflix-inks-deal-shawn-levys-21-laps-1064839.      [22]        Debra Birnbaum and Cynthia Littleton, Ryan Murphy Inks Mammoth Overall deal with Netflix, Variety (Feb. 13, 2018), https://variety.com/2018/tv/news/ryan-murphy-netflix-overall-deal-fox-1202698305/.      [23]        Id.      [24]        Natalie Jarvey and Lesley Goldberg, ‘Handmaid’s Tale’ Showrunner Bruce Miller Inks Overall Deal at Hulu, The Hollywood Rep. (Apr. 30, 2018), https://www.hollywoodreporter.com/live-feed/handmaids-tale-showrunner-bruce-miller-inks-deal-at-hulu-1106790.      [25]        Id.      [26]        John Koblin, Jordan Peele Signs TV Deal With Amazon, N.Y. Times (June 5, 2018), https://www.nytimes.com/2018/06/05/business/media/amazon-jordan-peele.html.      [27]        Press Release, WndrCo, WndrCo Announces Initial Capital Raise of $1 Billion for New Media Platform (Aug. 7, 2018), https://www.businesswire.com/news/home/20180807005288/en/WndrCo-Announces-Initial-Capital-Raise-1-Billion.      [28]        Kevin Tran, Netflix furthers US cable partnership push, Business Insider (Jan. 31, 2018), http://www.businessinsider.com/netflix-furthers-us-cable-partnership-push-2018-1.      [29]        Bruce Haring, Comcast, Netflix Expand Partnership In Xfinity Packages, Deadline (Apr.13, 2018), https://deadline.com/2018/04/comcast-netflix-expand-partnership-in-xfinity-packages-1202363637/.      [30]        Sarah Perez, YouTube TV becomes first-ever presenting partner for the NBA Finals, following similar deal with MLB, TechCrunch (Mar. 26, 2018), https://techcrunch.com/2018/03/26/youtube-tv-becomes-first-ever-presenting-partner-for-the-nba-finals-following-similar-deal-with-mlb/.      [31]        Todd Spangler, YouTube TV Offers One-Week Credit After World Cup Outage, Variety (July 12, 2018), https://variety.com/2018/digital/news/youtube-tv-outage-one-week-credit-world-cup-1202872304/.      [32]        Todd Spangler, CBS All Access Available to Amazon Prime Members in U.S. as Add-On Channel, Variety (Jan. 5, 2018), https://variety.com/2018/digital/news/cbs-all-access-amazon-prime-channel-1202654346/.      [33]        Sahil Patel, Amazon has become an important distributor for over-the-top networks, Digiday (June 4, 2018), https://digiday.com/media/amazon-has-become-an-important-middle-man-for-over-the-top-networks/.      [34]        Tom Zanki, ‘China’s Netflix’ Leads 6 IPO Launches Exceeding $3B Total, LAW360 (March 19, 2018), https://www.law360.com/articles/1023526.      [35]        Id.      [36]        Tom Zanki, Chinese Streaming Co Leads 4 IPOs Netting $828M, LAW360 (March 28, 2018), https://www.law360.com/articles/1027175/chinese-streaming-co-leads-4-ipos-netting-828m.      [37]        Id.      [38]        Patrick Brzeski, Blumhouse Teams with Tang Media Partners to Make Horror Movies in China, The Hollywood Reporter (June 18, 2018), https://www.hollywoodreporter.com/news/blumhouse-teams-tang-media-partners-make-horror-movies-china-1120827.      [39]        Nancy Tartaglione, Blumhouse Partners With Tang Media On Chinese Horror/Thriller Pics, Deadline (June 18, 2018), https://deadline.com/2018/06/blumhouse-tang-media-chinese-horror-thriller-movies-deal-american-nightmare-1202412372/.      [40]        Cheang Ming, China’s Box Office Recently Beat The US, And Is Now On The Cusp Of A ‘New Growth Cycle,’ CNBC (May 24, 2018), https://www.cnbc.com/2018/05/24/china-beats-us-box-office-in-q1-and-is-entering-new-growth-cycle-hsbc.html.      [41]        Id.      [42]        J. DeMorel, Alibaba Buys State in Wanda Film in 41.2 Billion Share Sale, Bloomberg (February 5, 2018), https://www.bloomberg.com/news/articles/2018-02-05/alibaba-takes-stake-in-wanda-film-as-part-of-1-2-billion-sale.      [43]        Id.      [44]        Id.      [45]        Jason Raish, Can China’s Tech Giants Restore Confidence in Wanda?, The Hollywood Reporter (February 16, 2018), https://www.hollywoodreporter.com/news/can-chinas-tech-giants-restore-confidence-wanda-1084151.      [46]        Patrick Brzeski, China’s Wanda Plans $1.78B Consolidation of Film Assets, The Hollywood Reporter (June 25, 2018), https://www.hollywoodreporter.com/news/chinas-wanda-plans-178b-consolidation-film-assets-1123282.      [47]        Vivienne Chow, Wanda Unveils $1.77 Billion Plan to Consolidate Film Units, Variety (June 26, 2018), https://variety.com/2018/film/news/dalian-wanda-consolidate-film-units-china-1202857977/.      [48]        Brzeski, supra note 46.      [49]        Id.      [50]        Press Release, Epic Games, Fortnite Pro Am 2018, https://www.epicgames.com/fortnite/en-US/pro-am2018.      [51]        Justin Kirkland, 10 Celebrities Who Play Fortnite, Ranked, Esquire (May 11, 2018), https://www.esquire.com/entertainment/g20139550/celebrities-playing-fortnite/; Paul Tassi, Twitch Comments on the Record-Breaking Drake-Ninja ‘Fortnite’ Stream, Forbes (Mar. 15, 2018), https://www.forbes.com/sites/insertcoin/2018/03/15/twitch-comments-on-the-record-breaking-drake-ninja-fortnite-stream/#4a4bbb5f46c6.      [52]        Max Miceli, Epic Games Unveils Esports Plans With Fortnite World Cup Coming in 2019, The Esports Observer (June 25, 2018), https://esportsobserver.com/epic-games-fortnite-world-cup/.      [53]        Id.      [54]        Blake Hester, Tencent Invests $15 Million to Bring ‘Fortnite’ to China, Variety (Apr. 24, 2018), https://variety.com/2018/gaming/news/fortnite-tencent-china-1202785279/.      [55]        Patrick Hipes, ICM Partners Inks Partnership With Esports Talent Agency Evolved, Deadline Hollywood (June 14, 2018), https://deadline.com/2018/06/icm-partners-esports-evolved-joint-venture-1202410240/.      [56]        Id.      [57]        Jordan Crook, PlayVS, Bringing Esports Infrastructure to High Schools, Picks Up $15 Million, Techcrunch (June 4, 2018), https://techcrunch.com/2018/06/04/playvs-bringing-esports-infrastructure-to-high-schools-picks-up-15-million/.      [58]        Id.      [59]        Id.      [60]        Keith Collins, Net Neutrality Has Officially Been Repealed. Here’s How That Could Affect You., N.Y. TIMES (June 11, 2018), https://www.nytimes.com/2018/06/11/technology/net-neutrality-repeal.html.      [61]        Cecilia Kang, Senate Democrats Win Vote on Net Neutrality, a Centerpiece of 2018 Strategy, N.Y. TIMES (May 16, 2018), https://www.nytimes.com/2018/05/16/technology/net-neutrality-senate.html.      [62]        Cecilia Kang, Flurry of Lawsuits Filed to Fight Repeal of Net Neutrality, N.Y. Times (Jan. 16, 2018), https://www.nytimes.com/2018/01/16/technology/net-neutrality-lawsuit-attorneys-general.html.      [63]        Kelcee Griffis, 9th Cir. Hands Net Neutrality Litigation to DC Circ., Law360 (Mar. 28, 2018), https://www.law360.com/media/articles/1027383.      [64]        Klint Finley, New California Bill Restores Strong Net Neutrality Protection, Wired (July 5, 2018), https://www.wired.com/story/new-california-bill-restores-strong-net-neutrality-protections/; Klint Finley, Washington State Enacts Net Neutrality Law, In Clash With FCC, Wired (Mar. 5, 2018), https://www.wired.com/story/washington-state-enacts-net-neutrality-law-in-clash-with-fcc/.      [65]        Adam Satariano, What the G.D.P.R., Europe’s Tough New Data Law, Means For You, N.Y. Times (May 6, 2018), https://www.nytimes.com/2018/05/06/technology/gdpr-european-privacy-law.html.      [66]        Kieren McCarthy, US government weighs in on GDPR-Whois debacle, orders ICANN to go probe GoDaddy, The Register (Apr. 17, 2018),  https://www.theregister.co.uk/2018/04/17/us_government_whois_debacle/.      [67]        Mike Fleming Jr., It Will Soon Be Illegal For Studios To Verify Salary Quotes: Hollywood Dealmakers Brace For California Labor Code 432.3, Deadline (Dec. 13, 2017), https://deadline.com/2017/12/hollywood-dealmaking-california-labor-code-432-3-salary-quotes-1202225985/.      [68]        Philip Bonoli, Studios And Agencies Prepare For The Labor Code 432.3 Earthquake, Forbes (Dec. 13, 2017), https://www.forbes.com/sites/legalentertainment/2017/12/13/studios-and-agencies-prepare-for-the-labor-code-432-3-earthquake/#221350426509.      [69]        Eriq Gardner, Ozzy Osbourne Brings Antitrust Lawsuit Against AEG for Tying London and L.A. Venues, The Hollywood Rep. (Mar. 21, 2018), http://www.hollywoodreporter.com/thr-esq/ozzy-osbourne-brings-antitrust-lawsuit-aeg-tying-london-la-venues-1096448.      [70]        Id.      [71]        Id.      [72]        Id.      [73]        Id.      [74]        Eriq Gardner, AEG Says Ozzy Osbourne Lawsuit Isn’t What It Pretends to Be, The Hollywood Rep. (Jun. 4, 2018), http://www.hollywoodreporter.com/thr-esq/aeg-says-ozzy-osbourne-lawsuit-isnt-what-it-pretends-be-1116729.      [75]        Id.      [76]        Id.      [77]        Bonnie Eslinger, Coachella Owner Faces Antitrust Suit Over Artist Controls, Law360 (Apr. 9, 2018), http://www.law360.com/articles/1031313/coachella-owner-faces-antitrust-suit-over-artist-controls.      [78]        Eriq Gardner, AEG Faces Antitrust Lawsuit over Territorial Restrictions for Coachella Artists, The Hollywood Rep. (Apr. 10, 2018), http://www.hollywoodreporter.com/thr-esq/aeg-faces-antitrust-lawsuit-territorial-restrictions-coachella-artists-1101313.      [79]        Id.      [80]        Id.      [81]        Id.      [82]        Eriq Gardner, Disney Headed to Trial Over ‘Turner & Hooch’ Profits, The Hollywood Rep. (May 7, 2018), https://www.hollywoodreporter.com/thr-esq/disney-headed-trial-turner-hooch-profits-1109326.      [83]        Daniel Siegal, Disney Must Face ‘Turner & Hooch’ Royalty Fraud Claim, Law360 (May 4, 2018), https://www.law360.com/articles/1040685/disney-must-face-turner-hooch-royalty-fraud-claim.      [84]        Id.      [85]        Id.; Gardner, supra note 82.      [86]        Id.      [87]        Id.     [88]       Eriq Gardner, Judge Judy’s $47 Million Salary Isn’t Too Much, Rules Real Judge, The Hollywood Rep. (April 5, 2018), https://www.hollywoodreporter.com/thr-esq/judge-judys-47-million-salary-isnt-rules-real-judge-1100081.      [89]        Id.      [90]        Id.      [91]        Id.      [92]        Id.      [93]        Eriq Gardner, Judge Allows ‘Columbo’ Fraud Lawsuit Against Universal, The Hollywood Rep. (Feb. 9, 2018), https://www.hollywoodreporter.com/thr-esq/judge-allows-columbo-fraud-lawsuit-universal-1083344.      [94]        Id.      [95]        Id.      [96]        Id.      [97]        Goldman v. Breitbart News Network, LLC, No. 17-CV-3144, 2018 WL 911340, at *1 (S.D.N.Y. Feb. 15, 2018).      [98]        Id. at *2.      [99]        Id. at *3 (quoting Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417, 430 (1984)).    [100]        Id. at *4.    [101]        Id. at *3 (quoting H.R. Rep. 94–1476, 47, 51 (1976)).    [102]        Id. at *1.    [103]        Id. at *5.    [104]        Id.    [105]        Id. at *8.    [106]        Id. at *9.    [107]        Id. at *10.    [108]        Bill Donahue, Embedded Tweet Copyright Case Sent To 2nd Circ., Law360 (Mar. 20, 2018), https://www.law360.com/articles/1024012.    [109]        Heavy, Inc. v. Goldman, Case No. 18-910, Dkt. 35 (2d Cir. July 17, 2018).    [110]        Fox News Network, LLC v. TVEyes, Inc., 883 F.3d 169, 174 (2d Cir. 2018). See also Bill Donahue, Siding With Fox 2nd Circ. Says TVEyes Is Not Fair Use, Law360 (Feb. 27, 2108), https://www.law360.com/media/articles/1016495.    [111]        TVEyes, 883 F.3d at 173–74.    [112]        Id. at 174    [113]        Id. at 174, 176–79.    [114]        Id. at 174, 180.    [115]        Id. at 180, 181.    [116]        Bill Donahue, 2nd Circ. Won’t Rehear TVEyes Fair Use Case, Law360 (May 15, 2018), https://www.law360.com/articles/1043784/2nd-circ-won-t-rehear-tveyes-fair-use-case.    [117]        Eriq Gardner, ‘Cosby Show’ Producer Sues BBC for Using Clips in Bill Cosby Doc, The Hollywood Rep. (Nov. 6, 2017), https://www.hollywoodreporter.com/thr-esq/cosby-show-producer-sues-bbc-using-clips-bill-cosby-doc-1055167.    [118]        Eriq Gardner, BBC Points to Geoblocking in Bid To Defeat Lawsuit Over Use of ‘Cosby Show’ Clips, The Hollywood Rep. (Jan. 12, 2018), https://www.hollywoodreporter.com/thr-esq/bbc-points-geoblocking-bid-defeat-lawsuit-use-cosby-show-clips-1074282; The Carsey-Werner Co., LLC v. British Broad. Corp., No. CV 17-8041 PA (ASX), 2018 WL 1083550, at *1 (C.D. Cal. Feb. 23, 2018).    [119]        Id.; see also Eriq Gardner, BBC Points to Geoblocking in Bid To Defeat Lawsuit Over Use of ‘Cosby Show’ Clips, The Hollywood Rep. (Jan. 12, 2018), https://www.hollywoodreporter.com/thr-esq/bbc-points-geoblocking-bid-defeat-lawsuit-use-cosby-show-clips-1074282.    [120]        Carsey-Werner Co., 2018 WL 1083550, at *1.    [121]        Id. at *6.    [122]        Id. at *7.    [123]        See Complaint, Rearden LLC, et al. v. The Walt Disney Co., et al., No. 17-cv-04006, 2017 WL 3015899 (N.D. Cal. July 17, 2017).    [124]        See id.    [125]        See Reply in Support of Defendants’ Motion to Dismiss, Rearden LLC, et al. v. The Walt Disney Co., et al., No. 17-cv-04006, 2017 WL 7716172 (N.D. Cal. Nov. 9, 2017).    [126]        Rearden LLC v. Walt Disney Co., 293 F. Supp. 3d 963, 970 (N.D. Cal. 2018).    [127]        See First Amended Complaint, Rearden LLC, et al. v. The Walt Disney Co., et al., No. 17-cv-04006, 2018 WL 2948187 (N.D. Cal. Mar. 6, 2018).    [128]        See Notice of Motions and Motions for Partial Dismissal of First Amended Complaints, Rearden LLC, et al. v. The Walt Disney Co., et al., No. 17-cv-04006, 2018 WL 29498109 (N.D. Cal. Apr. 5, 2018).    [129]        See Bill Donahue, Hollywood Giants Must Face Copyright Claims Over Digital FX, Law360 (June 19, 2018), https://www.law360.com/articles/1054886/hollywood-giants-must-face-copyright-claims-over-digital-fx.    [130]        Disney Enterprises, Inc. v. Redbox Automated Retail, LLC, No. 2:17-cv-08655, Dkt. 1 (C.D. Cal. Nov. 30, 2017).    [131]        Disney Enterprises, Inc. v. Redbox Automated Retail, LLC, No. 2:17-cv-08655, Dkt. 74 (C.D. Cal. Feb. 20, 2018).    [132]        Id. at 17.    [133]        Id. at 18.    [134]        Dave Simpson, Term Changes Don’t Fix Disney’s Copyright Misuse: Redbox¸ Law360 (May 10, 2018), https://www.law360.com/articles/1042340/term-changes-don-t-fix-disney-s-copyright-misuse-redbox.    [135]        Disney Enterprises, Inc. v. Redbox Automated Retail, LLC, No. 2:17-cv-08655, Dkt. 86 at 2 (C.D. Cal. Apr. 9, 2018).    [136]        Disney Enterprises, Inc. v. Redbox Automated Retail, LLC, No. 2:17-cv-08655, Dkt. 94 at 12 (C.D. Cal. May 7, 2018).    [137]        Disney Enterprises, Inc. v. Redbox Automated Retail, LLC, No. 2:17-cv-08655, Dkt. 113 (C.D. Cal. Jul. 11, 2018).    [138]        Kat Greene, Playboy May Amend Centerfold Copyright Suit, Judge Rules, Law360 (February 15, 2018), https://www.law360.com/articles/1012972.    [139]        Id.    [140]        Playboy Entm’t Grp. Inc. v. Happy Mutants, LLC, No. CV-178140, 2018 WL 2315936, at *1 (C.D. Cal. Feb. 14, 2018).    [141]        Id. at *1, n.1.    [142]        See Response to Order to Show Cause, Playboy Entertainment Group, Inc. v. Happy Mutants, LLC, Case No. 2:17-cv-08140-FMO-PLA (March 12, 2018).    [143]        Capitol Records, LLC v. Vimeo, LLC, 826 F.3d 78 (2d Cir. 2016).    [144]        Capitol Records, LLC v. Vimeo, LLC, 137 S. Ct. 1374 (2017).    [145]        Capitol Records, LLC v. Vimeo, LLC, No. 09-CV-10101, 2018 WL 1634123, at *6 (S.D.N.Y. Mar. 31, 2018).    [146]        Id. at *4.    [147]        Id. at *6.    [148]        Dave Simpson, Split 9th Circ. Tosses Porn Co. Copyright Suit, Law360 (March 14, 2018), https://www.law360.com/media/articles/1022316.    [149]        Id.    [150]        Id.    [151]        Id.    [152]        Id.    [153]        Id.    [154]        de Havilland v. FX Networks, LLC, 21 Cal. App. 5th 845 (2018), review filed (May 4, 2018).    [155]        Id. at 851.    [156]        Id.    [157]        de Havilland, 21 Cal. App. 5th at 845.    [158]        Id. at 856, 870–71.    [159]        Id. at 849.    [160]        Id. at 864.    [161]        Id. at 864–67.    [162]        Lohan v. Take-Two Interactive Software, Inc., 97 N.E.3d 389, 392–93 (2018).    [163]        Id. at 122.    [164]        Id. at 119 (internal quotations omitted).    [165]        Bill Donahue, NY Top Court Says ‘Game Over’ For Lohan’s ‘GTA V’ Suit, Law360 (Mar. 29, 2018), https://www.law360.com/media/articles/1027785/ny-top-court-says-game-over-for-lohan-s-gta-v-suit.    [166]        Sivero v. Twentieth Century Fox Film Corp., No. B266469, 2018 WL 833696 (Cal. Ct. App. Feb. 13, 2018), reh’g denied (Mar. 2, 2018), review denied (May 23, 2018); see also Eriq Gardner, Appeals Court Won’t Let ‘Goodfellas’ Actor Have Another Shot at ‘Simpsons’ Mob Character, The Hollywood Rep. (Feb. 13, 2018), https://www.hollywoodreporter.com/thr-esq/appeals-court-wont-let-goodfellas-actor-have-shot-at-simpsons-mob-character-1084379.    [167]        Sivero, 2018 WL 833696, at *1.    [168]        Id. at 2.    [169]        Id.    [170]        Id. at 10.    [171]        Id.    [172]        Id.    [173]        Ashley Cullins, John Oliver, HBO Beat Coal Executive’s Defamation Lawsuit, The Hollywood Rep. (Feb. 24, 2018), https://www.hollywoodreporter.com/thr-esq/john-oliver-hbo-beat-coal-executives-defamation-lawsuit-1088133.    [174]        See id.    [175]        See id.    [176]        See Marshall Cty. Coal Co. v. Oliver, No. 17-C-124, 2018 WL 1082525, at *1 (W. Va. Cir. Ct. 2018).    [177]        See Amy B. Wang, A coal exec sued John Oliver for calling him a ‘geriatric Dr. Evil.’ A judge tossed the case, The Washington Post (Feb. 26, 2018), https://www.washingtonpost.com/news/arts-and-entertainment/wp/2018/02/26/a-coal-exec-sued-john-oliver-for-calling-him-a-geriatric-dr-evil-a-judge-tossed-the-case/.    [178]        See Eriq Gardner, Bill Cosby Asking Supreme Court to Review Janice Dickinson Defamation Lawsuit, The Hollywood Rep. (June 4, 2018), https://www.hollywoodreporter.com/thr-esq/bill-cosby-asking-supreme-court-review-janice-dickinson-defamation-lawsuit-1116912.    [179]        See Dickinson v. Cosby, 17 Cal. App. 5th 655, 660-61 (2017).    [180]        See id. at 687.    [181]        See McKee v. Cosby, 874 F.3d 54, 62 (1st Cir. 2017).    [182]        See Hill v. Cosby, 665 F. App’x 169, 177 (3d Cir. 2016).    [183]        Eriq Gardner, Bill Cosby’s Ex-Lawyer Marty Singer Escapes Janice Dickinson Lawsuit, The Hollywood Rep. (July 16, 2018), https://www.hollywoodreporter.com/thr-esq/bill-cosbys-lawyer-marty-singer-escapes-janice-dickinson-lawsuit-1127509.    [184]        Petition for Writ of Certiorari, Cosby v. Dickinson, No. 18-70.    [185]        Knight First Amendment Inst. at Columbia Univ. v. Trump, 302 F. Supp. 3d 541, 574-75 (S.D.N.Y. 2018).    [186]        Garrett Epps, What the @RealDonaldTrump Ruling Actually Means, The Atlantic (May 24, 2018), https://www.theatlantic.com/technology/archive/2018/05/what-the-realdonaldtrump-ruling-actually-means/561146/.    [187]        Bryan Fung and Hamza Shaban, Trump violated the Constitution when he blocked his critics on Twitter, a federal judge rules, The Washington Post (May 23, 2018), https://www.washingtonpost.com/news/the-switch/wp/2018/05/23/trump-cannot-block-twitter-users-for-their-political-views-court-rules/.    [188]        Knight First Amendment Inst., 302 F. Supp. 3d at 567.    [189]        Id. at 574.    [190]        See Prager Univ. v. Google LLC, No. 17-CV-06064-LHK, 2018 WL 1471939, at *8 (N.D. Cal. Mar. 26, 2018).    [191]        Eriq Gardner, Why Won’t Google Comment on a Lawsuit Accusing YouTube of Censoring Conservatives?, The Hollywood Rep. (Oct. 27, 2017), https://www.hollywoodreporter.com/thr-esq/why-wont-google-discuss-a-lawsuit-accusing-youtube-censoring-conservatives-1052497.    [192]        Prager Univ., 2018 WL 1471939, at *8.    [193]        Id. [194] IMDb.com, Inc. v. Becerra, No. 16-CV-06535-VC, 2017 WL 772346, at *1–2 (N.D. Cal. Feb. 22, 2017). [195] IMDb.com, Inc. v. Becerra, No. 16-CV-06535-VC, 2018 WL 979031, at *3 (N.D. Cal. Feb. 20, 2018). See also Eriq Gardner, California’s IMDb Age Censorship Law Declared Unconstitutional, The Hollywood Rep. (Feb. 20, 2018), https://www.hollywoodreporter.com/thr-esq/californias-imdb-age-censorship-law-declared-unconstitutional-1086540.    [196]        IMDb.com, 2018 WL 979031, at *2.    [197]        Id.    [198]        Id.    [199]        Id. at *3.    [200]        Id.    [201]        Id.    [202]        See RJ Vogt, Sesame Street Can’t Block Raunchy Movie Tagline In TM Row, Law360 (May 31, 2018), https://www.law360.com/articles/1048982/sesame-street-can-t-block-raunchy-movie-tagline-in-tm-row.    [203]        See id.    [204]        See Bill Donahue, Overturning TTAB, Judge Rules ‘Booking.com’ Not Generic, Law360 (Aug. 10, 2017), https://www.law360.com/articles/952925/overturning-ttab-judge-rules-booking-com-not-generic.    [205]        Id.    [206]        See Bill Donahue, Booking.com Asks Full 4th Cir. To Nix USPTO Atty Fee Rule, Law360 (Apr. 12, 2018), https://www.law360.com/articles/1032794/booking-com-asks-full-4th-circ-to-nix-uspto-atty-fee-rule.    [207]        See Eriq Gardner, ‘Star Trek’/Dr. Suess Mashup Creator Beats Trademark Claims, The Hollywood Rep. (May 22, 2018), https://www.hollywoodreporter.com/thr-esq/star-trek-dr-seuss-mashup-creator-beats-trademark-claims-1113911.    [208]        See id.; Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989).    [209]        See Gardner, supra note 207.    [210]        Ben Sisario, “Blurred Lines” Verdict Upheld by Appeals Court, The New York Times (Mar. 21, 2018), https://www.nytimes.com/2018/03/21/business/media/blurred-lines-marvin-gaye-copyright.html.    [211]        Bill Donahue, “Blurred Lines” Ruling Leaves Big Questions Unanswered, Law360 (Mar. 21, 2018), https://www.law360.com/articles/1024899/.    [212]        Williams et al. v. Gaye et al., No. 15-56880, 2018 WL 3382875, at *21 (9th Cir. Mar. 21, 2018) (Amend. Op.).    [213]        Williams, 2018 WL 3382875, at *23.    [214]        Id.    [215]        Id. at *27.    [216]        Id. at *31-32.    [217]        Id. at *33, n.14.    [218]        Id. at *19.    [219]        Eriq Gardner, Appeals Court Won’t Rehear “Blurred Lines” Case, The Hollywood Rep., July 11, 2018, https://www.hollywoodreporter.com/thr-esq/appeals-court-wont-rehear-blurred-lines-case-1126253.    [220]        Eriq Gardner, Music Publishers Win Major Copyright Fight Over Streaming of Legendary Rock Concerts, The Hollywood Rep. (Apr. 10, 2018), https://www.hollywoodreporter.com/thr-esq/music-publishers-win-major-copyright-fight-streaming-legendary-rock-concerts-1101359.    [221]        Id.    [222]        Abkco Music, Inc., et al. v. William Sagan, et al., 2018 WL 1746564, at *12 (S.D.N.Y. Apr. 9, 2018).    [223]        Id. at *12-15; see also Gardner, supra note 220.    [224]        Gardner, supra note 220.    [225]        Id.    [226]        Eriq Gardner, Jay-Z Triumphs in “Big Pimpin” Appeal as Egyptians Can’t Enforce Moral Rights, The Hollywood Rep. (May 31, 2018), https://www.hollywoodreporter.com/thr-esq/jay-z-triumphs-big-pimpin-appeal-as-egyptians-cant-enforce-moral-rights-1116131.    [227]        Fahmy v. Jay-Z, 891 F.3d 823, 823, 831 (9th Cir. 2018).    [228]        Id. at 826.    [229]        Id.    [230]        Id. at 829. The following Gibson Dunn lawyers assisted in the preparation of this client update: Scott Edelman, Howard Hogan, Ben Ross, Nathaniel Bach, Corey Singer, Jonathan Soleimani, Sara Ciccolari-Micaldi, Michael Policastro, Aaron Frumkin, Andrew Blythe, Rachil Davids, Lauryn Togioka, Harrison Korn, Brittany Schmeltz, Sarah Graham, and Sean O’Neill. Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding these developments.  Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or the following leaders and members of the firm’s Media, Entertainment & Technology Practice Group: Scott A. Edelman – Co-Chair, Los Angeles (+1 310-557-8061, sedelman@gibsondunn.com) Kevin Masuda – Co-Chair, Los Angeles (+1 213-229-7872, kmasuda@gibsondunn.com) Orin Snyder– Co-Chair, New York (+1 212-351-2400, osnyder@gibsondunn.com) Ruth E. Fisher – Los Angeles (+1 310-557-8057, rfisher@gibsondunn.com) Howard S. Hogan – Washington, D.C. (+1 202-887-3640, hhogan@gibsondunn.com) Ari Lanin – Los Angeles (+1 310-552-8581, alanin@gibsondunn.com) Benyamin S. Ross – Los Angeles (+1 213-229-7048, bross@gibsondunn.com) Helgi C. Walker – Washington, D.C. (+1 202-887-3599, hwalker@gibsondunn.com) Nathaniel L. Bach – Los Angeles (+1 213-229-7241,nbach@gibsondunn.com) © 2018 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

April 4, 2018 |
The Hollywood Reporter Names Scott Edelman and Orin Snyder to its 2018 Power Lawyers List

The Hollywood Reporter named Century City partner Scott Edelman and New York partner Orin Snyder to its 2018 Power Lawyers list, which features 100 of the most influential entertainment attorneys in the country. The feature was published on April 4, 2018.

March 16, 2018 |
Aerospace and Related Technologies – Key Developments in 2017 and Early 2018

Click for PDF This March 2018 edition of Gibson Dunn’s Aerospace and Related Technologies Update discusses newsworthy developments, trends, and key decisions from 2017 and early 2018 that are of interest to aerospace and defense, satellite, and drone companies; and new market entrants in the commercial space and related technology sectors, including the private equity and other financial institutions that support and enable their growth. Specifically, this update covers the following areas: (1) commercial unmanned aircraft systems (“UAS”), or drones; (2) government contracts litigation involving companies in the aerospace and defense industry; (3) the commercial space sector; and (4) cybersecurity and privacy issues related to the national airspace.  We discuss each of these areas in turn below. I.    COMMERCIAL UNMANNED AIRCRAFT SYSTEMS The commercial drone industry has continued to mature through advancements in technology, government relations, and public perception.  Commercial drones are being used for various sensory data collection, building inspections, utility inspections, agriculture monitoring and treatment, railway inspections, pipeline inspections, mapping of mines, and photography.  New drone applications are being created on a regular basis.  For example, the concept of flying drone taxis was validated in Dubai in September 2017 when an uncrewed two-seater drone successfully conducted its first test flight. Around a year and a half ago, United States regulations governing non-recreational drone operations were finalized.  Since then, the Federal Aviation Administration (“FAA”) has issued over 60,000 remote pilot certificates.  The FAA has and continues to make efforts to advance its technology, and it recently released a prototype application to provide operators with automatic approval of specific airspace authorizations.  The national beta test of this system will launch in 2018, and we will be sure to report back with the results. One of the biggest boons for the industry over the past 15 months was the positive public perception stemming from Hurricane Harvey relief efforts.  In the days following the disaster, drones worked in concert with government agencies to support search and rescue missions, inspect roads and railroads, and assess water plants, oil refineries, cell towers, and power lines.  Further, major insurance companies used drones to assess claims in a safer, faster, and more efficient manner.  The aftermath of this disaster demonstrated the value of drone technology and increasingly has driven a positive public perception of the industry.  Indeed, even aside from the disaster relief efforts, media sources continue to carry positive drone stories.  For example, in January 2018, Australian lifeguards were testing a drone with the ability to release an inflatable rescue pod; during its testing, the drone was called into action, and rescued two teenagers from drowning. The future is bright, but there are still many obstacles for the industry to overcome before it fully matures, such as clarity around low altitude airspace, privacy concerns, and the risk to people, property, and other aircraft. To get you caught up on 2017 and early 2018 drone developments, we have briefly summarized below: (A) highlights of drone litigation impacting airspace, including highlights from previous years for context; (B) drone registration; (C) privacy issues related to drones; (D) the United States government’s expanded use of drones; (E) drone countermeasures; (F) drone safety studies; and (G) the UAS airspace integration pilot program. A.    Litigation Highlights Regarding Airspace Huerta v. Haughwout, No. 3:16-cv-358, Dkt. No. 30 (D. Conn. Jul. 18, 2016) The latter half of 2016 featured an important decision regarding the FAA’s authority over low-level airspace.  The 2016 decision, Huerta v. Haughwout—also known as “the flamethrower drone case,” involved two YouTube videos posted by the Haughwouts.  One video featured a drone firing an attached handgun, while a second video showed a drone using an attached flamethrower to scorch a turkey.  After the videos were publicly uploaded, the FAA served the Haughwouts with an administrative subpoena to acquire further information about the activities featured in the videos.  The Haughwouts refused to comply with the FAA’s subpoenas, asserting that their activities were not subject to investigation by the FAA.  In response, the FAA sought enforcement of the subpoenas in the District of Connecticut.[1] Judge Jeffrey Meyer found the administrative subpoenas to be valid.  Most importantly, however, his order included dicta casting doubt on the FAA’s claim to control all airspace from the ground up:  “The FAA believes it has regulatory sovereignty over every inch of outdoor air in the United States…. [T]hat ambition may be difficult to reconcile with the terms of the FAA’s statute that refer to ‘navigable airspace.'”  While this dicta addressed the question of where the FAA’s authority begins, Judge Meyer also noted that “the case does not yet require an answer to that question.”[2]  Judge Meyer further stated: Congress surely understands that state and local authorities are (usually) well positioned to regulate what people do in their own backyards.  The Constitution creates a limited national government in recognition of the traditional police power of state and local government.  No clause in the Constitution vests the federal government with a general police power over all of the air or all objects that leave the ground.  Although the Commerce Clause allows for broad federal authority over interstate and foreign commerce, it is far from clear that Congress intends–or could constitutionally intend–to regulate all that is airborne on one’s own property and that poses no plausible threat to or substantial effect on air transport or interstate commerce in general.[3] 2017 featured the resolution of another lawsuit where the plaintiff attempted to extend the significance of Haughwout in an effort to get the courts to address the question of what “navigable airspace” means in the context of drones (see discussion of Singer v. City of Newton, infra). Boggs v. Merideth, No. 3:16-cv-00006 (W.D. Ky. Jan. 4, 2016) In Boggs v. Merideth—better known as “the Drone Slayer case”—a landowner shot down an operator’s drone with a shotgun in the Western District of Kentucky.[4]  The plaintiff flew his drone roughly 200 feet above the defendant’s property, causing the defendant—the self-anointed “Drone Slayer”—to claim the drone was trespassing and invading his privacy and shoot it down.  The plaintiff believed the airspace 200 feet above the ground was federal airspace and therefore the defendant could not claim the drone was trespassing. Following a state judge’s finding that the defendant acted “within his rights,” the drone operator filed a complaint in federal court for declaratory judgment to “define clearly the rights of aircraft operators and property owners.”[5]  The case had the potential to be a key decision on the scope of federal authority over the use of airspace.  Rather than claiming defense of property, however, the defendant moved to dismiss the complaint on jurisdictional grounds.  The plaintiff unsuccessfully attempted to rely on the decision in Huerta v. Haughwout for the proposition that all cases involving the regulation of drone flight should be resolved by federal courts.  The court rejected the plaintiff’s argument, noting that Haughwout only concerned the FAA’s ability to exercise subpoena power and enforce subpoenas in federal court.  In fact, the district court noted, the court in Haughwout “expressed serious skepticism as to whether all unmanned aircrafts are subject to FAA regulation.”[6]  In his March 2017 order, Senior District Court Judge Thomas B. Russell granted the defendant’s motion to dismiss for lack of federal jurisdiction, stating that the issue of whether or not the drone was in protected airspace only arises on the presumption that the defendant would raise the defense that he was defending his property.[7]  Consequently, there was no federal question jurisdiction and the case was thrown out without ever reaching its merits. While the answer to what exactly constitutes “navigable airspace” in the drone context remained unanswered in 2017, the year did mark the beginning of federal courts addressing the overlap between conflicting state, local, and federal drone laws. Singer v. City of Newton No. 1:17-cv-10071 (D. Mass. Jan. 17, 2017) On September 21, 2017, a federal judge in the District of Massachusetts held that portions of the City of Newton, Massachusetts’s (“Newton”) ordinance attempting to regulate unmanned aircraft operations within the city were invalid.[8] The case, Singer v. City of Newton, marks the first time a federal court has struck down a local ordinance attempting to regulate drones.  The court held the following four city ordinance provisions to be unenforceable: (1) a requirement that all owners register their drones with the city; (2) a ban on all drone operations under 400 feet that are over private property unless done with express permission of the property owner; (3) a ban on all drone operations over public property, regardless of altitude, unless done with the express permission of the city; and (4) a requirement that no drone be operated beyond the visual line of sight of its operator.[9] All four of these provisions of the Newton ordinance were found to be preempted by federal regulations promulgated by the FAA. In the course of holding that the four sections of Newton’s ordinance were each preempted, the court identified the congressional objectives each section inhibited.  One relevant congressional objective is to make the FAA the exclusive regulatory authority for registration of drones.  The Newton ordinance required the registration of drones with the City of Newton, which impeded Congress’s objective; thus, the court found that section to be preempted.[10] The court also identified a congressional objective for the FAA to develop a comprehensive plan to safely accelerate the integration of drones into the national airspace system.  The two sections of the Newton ordinance requiring prior permission to fly above both public and private property within the city effectively eliminated any drone activity without prior permission; thus those sections were held to interfere with the federal objective and were invalidated.[11] Lastly, the court found that the Newton ordinance’s provision barring drone usage beyond the visual line of sight of the operator conflicted with a less restrictive FAA rule allowing such usage if a waiver is obtained or if a separate visual observer can see the drone throughout its flight and assist the operator.[12] The Singer ruling marked the long-anticipated beginning of federal courts addressing overlapping state, local, and federal drone laws.  While the ruling is significant for invalidating sections of a local ordinance and thus establishing a framework that federal courts may follow to invalidate state and local drone laws elsewhere, it is important not to overstate the case’s current significance.  The court in Singer declined to hold that law relating to airspace was expressly preempted or field preempted, but rather decided it was conflict preempted.  Consequently, the case does not provide support for the assertion that all state and local drone laws related to airspace will be preempted by FAA regulations.  Further, the court did not opine on the lower limits of the National Airspace and whether it goes to the ground, an issue likely to come up in future litigation. The unchallenged portions of the Newton ordinance still stand, and the closing lines in the opinion recognize that Newton is free to redraft the invalidated portions to avoid direct conflict with FAA regulations.  Thus it remains possible, even in the District of Massachusetts, for federal law to coexist with state and local laws in this field.  In order to successfully avoid invalidation in the courts, however, state and local lawmakers must draft legislation that allows for compliance with federal regulations, and which does not interfere with any federal objectives. The year 2017 left much to still be determined by the courts.  While Newton demonstrated that preemption concerns do and will continue to exist, the case did not address the boundary of the National Airspace.  Haughwout did address the boundary—though only through dicta—and suggested that, when the issue is decided, the boundary will likely not extend to the ground.  Thus, as was the case at the start of 2017, where the boundary will be drawn remains to be seen. B.    Drone Registration: From Mandatory to Optional and Back to Mandatory In December 2015, days before tens of thousands of drones were gifted for the holidays, the FAA adopted rules requiring the registration of drones weighing more than 0.55 pounds prior to operation.  This registration requirement only impacted recreational users, as commercial users are required to register under Part 107.  This rule was challenged in Taylor v. Huerta, and on May 19, 2017, the U.S. Court of Appeals for the D.C. Circuit vacated the rule.[13]  The FAA instituted a program to issue refunds, and recreational pilots enjoyed the freedom of flying unregistered drones for the next seven months. The Circuit Court struck down the rule because the FAA lacked statutory authority to issue such a rule for recreational pilots.  Section 336 of the FAA Modernization and Reform Act of 2012 states that the “Administrator of the Federal Aviation Administration may not promulgate any rule or regulation regarding a model aircraft.”[14]  The Court held that the FAA’s registration rule “directly violates that clear statutory prohibition” and vacated the rule to the extent it applied to model aircraft.[15]  The FAA responded by offering $5 registration fee refunds and the option to have one’s information removed from the federal database, but encouraging recreational operators to voluntarily register their drones. However, in a turn of events, on December 12, 2017, the President signed the National Defense Authorization Act of 2018, which included a provision reinstating the rule: Restoration Of Rules For Registration And Marking Of Unmanned Aircraft.—The rules adopted by the Administrator of the Federal Aviation Administration in the matter of registration and marking requirements for small unmanned aircraft (FAA-2015-7396; published on December 16, 2015) that were vacated by the United States Court of Appeals for the District of Columbia Circuit in Taylor v. Huerta (No. 15-1495; decided on May 19, 2017) shall be restored to effect on the date of enactment of this Act.[16] As a result of the Act, both recreational and commercial pilots are now required to register their drones, and one can do so on the FAA’s website. C.    UAS and Privacy 1.    Voluntary Best Practices Remain Intact A 2015 Presidential Memorandum issued by then President Obama ordered the National Telecommunications and Information Administration (“NTIA”) of the U.S. Department of Commerce to create a private-sector engagement process to help develop voluntary best practices for privacy and transparency issues regarding commercial and private drone use.[17]  Since Part 107 of Title 14 of the Code of Federal Regulations (“Part 107”)[18] does not address privacy, privacy advocates hoped that the NTIA would force the FAA to promulgate privacy regulations.[19]  Prior attempts to petition the FAA to consider privacy concerns in its Notice of Proposed Rulemaking (“NPRM”) for Part 107 were unsuccessful.[20] The NTIA issued its voluntary best privacy practices for drones on May 19, 2016.[21]  While the final best practices found support from some privacy organizations and most of the commercial drone industry, other privacy groups raised concerns that the best practices neither established nor encouraged binding legal standards.[22]  Nonetheless, the best practices offer useful guidelines for companies testing and/or actively conducting drone operations. 2.    Litigation Regarding the FAA’s Role in Addressing Privacy As we discussed in an earlier update, the Electronic Privacy Information Center (“EPIC”) challenged the FAA’s decision to exclude privacy regulations from Part 107 in an August 2016 petition for review.[23]  In 2012, EPIC petitioned the FAA to promulgate privacy regulations applicable to drone use, which the FAA denied in February 2014.[24]  EPIC argued that the FAA Modernization and Reform Act of 2012 required the FAA to consider privacy issues in its NPRM.[25]  The FAA argued that while the Act directed the FAA to develop a comprehensive plan to safely integrate drones into the national airspace system, privacy considerations went “beyond the scope” of that plan.[26]  The D.C. Circuit dismissed EPIC’s petition for review on two grounds.[27]  First, the Court deemed EPIC’s petition for review “time-barred” because EPIC filed 65 days past the time allotted under 49 U.S.C. § 46110(a).[28]  Second, the Court held that the FAA’s “conclusion that privacy is beyond the scope of the NPRM” was not a final agency determination subject to judicial review.[29] After the rule became final, EPIC filed a new petition for review asking the court to vacate Part 107 and remand it to the FAA for further proceedings.[30]  Consolidated with a related case, Taylor v. FAA, No. 16-1302 (D.C. Cir. filed August 29, 2016), EPIC argues that the FAA violated the Act by: (1) refusing to consider “privacy hazards,” and (2) refusing to “conduct comprehensive drone rulemaking,” which necessarily includes issues related to privacy.[31]  The FAA argues: (1) EPIC lacks standing, (2) the FAA reasonably decided not to address privacy concerns, and (3) even if EPIC has standing, Section 333 of the Act does not require the FAA to promulgate privacy regulations.[32]  Judge Merrick Garland, Judge David Sentelle, and Judge A. Raymond Randolph heard oral arguments in the consolidated cases on January 25, 2018.[33]  All eyes thus remain on the D.C. Circuit to determine whether the FAA must issue regulations covering privacy concerns raised by increased drone use. D.    The United States Government Expands Its Use of Drones Four years after the U.S. Department of Defense (“DoD”) issued its 25-year “vision and strategy for the continued development, production, test, training, operation, and sustainment of unmanned [aircraft] systems technology,”[34] the drone defense industry continues to experience rapid growth.  A recent market report estimated that commercial and government drone sales will surpass $12 billion by 2021.[35]  However, that estimate is likely conservative when considering that the DoD allocated almost $5.7 billion to drone acquisition and research in 2017 alone.[36]  Likewise, the DoD allocates almost $7 billion to drone technology in its 2018 fiscal year Defense Budget.[37]  Additionally, Goldman Sachs forecasted a $70 billion market opportunity for military drones by 2020.[38]  According to Goldman Sachs: “Current drone technology has already surpassed manned aircraft in endurance, range, safety and cost efficiency — but research and development is far from over.  The next generation of drones will widen the gap between manned and unmanned flight even further, adding greater stealth, sensory, payload, range, autonomous, and communications capabilities.”[39]  It should thus come as no surprise that organizations developing defense-specific drones will expect increased demand for complete systems and parts in the coming years. 1.    United States Government’s Domestic Use Drones The U.S. government mostly acquires drones for overseas military operations, a trend dating back to the deployment of the Predator drone in post-9/11 conflict territories.[40]  Domestic use of DoD-owned drones remains subject to strict governmental approval, and armed drones are prohibited on U.S. soil.[41]  In February 2015, the Deputy Secretary of Defense issued Policy Memorandum 15-002 entitled “Guidance for the Domestic Use of Unmanned Aircraft Systems.”[42]  Under the policy, the Secretary of Defense must approve all domestic use of DoD-owned UAVs, with one exception—domestic search and rescue missions overseen by the Air Force Rescue Coordination Center.[43]  However, DoD personnel may use drones to surveil U.S. persons where permitted by law and where approved by the Secretary.[44]  The policy expired on February 17, 2018,[45] and it remains to be seen how the Trump administration will handle domestic use of DoD-owned drones and the integration of UAVs into day-to-day civilian operations. E.    Drone Countermeasures In response to the rapid growth of militarized consumer drones, particularly in ISIS-controlled territories,[48] 2017 saw an increased offering of anti-drone technologies in the U.S.[49]  In April 2017, the U.S. Army’s Rapid Equipment Force purchased 50 of Radio Hill Technologies’ “Dronebuster” radar guns.[50]  The Dronebuster uses radio frequency technology to interrupt the control of drones by effectively jamming the control frequency or the GPS signal.[51]  The end-user can overwhelm the drone and deprive its operator of control or cause the drone to “fall out of the sky.”[52]  Handheld radar-type guns like the Dronebuster weigh about five pounds and cost an average of $30,000.[53]  The U.S. military also experimented with the Mobile High-Energy Laser-equipped Stryker vehicle.[54]  Similar to the Dronebuster, the 5 to 10kW laser overwhelms target drones’ control systems with high bursts of energy.[55]  It can shoot down drones 600 meters away, all without making a sound.[56] F.    Drone Safety Studies Making UAS operations commonplace in urban airspace will be a big step in the technological and economic advancement of the U.S.; however, there are obstacles to overcome in ensuring the safe operation of drones in urban areas.  On April 28, 2017, the Alliance for System Safety of UAS through Research Excellence (“ASSURE”) released the results of a study that explored the severity of a UAS collision with people and property on the ground.[57]  First, ASSURE determined the most likely impact scenarios by reviewing various operating environments for UAS and determining their likely exposure to people and other manned aircraft.[58]  Then the team conducted crash tests and analyzed crash dynamics by measuring kinetic energy transfer.[59]  The results revealed that earlier measurements of the danger of collision grossly overestimate the risk of injury from a drone.[60]  ASSURE concluded that the DJI Phantom 3 drone has a 0.03% chance of causing a head injury if it falls on a person’s head.[61]  This is a very low probability considering blocks of steel or wood of the same weight have a 99% risk of causing a head injury in the same scenario.[62]  The disparity in probability of head injury is largely due to the fact that the DJI Phantom 3 drone absorbs most of the energy resulting from a collision, and therefore less energy is transferred on impact from the drone than from a block of steel or wood in the same collision.[63] In fact there are numerous steps that drone designers and manufacturers can take to reduce the likelihood of injury in the event of a collision.[64]  Projectile mass and velocity, as well as stiffness of the UAS, are the primary drivers of impact damage.[65]  As such, multi-rotor drones tend to be safer because they fall more slowly due to the drag of the rotors as the drones fall through the air.[66]  The study made clear that blade guards should be a design requirement for drones used in close proximity to people in order to minimize the lacerations that can result from a collision.[67]  Moreover, ASSURE found that the more flexible the structure of the drone, the more energy the drone retains during impact, causing less harm to the impacted object of the collision.[68] Regarding crashes with other manned aircraft, however, the study revealed that the impact of a drone can be much more severe than the impact of a bird of equivalent size and speed.[69]  As such, the structural components of a commercial aircraft that allows it to withstand bird strikes from birds up to eight pounds are not an appropriate guideline for preventing damage from a UAS strike.[70]  The study also examined the dangers associated with lithium batteries, which are used to power most drones, in collisions.[71]  The major concern is the risk of a battery fire.[72]  The study found that typical high-speed impacts cause complete destruction of the battery, eliminating any concerns about battery fires.[73]  However, the lower impact crashes, which are mainly associated with take-off and landing, left parts of the battery intact, posing a risk of battery fire.[74] While the ASSURE study is the first of its kind, it certainly marks the need for more studies that analyze the practical aspects of collisions and how to reduce risk to minimize harm.  The hazards associated with commonplace drone operation are many.[75]  Analysis of the physical impact of a collision is one aspect of minimizing UAS risks.  There is still much work to be done in order to minimize other collateral risks, such as the risk of technology failures, which range from UAS platform failures, to failures of hardware or communication links controlling the UAS.[76]  Environmental hazards, such as the effect of rain, lightning, and other types of weather remains to be studied.[77]  Ways to safeguard against human error or intentional interference is another aspect of UAS safety that has yet to be studied in detail.[78]  Data link spoofing, jamming, or hijacking poses significant safety hazards, particularly as incidents of data breaches become more and more common.[79]  Before the integration of UAS into national airspace can be fully implemented, industry stakeholders must collaborate to conduct studies that will help inform legislators about what kind of technological requirements and operational regulations are necessary. G.    UAS Airspace Integration Pilot Program In October 2017, the U.S. Department of Transportation (“DOT”) announced that it was launching the Unmanned Aircraft Systems Integration Pilot Program.[80]  The program, which was established in response to a presidential directive, is meant to accelerate the integration of UAS into the national airspace through the creation of public-private partnerships between UAS operators, governmental entities, and other private stakeholders.[81]  The program is designed to establish greater regulatory certainty and stability regarding drone use.[82]  After reviewing the applications, DOT will select a minimum of five partnerships with the goal of collaborating with the selected industry stakeholder in order to evaluate certain advanced UAS operational concepts, such as night operations, flights beyond the pilot’s line of sight, detect-and-avoid technologies, flights over people, counter-UAS security operations, package delivery, the integrity and dependability of data links between pilot and aircraft, and cooperation between local authorities and the FAA in overseeing UAS operations.[83] One such application was made by the City of Palo Alto, in partnership with the Stanford Blood Center, Stanford hospital, and Matternet, a private drone company.[84]  The City of Palo Alto has proposed the use of drones to deliver units of blood from the Stanford Blood Center to Stanford hospital, which would involve establishing an approved flight path for drones to transfer the units of blood in urgent situations.[85]  Matternet has already tested its drones’ capacity for transporting blood and other medical samples in Switzerland.[86]  A second project proposed by the City of Palo Alto involves the use of drones in order to monitor the perimeter of the Palo Alto Airport.[87]  This project involves a partnership between the city and a company called Multirotor, a German drone company that has experience working with the German army and the Berlin Police Department to integrate UAS as tools for law enforcement activities.[88] The creation of the pilot program has given stakeholders the sense that the current administration is supportive of integrating drones into the national airspace.  The support of the government has created the potential for unprecedented growth in an industry that could bring lucrative returns to its stakeholders.  The DOT has already received over 2,800 interested party applications.[89]  The majority of these applications have come from commercial drone companies, as well as various other stakeholders including energy companies, law enforcement agencies, and insurance providers.[90]  The UAS Pilot Program is to last for three years.[91]  The projected economic benefit of integrated UAS is estimated to equal $82 billion, creating up to 100,000 jobs.[92]  Industries that could see immediate returns from the program include precision agriculture, infrastructure inspection and monitoring, photography, commerce, and crisis management.[93]  The advent of established, government-sanctioned rules for the operation of UAS will motivate industry stakeholders both in the public and private sectors to push forward with new and innovative ways to use drones. II.    GOVERNMENT CONTRACTS LITIGATION IN THE AEROSPACE AND DEFENSE INDUSTRY Gibson Dunn’s 2017 Year-End Government Contracts Litigation Update and 2017 Mid-Year Government Contracts Litigation Update cover the waterfront of the most important opinions issued by the U.S. Court of Appeals for the Federal Circuit, U.S. Court of Federal Claims, Armed Services Board of Contract Appeals (“ASBCA”), and Civilian Board of Contract Appeals among other tribunals.  We invite you to review those publications for a full report on case law developments in the government contracts arena. In this update, we (A) summarize key court decisions related to government contracting from 2017 that involve players in the aerospace and defense industry.  The cases discussed herein, and in the Government Contracts Litigation Updates referenced above, address a wide range of issues with which government contractors in the aerospace and defense industry are likely familiar. A.    Select Decisions Related to Government Contractors in the Aerospace and Defense Industry Technology Systems, Inc., ASBCA No. 59577 (Jan. 12, 2017) TSI held four cost-plus-fixed-fee contracts with the Navy for research and development.  Several years into the contracts, the government disallowed expenses that had not been questioned in prior years.  TSI appealed to the ASBCA, arguing that it relied to its detriment on the government’s failure to challenge those same expenses in prior years. The Board (Prouty, A.J.) held that the challenged costs were “largely not allowable” and that “the principle of retroactive disallowance,” which it deemed “a theory for challenging audits whose heyday has come and gone,” did not apply because the same costs had simply not come up in the prior audits.  The theory of retroactive disallowance, first articulated in a Court of Claims case in 1971, prevents the government from challenging costs already incurred when the cost previously had been accepted following final audit of historical costs; the contractor reasonably believed that it would continue to be approved; and it detrimentally relied on the prior acceptance.  Tracing the precedent discussing the principle, the Board cited the Federal Circuit’s decision in Rumsfeld v. United Technologies Corp., 315 F.3d 1361 (Fed. Cir. 2003), which stated that “affirmative misconduct” on the part of the government would be required for the principle of retroactive disallowance to apply because it is a form of estoppel against the government.  The Board “sum[med] up: there is no way to read our recent precedent or the Federal Circuit’s except to include an affirmative misconduct requirement amongst the elements of retroactive disallowance.  Period.”  Further, the Board held that the government’s failure to challenge the same costs in prior years did not constitute a “course of conduct precluding the government from disallowing the costs in subsequent audits.” Delfasco LLC, ASBCA No. 59153 (Feb. 14, 2017) Delfasco had a contract with the Army for the manufacture and delivery of a specified number of munition suspension lugs.  The Army thereafter exercised an option to double the number of lugs required.  When Delfasco stopped making deliveries due to an inability to pay its subcontractor, the Army terminated the contract for default.  Delfasco appealed to the ASBCA, asserting that the government had waived its right to terminate for untimely performance by allegedly stringing Delfasco along even after the notice of termination. The Board (Prouty, A.J.) set out the test for waiver in a case involving termination for default due to late delivery as follows:  “(1) failure to terminate within a reasonable time after the default under circumstances indicating forbearance, and (2) reliance by the contractor on the failure to terminate and continued performance by him under the contract with the Government’s knowledge and implied or express consent.”  The Board held that Delfasco failed to satisfy the first prong because the government’s show cause letter placed Delfasco on notice that any continued performance would only be for the purpose of mitigating damages.  Moreover, Delfasco failed to satisfy the second prong because Delfasco’s payment to its subcontractor after the show cause letter would have been owed regardless, and was not paid in reliance upon the government’s failure to terminate.  Therefore, the Board found that the government had not waived its right to terminate, and denied the appeal. Raytheon Co., ASBCA Nos. 57743 et al. (Apr. 17, 2017) Raytheon appealed from three final decisions determining that an assortment of costs—including those associated with consultants, lobbyists, a corporate development database, and executive aircraft—were expressly unallowable and thus subject to penalties.  After a two-week trial, the Board (Scott, A.J.) sided largely with Raytheon in a wide-ranging decision that covers a number of important cost principles issues. First, the Board rejected the government’s argument that the consultant costs were expressly unallowable simply because the government was dissatisfied with the level of written detail of the work product submitted to support the costs.  Judge Scott noted that written work product is not a requirement to support a consultant’s services under FAR 31.205-33(f), particularly not where, as here, much of the consultants’ work was delivered orally due to the classified nature of the work performed.  The Board found that not only were the consultant costs not expressly unallowable, but indeed were allowable.  This is a significant ruling because the documentation of consultant costs is a recurring issue as government auditors frequently make demands concerning the amount of documentation required to support these costs during audits. Second, the government sought to impose penalties for costs that inadvertently were not withdrawn in accordance with an advance agreement between Raytheon and the government concerning two executive aircraft.  Raytheon agreed that the costs should have been withdrawn and agreed to withdraw them when the error was brought to its attention, but asserted that the costs were not expressly unallowable and subject to penalty.  The Board agreed, holding that the advance agreements did not themselves clearly name and state the costs to be unallowable, and further that advance agreements do not have the ability to create penalties because a cost must be named and stated to be unallowable in a cost principle (not an advance agreement) to be subject to penalties.  This ruling could have significance for future disputes arising out of advance agreements. Third, the government alleged that costs associated with the design and development of a database to support the operations of Raytheon’s Corporate Development office were expressly unallowable organizational costs under FAR 31.205-27.  The Board disagreed, validating Raytheon’s argument that a significant purpose of the Corporate Development office was allowable generalized long-range management planning under FAR 31.205-12, thus rendering the costs allowable (not expressly unallowable). The only cost for which the Board denied Raytheon’s appeals concerned the salary costs of government relations personnel engaged in lobbying activities.  Raytheon presented evidence that it had a robust process for withdrawing these costs as unallowable under FAR 31.205-22, but inadvertently missed certain costs in this instance due to, among other things, “spreadsheet errors.”  Raytheon agreed that the costs were unallowable and should be withdrawn, but disputed that the costs of employee compensation (a generally allowable cost) were expressly unallowable and further argued that the contracting officer should have waived penalties under FAR 42.709-5(c) based on expert evidence that Raytheon’s control systems for excluding unallowable costs were “best in class.”  The Board found that salary costs associated with unallowable lobbying activities are expressly unallowable and that the contracting officer did not abuse his discretion in denying the penalty waiver. L-3 Comms. Integrated Sys. L.P. v. United States, No. 16-1265C (Fed. Cl. May 31, 2017) L-3 entered an “undefinitized contractual action” (“UCA”) with the Air Force in which it agreed to provide certain training services while still negotiating the terms of the contract.  After the parties failed to reach agreement on the prices for two line items in the UCA, the Air Force issued a unilateral contract modification, setting prices for those line items and definitizing the contract.  L-3 argued that the Air Force’s price determination was unreasonable, arbitrary and capricious, and in violation of the FAR, and filed suit seeking damages.  The government moved to dismiss for lack of subject matter jurisdiction. The Court of Federal Claims (Kaplan, J.) dismissed L-3’s complaint, concurring with the government that L-3 had never presented a certified claim to the contracting officer for payment “of a sum certain to cover the losses it allegedly suffered.”  The court found that the proposals L-3 had presented to the Air Force were not “claims,” but rather proposals made during contract negotiations that did not contain the requisite claim certification language. Innoventor, Inc., ASBCA No. 59903 (July 11, 2017) In 2011, the government entered into a fixed-price contract with Innoventor for the design and manufacture of a dynamic brake test stand.  As part of the contract’s purchase specifications, the new design had to undergo and pass certain testing.  After problems arose in the testing process, Innoventor submitted a proposal to modify certain design components and applied for an equitable adjustment due to “instability of expectations.”  The contracting officer denied Innoventor’s request for an equitable adjustment, stating that the government had not issued a modification directing a change that would give rise to such an adjustment.  Innoventor submitted a claim, which the contracting officer denied, and Innoventor appealed. The Board (Sweet, A.J.) held that the government was entitled to judgment as a matter of law because there was no evidence that the government changed Innoventor’s performance requirements, let alone that anyone with authority directed any constructive changes.  Here, the contract was clear that Innoventor’s design had to pass certain tests, and because it failed some of them, and did not perform pursuant to the contract terms, there was no change in the original contract terms that would give rise to a constructive change.  The Board also found that there was no evidence that any person beyond the contracting officer had authority to direct a change because the contract expressly provided that only the contracting officer has authority to change a contract.  Accordingly, the Board denied Innoventor’s appeal. L-3 Commc’ns Integrated Sys., L.P., ASBCA Nos. 60713 et al. (Sept. 27, 2017) L-3 appealed from multiple final decisions asserting government claims for the recovery of purportedly unallowable airfare costs.  Rather than audit and challenge specific airfare costs, the Defense Contract Audit Agency simply applied a 79% “decrement factor” to all of L-3’s international airfare costs over a specified dollar amount, claiming that this was justified based on prior-year audits.  After filing the appeals, L-3 moved to dismiss for lack of jurisdiction on the grounds that the government had failed to provide adequate notice of its claims by failing to identify which specific airfare costs were alleged to be unallowable, as well as the basis for those allegations. The Board (D’Alessandris, A.J.) denied the motion to dismiss, holding that the contracting officer’s final decisions sufficiently stated a claim in that they set forth a sum certain and a basis for such a claim.  The Board held that L-3 had enough information to understand how the government reached its claim, and its contention that this was not a valid basis for the disallowance of costs for the year in dispute went to the merits and not the sufficiency of the final decisions. Scott v. United States, No. 17-471 (Fed. Cl. Oct. 24, 2017) Brian X. Scott brought a pro se claim in the Court of Federal Claims seeking monetary and injunctive relief for alleged harms arising from the Air Force’s handling of his unsolicited proposal for contractual work.  Scott was an Air Force employee who submitted a proposal for countering the threat of a drone strike at the base where he was stationed.  The proposal was rejected, but Scott alleged that portions of the proposal were later partially implemented.  Scott sued, claiming that the Air Force failed properly to review his proposal and that his intellectual property was being misappropriated.  Scott argued that jurisdiction was proper under the Tucker Act because an implied-in-fact contract arose that prohibited the Air Force from using any data, concept, or idea from his proposal, which was submitted to a contracting officer with a restrictive legend consistent with FAR § 15.608. The Court of Federal Claims (Lettow, J.) found that it had jurisdiction under the Tucker Act because an implied-in-fact contract was formed when the Air Force became obligated to follow the FAR’s regulatory constraints with regard to Scott’s proposal.  Nevertheless, the Court granted the government’s motion to dismiss because Scott’s factual allegations, even taken in the light most favorable to him, did not plausibly establish that the government acted unreasonably or failed to properly evaluate his unsolicited proposal by using concepts from the proposal where Scott’s proposal addressed a previously published agency requirement. III.    COMMERCIAL SPACE SECTOR A.    Overview of Private Space Launches and Significant Milestones Space exploration is always fascinating—2017 and early 2018 was no exception.  Starting off in February 2017, India’s Polar Satellite Launch Vehicle launched 104 satellites, setting a record for the number of satellites launched from a single rocket.[101]  In June, NASA finally unveiled its 12 chosen candidates for its astronaut program out of a pool of over 18,000 applicants, which was a record-breaking number.[102]  A few months later, NASA’s Cassini spacecraft was intentionally plunged into Saturn, ending over a decade’s worth of service.[103]  President Donald Trump also signed Space Policy Directive 1, which instructs NASA to send astronauts back to the moon, which President Trump noted would help establish a foundation for an eventual mission to Mars.[104] In what was widely expected to be a record year for private space launches, SpaceX and other private space companies clearly delivered.  In 2017, SpaceX, the company founded and run by Elon Musk, flew a record 18 missions utilizing the Falcon 9 rocket.[105]  Blue Origin, the company founded by Jeff Bezos, also made significant progress.  It was able to launch a new version of its New Shepard vehicle on its first flight, which Bezos hopes will lay the foundation for potential crewed missions.[106]  Then, in late December, California startup Made in Space sent a machine designed to make exotic ZBLAN optical fiber to the International Space Station.[107]  Without a doubt, 2017 played witness to many significant milestones in space exploration. Additional milestones have already been surpassed in early 2018.  February 6, 2018 was a historic date for Space technology and exploration—SpaceX’s Falcon Heavy had its maiden launch.  The Falcon Heavy can carry payloads larger than any available commercial rocket, and it has the potential to launch payloads outside of Earth’s orbit.  In fact, the Falcon Heavy did just that by launching a Tesla Roadster, driven by “Starman” into interplanetary space.  Starman will likely continue driving its orbit for millions of years.  It is only a matter of time until Starman is replaced with astronauts and the destination becomes Mars—SpaceX plans to launch such a mission in 2024. B.    Update on Outer Space Treaty and Surrounding Debate The Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, Including the Moon and Other Celestial Bodies, otherwise known as the Outer Space Treaty, recently celebrated its 50th anniversary.  Signed in 1967 and designed to prevent a new form of colonial competition, the Treaty was lauded for its principal framework on international space law.  Indeed, shortly after the Treaty was entered into force, the United States and the Soviet Union successfully collaborated on many space missions and exercises.[108] The Treaty is not complex.  Consisting of 17 short articles, the Treaty obligates its signatories to perform space exploration “for the benefit and interest of all countries” and to not “place in orbit around the Earth any objects carrying nuclear weapons or any other kinds of weapons of mass destruction.”[109]  Having been in force for over 50 years, there have recently been discussions regarding whether the Treaty is ripe for an update.  Only as far back as half a decade ago, experts met in Australia to discuss moon-mining of anything from water and fuel to rare minerals in what was then a world’s first “Off-Earth Mining Forum.”[110]  Discussion surrounded the legality of such mining under the Treaty.  Then in 2014, NASA accepted applications from companies that desired to mine rare moon minerals in a program called “Lunar Cargo Transportation and Landing by Soft Touchdown.”[111]  This once again sparked a debate on the legality of such actions, specifically lunar property rights. In 2017, the focus turned toward private and commercial space flight, and spurred conversation as to whether the 50-year-old treaty needed an update.  For one, the Treaty was designed, and has been entirely focused, on only individual countries.  Thus, there is an argument that the Treaty does not apply to private appropriation of celestial territory.  Second, the quaint nature of the Treaty has spawned efforts at tackling the private appropriation issues.  For instance, the United States passed the Space Act of 2015, which provides for private commercial “exploration and exploitation of space resources.”[112]  The Act has incited further debate on the various legal loopholes that inherently afflict the Treaty and its ban on countries owning celestial territory. Meanwhile, the U.S. government has continued to find methods of regulation, specifically those involving the FAA and the Federal Communications Commission (“FCC”), among others.[113]  Now, lawmakers are purportedly discussing legislation that would provide a regulatory framework for private commercial space travel to adhere to the Treaty, as there currently does not exist a framework for the U.S. government to oversee the launch of private space stations.[114] Moreover, Senator Ted Cruz (R-TX) has been leading the charge on updating the Treaty to address issues related to modern spaceflight, where private commercial entities are playing an ever-increasing role.[115]  In May, Senator Cruz, the chairman of the Subcommittee on Space, Science, and Competitiveness, convened a hearing to “examine U.S. government obligations under the [Treaty]” and to also “explore the Treaty’s potential impacts on expansion of our nation’s commerce and settlement in space.”[116]  Featuring a panel of legal experts and a panel of commercial space business leaders, the hearing raised a number of different viewpoints with one apparently unifying message: the Treaty should not be amended.  One of the panel members, Peter Marquez, while acknowledging that the Treaty is not perfect, expressed concern that opening up the Treaty to modifications would leave the space industry worse off, and would be a detriment to national and international security.[117] One area of particular interest was Article VI of the Treaty, which provides that nations authorize and supervise space activities performed by non-governmental entities, such as a private commercial space company.  The CEO of Moon Express, Bob Richards, noted that while the Treaty should remain unchanged, the U.S. should adopt a streamlined regulatory procedure and process to make approvals for space activities more efficient and clear.[118]  One of the legal experts sitting on the panel, Laura Montgomery, expressed her belief that the U.S. need not further regulate new commercial space because a close reading of the Treaty would indicate that mining and other similar activities do not require such governmental approvals.[119] While the ultimate general consensus appeared to be that no change to the Treaty was necessary to accomplish the goals of private commercial space enterprises, the hearing did bring to light the issues that currently confront modern space protocols. C.    The American Space Commerce Free Enterprise Act of 2017, Which Seeks to Overhaul U.S. Commercial Space Licensing Regime, Passes Committee but Stalls in House On June 7, 2017, House members led by Rep. Lamar Smith (R-TX), Chairman of the U.S. House Science, Space, and Technology Committee, introduced H.R. 2809—the American Space, Commerce, and Free Enterprise Act of 2017 (“ASCFEA”).[120]  The bill, if adopted, would amend Title 51 of the United States Code to liberalize licensing requirements to conduct a variety of commercial space activities, while consolidating the licensing approval process for such activities under the authority of the U.S. Department of Commerce (“DOC”).[121] The regulation of commercial space activities historically has been distributed among a variety of agencies—with the National Oceanic and Atmospheric Administration (“NOAA”) governing remote sensing, the FCC governing communications satellites,[122] and the FAA/AST regulating launch, reentry, and some other non-traditional activities.[123]  But with that patchwork of authority, proponents of the Act believe there exists a regulatory gap for overseeing and authorizing new and innovative space activities.[124]  A primary goal of the Act is to address this perceived uncertainty, and in so doing, resolve long-standing questions associated with the United States’ responsibility to regulate commercial space activities under the Outer Space Treaty,[125] which the bill’s text references extensively. In its current form, the bill would grant the Office of Space Commerce (within the DOC) “the authority to issue certifications to U.S. nationals and nongovernmental entities for the operation of:  (1) specified human-made objects manufactured or assembled in outer space . . . and (2) all items carried on such objects that are intended for use in outer space.”[126]  The bill further eliminates the Commercial Remote Sensing Regulatory Affairs Office of the NOAA, and vests authority to issue permits for remote sensing systems, again, in the DOC.[127]  The bill also creates a certification process for other “commercial payloads not otherwise licensed by the government,” thereby providing fallback legislation for “non-traditional applications like satellite servicing, commercial space stations and lunar landers.”[128]  The DOC hence would occupy all the regulatory authority for commercial space activities, except for the FCC and FAA/AST’s current authority, which those agencies would maintain.[129] The commercial space industry supports the bill, and in particular the bill’s apparent presumption in favor of regulatory approval.[130]  Industry also supports the bill’s overhaul of the regulation of remote sensing—for example, the bill requires the DOC to issue a certification decision within just 60 days (or else the application is granted),[131] provide an explanation for any rejections, and grant every application that seeks authorization for activities involving “the same or substantially similar capabilities, derived data, products, or services are already commercially available or reasonably expected to be made available in the next 3 years in the international or domestic marketplace.”[132] Some opponents of the bill contend that the consolidation of regulatory approval will limit interagency review, which is important because the DoD, State Department, and the intelligence community currently play some regulatory role in the review of aspects of new commercial space activities that are perceived to potentially pose a threat to national security.[133]  Others contend that the Office of Space Commerce has inadequate resources and experience to handle the regulatory approvals.  The bill seeks to ameliorate these concerns by authorizing $5 million in funding for the Office in 2018.[134]  The Department of Justice also has voiced some constitutional concerns.[135] The House referred the bill to the House Committee on Science, Space, and Technology,[136] which on June 8, 2017 passed three amendments by voice vote.[137]  Since being marked up in committee, the bill has seen no further action by the House.[138]  The DOC currently is seeking public input on possible changes to commercial space operations licensing more broadly.[139] D.    Industry and Government Regulators Call for Changes to NOAA’s Licensing of Remote Sensing Technology ASCFEA’s effort to strip NOAA of its authority to regulate remote sensing technology coincides with a growing number of complaints from the remote sensing industry and government regulators concerning NOAA’s ability to handle an increased number of licensing applications.[140] The Land Remote Sensing Policy Act of 1992 authorized the Secretary of Commerce to “license private sector parties to operate private remote sensing space systems.”[141]  But despite a sea change in remote sensing technology and activities since 1992, that law remains the main source of authority for remote sensing licensing, and Congress has made few modifications to the law since its inception.[142]  Given the speed of technological change, and increased industry competition, remote sensing companies are advocating for NOAA to adopt a “permissive” approach to licensing, akin to the language proposed in the ASCFEA.[143] NOAA’s issues have been exacerbated by the fact that license applications are now more varied and complex than they were previously.[144]   Representatives from NOAA describe how prior to 2011, it took an average of 51 days to review license applications, since many applications sought permission for similar concepts for satellite systems.[145]  Even though the Land Remote Sensing Policy Act of 1992 calls for a 120-day approval window, in practice, applications now extend far longer than that—and further, NOAA sometimes provides little to no explanation about why it rejects particular applications.[146]  Under the ASCFEA, the DOC would be required to approve applications using the “same or substantially similar capabilities, derived data, products, or services as are already commercially available or reasonably expected to be made available in the next 3 years in the international or domestic marketplace.”[147] Another complexity is that many companies develop technology that do not solely or traditionally perform remote sensing functions, but have remote sensing capabilities.[148]  The ASCFEA addresses this problem by offering exceptions for “De Minimis” uses of remote sensing technology.[150] E.    Commercial Space Policy in the Trump Era On December 11, 2017, President Trump signed White House Space Policy Directive 1, entitled “Reinvigorating America’s Human Space Exploration Program.”[151]  As the subject suggests, the Directive’s goal is to bring a renewed focus on human space flight at a time when the United States lacks an organic capability to send American astronauts into low-Earth orbit, let alone beyond.[152]  Fittingly, President Trump signed the directive on the forty-fifth anniversary of the lunar landing of Apollo 17, with Apollo 17 astronaut Senator Harrison Schmitt present at the ceremony.[153] According to the Directive, the United States will “[l]ead an innovative and sustainable program of exploration with commercial and international partners to enable human expansion across the solar system….”[154]  The directive calls for missions beyond low-Earth orbit, with the United States “lead[ing] the return of humans to the Moon for long-term exploration and utilization, followed by human missions to Mars and other destinations.”[155] NASA is already working with several commercial entities to develop transportation to and from low-Earth orbit, as well as to the International Space Station.[156]  And a call for a return to the moon for use as a stepping-stone to other destinations is not new with President Trump; previous administrations have expressed a similar desire.[157]  What remains to be seen is how this “long-term exploration” will be funded, with a good indicator being what “will be reflected in NASA’s FISCAL Year 2019 budget request.”[158]  Until then, “No bucks, no Buck Rogers.”[159] F.    Updates on Space Law in Luxembourg, India, and Australia Luxembourg Continues its Push for Commercial Space Prominence The small country of Luxembourg, a signatory to the Outer Space Treaty,[160] has major commercial space ambitions.  In 2016, Luxembourg passed a law to set aside €200 million to fund commercial space mining activities, and also offered to help interested companies obtain private financing.[161]  On July 13, 2017, following the United States’ lead,[162] Luxembourg passed a law that gives qualifying companies the right to own any space resources they extract from celestial bodies including asteroids.[163]  The law further outlines a regulatory framework for “the government to authorize and supervise resource extraction and other space activities,” except for communications satellites, which a different Luxembourg agency regulates.[164]  To qualify for a space mining license, companies must be centrally administered and own a registered office in Luxembourg, and also must obtain regulatory approval.[165]  It is as of now unclear whether the Luxembourg law (as well as the U.S.’s analogous law) violate the Outer Space Treaty, which prohibits companies from claiming territory on celestial bodies, but does not clarify whether that prohibition extends to materials extracted from those celestial bodies.[166] India Unveils Draft of New Commercial Space Law; Sets Satellite Launch Record In November 2017, the India Department of Space released and sought comments for the “Space Activities Act, 2017.”[167]  The stated goal of the bill is to “encourage enhanced participation of non-governmental/private sector agencies in space activities in India.”[168]  The bill as currently drafted vests authority in the Indian Government to formulate a licensing scheme for any and all “Commercial Space Activity,” and states that licenses may be granted if the sought activity does not jeopardize public health or safety, and does not violate India’s international treaty obligations, such as the Outer Space Treaty, to which India is a signatory.[169] India’s space agency also made headlines this year when it sent 104 satellites into space in 18 minutes—purportedly tripling the prior record for single-day satellite launches.[170]  The New York Times reports that satellite and other orbital companies closely scrutinized the launch, since India’s space agency is cheaper to employ for satellite launches than its European and North American counterparts.[171] Australia Announced that It Will Create a Space Agency; Details Pending In September 2017, Australia’s Acting Minister for Industry, Innovation and Science announced that Australia will create a national space agency.[172]  While details are still pending, Australia’s goal purportedly is to take advantage of the $300-$400 billion space economy, while creating Australian jobs in the process.[173] IV.    CYBERSECURITY AND PRIVACY ISSUES IN THE NATIONAL AIRSPACE A.    Cybersecurity Issues The Federal Aviation Administration (FAA) has lagged behind other sectors in establishing robust cybersecurity and privacy safeguards in the national airspace, although federal policy identifies the transportation sector (which includes the aviation industry) as one of the 16 “critical infrastructure” sectors that have the ability to impact significantly the nation’s security, economy, and public health and safety.[174]  The need for the FAA to establish robust safeguards is obvious, as the catastrophic impact of a cyber attack on the national airspace is not hard to imagine post-9/11.  Recently, one hacker claimed he compromised the cabin-based in-flight entertainment system to control a commercial airline engine in flight. One development of note is the reintroduction of the Cybersecurity Standards for Aircraft to Improve Resilience Act of 2017 by U.S. Senators Edward Markey and Richard Blumenthal.[175] Senator Markey first introduced legislation aimed at improving aircraft cyber security protection in April 2016, following a 2015 survey of U.S. airline CEOs to discover standard cybersecurity protocols used by the aviation industry.  If signed into law, the bill would require the U.S. Department of Transportation to work with DoD, Homeland Security, the Director of National Intelligence, and the FCC to incorporate requirements relating to cybersecurity into the requirements for certification.  Additionally, the bill would establish standard protections for all “entry points” to the electronic systems of aircraft operating in the U.S.  This would include the use of isolation measures to separate critical software systems from noncritical software systems. B.    UAS Privacy Concerns UAS are equipped with highly sophisticated surveillance technology with the ability to collect personal information, including physical location.  Senator Ayotte, Chair of the Subcommittee on Aviation Operations, Safety, and Security, summarized the privacy concerns drones pose as follows: “Unlimited surveillance by government or private actors is not something that our society is ready or willing or should accept.  Because [drones] can significantly lower the threshold for observation, the risk of abuse and the risk of abusive surveillance increases.”  We describe below several recent federal and state efforts to address this issue. 1.    State Legislation Addressing Privacy Concerns At least five out of the twenty-one states that either passed legislation or adopted resolutions related to UAS in 2017 specifically addressed privacy concerns.[176] Colorado HB 1070 requires the center of excellence within the department of public safety to perform a study that identifies ways to integrate UAS within local and state government functions relating to firefighting, search and rescue, accident reconstruction, crime scene documentation, emergency management, and emergencies involving significant property loss, injury or death.  The study must consider privacy concerns, in addition to costs and timeliness of deployment, for each of these uses. New Jersey SB 3370 allows UAS operation that is consistent with federal law, but also creates criminal offenses for certain UAS surveillance and privacy violations.  For example, using a UAS to conduct surveillance of a correction facility is a third degree crime.  Additionally, the law also applies the operation of UAS to limitations within restraining orders and specifies that convictions under the law are separate from other convictions such as harassment, stalking, and invasion of privacy. South Dakota SB 22 also prohibits operation of drones over the grounds of correctional and military facilities, making such operation a class 1 misdemeanor.  Further, the law modifies the crime of unlawful surveillance to include intentional use of a drone to observe, photograph or record someone in a private place with a reasonable expectation of privacy, and landing a drone on the property of an individual without that person’s consent.  Such purportedly unlawful surveillance is a class 1 misdemeanor unless the individual is operating the drone for commercial or agricultural purposes, or the individual is acting within his or her capacity as an emergency management worker. Utah HB 217 modifies criminal trespass to include drones entering and remaining unlawfully over property with specified intent.  Depending on the intent, a violation is either a class B misdemeanor, a class A misdemeanor, or an infraction, unless the person is operating a UAS for legitimate commercial or educational purposes consistent with FAA regulations.  Utah HB 217 also modifies the offense of voyeurism, a class B misdemeanor, to include the use of any type of technology, including UAS, to secretly record video of a person in certain instances. Virginia HB 2350 makes it a Class 1 misdemeanor to use UAS to trespass upon the property of another for the purpose of secretly or furtively peeping, spying, or attempting to peep or spy into a dwelling or occupied building located on such property. 2.    UAS Identification and Tracking Report The FAA chartered an Aviation Rulemaking Committee (“ARC”) in June 2017 to provide recommendations on the technologies available for remote identification and tracking of UAS, and how remote identification may be implemented.[177]  However, the ARC’s 213 page final report, dated September 30, 2017, notes that the ARC lacked sufficient time to fully address privacy and data protection concerns, and that therefore those topics were not addressed: [T]he ARC also lacks sufficient time to perform an exhaustive analysis of all the privacy implications of remote ID, tracking, or UTM, and did not specifically engage with privacy experts, from industry or otherwise, during this ARC.  These members agree, however, that it is fundamentally important that privacy be fully considered and that appropriate privacy protections are in place before data collection and sharing by any party (either through remote ID and/or UTM) is required for operations.  A non-exhaustive list of important privacy considerations include, amongst other issues, any data collection, retention, sharing, use and access.  Privacy must be considered with regard to both PII and historical tracking information.  The privacy of all individuals (including operators and customers) should be addressed, and privacy should be a consideration during the rulemaking for remote ID and tracking. Accordingly, the ARC recognizes the fundamental importance of fully addressing privacy and data protection concerns, and we anticipate that future rulemaking will address these issues. IV.    CONCLUSION We will continue to keep you informed on these and other related issues as they develop. [1] See Huerta, No. 3:16-cv-358, Dkt. No. 30. [2] Id. [3] Id. [4] See Boggs, No. 3:16-cv-00006, Dkt. No. 1 (W.D. Ky. Jan. 4, 2016). [5] See id. [6] See Boggs, No. 3:16-cv-00006, Dkt. No. 20 (W.D. Ky. Jan. 4, 2016). [7] See id. [8] See Singer, No. 1:17-cv-10071, Dkt. N. 63 (D. Mass. Jan. 17, 2017). [9] See id. [10] See id. [11] See id. [12] See id. [13] See Taylor v. Huerta, 856 F.3d 1089 (D.C. Cir. 2017). [14] See Pub. L. No. 112–95, § 336(a), 126 Stat. 11, 77 (2012) (codified at 49 U.S.C. § 40101 note). [15] See Taylor, 856 F.3d at 1090. [16] See Pub. L. No. 115–91, § 3 1092(d), (2017). [17] The White House, Office of the Press Secretary, Presidential Memorandum:  Promoting Economic Competitiveness While Safeguarding Privacy, Civil Rights, and Civil Liberties in Domestic Use of Unmanned Aircraft Systems, Feb. 15, 2015, available at https://obamawhitehouse.archives.gov/the-press-office/2015/02/15/presidential-memorandum-promoting-economic-competitiveness-while-safegua. [18] Operation and Certification of Small Unmanned Aircraft Systems, 81 Fed. Reg. 42064 (June 28, 2016). [19] Electronic Privacy Information Center (“EPIC”), EPIC v. FAA: Challenging the FAA’s Failure to Establish Drone Privacy Rules, https://epic.org/privacy/litigation/apa/faa/drones/ (last visited Jan. 18, 2018). [20] See generally Electronic Privacy Information Center v. FAA (EPIC I), 821 F.3d 39, 41-42 (D.C. Cir. 2016) (noting that FAA denied EPIC’s petition for rulemaking requesting that the FAA consider privacy concerns). [21] Voluntary Best Practices for UAS Privacy, Transparency, and Accountability, NTIA-Convened Multistakeholder Process (May 18, 2016), https://www.ntia.doc.gov/files/ntia/publications/ uas_privacy_best_practices_6-21-16.pdf. [22] EPIC, supra, note xix. [23] EPIC I, supra, note xx, at 41. [24] Id. 41-42. [25] Id. [26] Id. [27] Id. at 42-43. [28] Id. at 42. [29] Id. at 43. [30] Pet. For Review, Electronic Privacy Information Center v. FAA (EPIC II), Nos. 16-1297, 16-1302 (Filed Aug. 22, 2016), https://epic.org/privacy/litigation/apa/faa/drones/EPIC-Petition-08222016.pdf. [31] Appellant Opening Br., EPIC II, Nos. 16-1297, 16-1302 (Filed Feb. 28, 2017), https://epic.org/privacy/litigation/apa/faa/drones/1663292-EPIC-Brief.pdf. [32] Appellee Reply Br., EPIC II, Nos. 16-1297, 16-1302 (Filed April 27, 2017), https://epic.org/privacy/litigation/apa/faa/drones/1673002-FAA-Reply-Brief.pdf. [33] United States Court of Appeals District of Columbia Circuit, Oral Argument Calendar, https://www.cadc.uscourts.gov/internet/sixtyday.nsf/fullcalendar?OpenView&count=1000 (last visited Jan. 18, 2018). [34] United States Department of Defense, Unmanned Systems Integrated Roadmap (2013), https://www.defense.gov/Portals/1/Documents/pubs/DOD-USRM-2013.pdf. [35] Andrew Meola, Drone Marker Shows Positive Outlook with Strong Industry Growth and Trends, Business Insider, July 13, 2017, available at http://www.businessinsider.com/drone-industry-analysis-market-trends-growth-forecasts-2017-7. [36] Office of the Under Secretary of Defense, U.S. Department of Defense Fiscal Year 2017 Budget Request (Feb. 2016). [37] Office of the Under Secretary of Defense, U.S. Department of Defense Fiscal Year 2018 Budget Request (May 2017). [38] Goldman Sachs, Drones: Reporting for Work, http://www.goldmansachs.com/our-thinking/technology-driving-innovation/drones/ (last visited Jan. 18, 2017). [39] Id. [40] Chris Woods, The Story of America’s Very First Drone Strike, The Atlantic, May 30, 2016, available at https://www.theatlantic.com/international/archive/2015/05/america-first-drone-strike-afghanistan/394463/. [41] Deputy Secretary of Defense, Policy Memorandum 15-002, “Guidance for the Domestic Use of Unmanned Aircraft Systems” (Feb. 17, 2015), https://www.defense.gov/Portals/1/Documents/Policy%20Memorandum%2015-002%20_Guidance%20for%20the%20Domestic%20Use%20of%20Unmanned%20Aircraft%20Systems_.pdf. [42] Id. [43] Id. [44] Id. [45] Id. [47] Id. [48] Eric Schmitt, Pentagon Tests Lasers and Nets to Combat Vexing Foe: ISIS Drones, N.Y. Times, Sept. 23, 2017, available at https://www.nytimes.com/2017/09/23/world/middleeast/isis-drones-pentagon-experiments.html. [49] Id. [50] Christopher Woody, The Pentagon is Getting Better at Stopping Enemy Drones—and Testing Its Own for Delivering Gear to the Battlefield, Business Insider, Apr. 24, 2017, available at https://www.businessinsider.com/military-adding-drones-and-drone-defense-to-its-arensal-2017-4. [51] Id. [52] Radio Hill Technology, Birth of the Dronebuster, http://www.radiohill.com/product/ (last visited Jan. 18, 2018). [53] Id. [54] Kyle Mizokami, The Army’s Drone-Killing Lasers are Getting a Tenfold Power Boost, Popular Mechanics, July 18, 2017, available at http://www.popularmechanics.com/military/research/news/a27381/us-army-drone-killing-laser-power/. [55] Sydney J. Freedberg Jr., Drone Killing Laser Stars in Army Field Test, Breaking Defense, May 11, 2017, available at https://breakingdefense.com/2017/05/drone-killing-laser-stars-in-army-field-test/. [56] Mizokami, supra, note lv. [57] ASSURE, UAS Ground Collision Severity Evaluation Final Report, United States (2017), available at http://www.assureuas.org/projects/deliverables/sUASGroundCollisionReport.php?Code=230 (ASSURE Study). [58] Id. [59] Id. [60] Id. [61] DJI, DJI Welcomes FAA-Commissioned Report Analyzing Drone Safety Near People, Newsroom News, Apr. 28, 2017, available at https://www.dji.com/newsroom/news/dji-welcomes-faa-commissioned-report-analyzing-drone-safety-near-people. [62] Id. [63] Id. [64] ASSURE Study, supra note lviii. [65] Id. [66] Id. [67] Id. [68] Id. [69] ASSURE, FAA and Assure Announce Results of Air-to-Air Collision Study, ASSURE: Alliance for System Safety of UAS through Research Excellence, Nov. 27, 2017, available at https://pr.cirlot.com/faa-and-assure-announce-results-of-air-to-air-collision-study/. [70] Id. [71] ASSURE Study, supra note lviii. [72] Id. [73] Id. [74] Id. [75] See Pathiyil, et al., Issues of Safety and Risk management for Unmanned Aircraft Operations in Urban Airspace, 2017 Workshop on Research, Education and Development of Unmanned Aerial Systems (RED-UAS), Oct. 3, 2017, available at http://ieeexplore.ieee.org/stamp/stamp.jsp?arnumber=8101671. [76] Id. [77] Id. [78] Id. [79] Id. [80] Patrick C. Miller, 2,800 Interested Parties Apply for UAS Integration Pilot Program, UAS Magazine, Jan. 3, 2018, available at http://www.uasmagazine.com/articles/1801/2-800-interested-parties-apply-for-uas-integration-pilot-program. [81] Unmanned Aircraft Systems Integration Pilot Program, 82 Fed. Reg. 50,301 (Oct. 25, 2017) (Presidential directive creating the program); see also Unmanned Aircraft Systems Integration Pilot Program—Announcement of Establishment of Program and Request for Applications, 82 Fed. Reg. 215 (Nov. 8, 2017) (Department of Transportation Notice of the UAS Pilot Program). [82] See id. [83] See id. [84] Elaine Goodman, Blood Deliveries by Drone Proposed—City Submits Unique Ideas to FAA, Daily Post, Jan. 5, 2018, available at http://padailypost.com/2018/01/05/blood-deliveries-by-drone-proposed-city-submits-unique-ideas-to-faa/. [85] Id. [86] Id. [87] Id. [88] Id. [89] Miller, supra note lxxxi. [90] Id. [91] Id. [92] Id. [93] Id. [101]   NASA Spaceflight, India’s PSLV deploys a record 104 satellites (Feb. 14, 2017), available at https://www.nasaspaceflight.com/2017/02/indias-pslv-record-104-satellites/. [102]   NASA, NASA’s Newest Astronaut Recruits to Conduct Research off the Earth, For the Earth and Deep Space Missions (June 7, 2017), available at https://www.nasa.gov/press-release/nasa-s-newest-astronaut-recruits-to-conduct-research-off-the-earth-for-the-earth-and. [103]   NASA, Cassini Spacecraft Ends Its Historic Exploration of Saturn (Sept. 15, 2017), available at https://www.nasa.gov/press-release/nasa-s-cassini-spacecraft-ends-its-historic-exploration-of-saturn. [104]   NASA, New Space Policy Directive Calls for Human Expansion Across Solar System (Dec. 11, 2017), available at https://www.nasa.gov/press-release/new-space-policy-directive-calls-for-human-expansion-across-solar-system. [105]   TechCrunch, SpaceX caps a record year with 18th successful launch of 2017 (Dec. 22, 2017), available at https://techcrunch.com/2017/12/22/spacex-caps-a-record-year-with-18th-successful-launch-of-2017/. [106]   The Verge, After a year away from test flights, Blue Origin launches and lands its rocket again (Dec. 12, 2017), available at https://www.theverge.com/2017/12/12/16759934/blue-origin-new-shepard-test-flight-launch-landing. [107]   Space.com, SpaceX Launches (and Lands) Used Rocket on Historic NASA Cargo Mission (Dec. 15, 2017), available at https://www.space.com/39063-spacex-launches-used-rocket-dragon-spacecraft-for-nasa.html. [108]   U.S. Department of State, Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, Including the Moon and Other Celestial Bodies, available at https://www.state.gov/t/isn/5181.htm#treaty. [109] NTI, Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, Including the Moon and Other Celestial Bodies (Outer Space Treaty) (Feb. 1, 2017), available at http://www.nti.org/learn/treaties-and-regimes/treaty-principles-governing-activities-states-exploration-and-use-outer-space-including-moon-and-other-celestial-bodies-outer-space-treaty/. [110] PHYS.ORG, Space likely for rare earth search, scientists say (Feb. 20, 2013), available at https://phys.org/news/2013-02-space-rare-earths-scientists.html. [111]   NASA, Lunar CATALYST (Jan. 16, 2014), available at https://www.nasa.gov/content/lunar-catalyst/#.WmLx1qinGHs. [112]   The Conversation, The Outer Space Treaty has been remarkably successful – but is it fit for the modern age? (Jan. 27, 2017), available at http://theconversation.com/the-outer-space-treaty-has-been-remarkably-successful-but-is-it-fit-for-the-modern-age-71381. [113]   The Verge, How an international treaty signed 50 years ago became the backbone for space law (Jan. 27, 2017), available at https://www.theverge.com/2017/1/27/14398492/outer-space-treaty-50-anniversary-exploration-guidelines. [114]   Id. [115]   The Space Review, Is it time to update the Outer Space Treaty? (June 5, 2017), available at http://www.thespacereview.com/article/3256/1. [116]   U.S. Senate, Reopening the American Frontier:  Exploring How the Outer Space Treaty Will Impact American Commerce and Settlement in Space (May 23, 2017), available at https://www.commerce.senate.gov/public/index.cfm/hearings?ID=5A91CD95-CDA5-46F2-8E18-2D2DFCAE4355. [117]   The Space Review, supra note cxvi. [118]   Id. [119]   Id. [120] H.R. Rep No. 2809 (2017), available at https://www.congress.gov/bill/115th-congress/house-bill/2809.  The other primary sponsors of the bill are Brian Babin (R-TX), chairman of the space subcommittee; and Rep. Jim Bridenstine (R-OK). [121] Sandy Mazza, Space exploration regulations need overhaul, new report says, Daily Breeze (Dec. 2, 2017), https://www.dailybreeze.com/2017/12/02/space-exploration-regulations-need-overhaul-new-report-says/.  The Act’s stated purpose is to “provide greater transparency, greater efficiency, and less administrative burden for nongovernmental entities of the United States seeking to conduct space activities.”  H.R. Rep No. 2809 (2017), available at https://www.congress.gov/bill/115th-congress/house-bill/2809 (Section 2(c)). [122] Jeff Foust, House bill seeks to streamline oversight of commercial space activities, Space News (June 8, 2017), http://spacenews.com/house-bill-seeks-to-streamline-oversight-of-commercial-space-activities/. [123] Marcia Smith, New Commercial Space Bill Clears House Committee, Space Policy Online (June 8, 2017), https://spacepolicyonline.com/news/new-commercial-space-bill-clears-house-committee/. [124] Under the Obama administration, many in government and industry presumed that the regulation of new space activities would fall to FAA/AST.  See Marcia Smith, New Commercial Space Bill Clears House Committee, Space Policy Online (June 8, 2017), https://spacepolicyonline.com/news/new-commercial-space-bill-clears-house-committee/ (In fact, the agency heads of the FAA/AST, and the Office of Science and Technology Policy, recommended the same). [125] Marcia Smith, Companies Agree FAA Best Agency to Regulate Non-Traditional Space Activities, Space Policy Online (Nov. 15, 2017), https://spacepolicyonline.com/news/companies-agree-faa-best-agency-to-regulate-non-traditional-space-activities/. [126] H.R. Rep No. 2809 (2017), available at https://www.congress.gov/bill/115th-congress/house-bill/2809. [127] Id. [128] Jeff Foust, House bill seeks to streamline oversight of commercial space activities, Space News (June 8, 2017), http://spacenews.com/house-bill-seeks-to-streamline-oversight-of-commercial-space-activities/. [129] Marcia Smith, New Commercial Space Bill Clears House Committee, Space Policy Online (June 8, 2017), https://spacepolicyonline.com/news/new-commercial-space-bill-clears-house-committee/. [130] Marcia Smith, New Commercial Space Bill Clears House Committee, Space Policy Online (June 8, 2017), https://spacepolicyonline.com/news/new-commercial-space-bill-clears-house-committee/; Marcia Smith, Companies Agree FAA Best Agency to Regulate Non-Traditional Space Activities, Space Policy Online (Nov. 15, 2017), https://spacepolicyonline.com/news/companies-agree-faa-best-agency-to-regulate-non-traditional-space-activities/.  The bill, for example, requires e the Secretary of Commerce to issue certifications or permits for commercial space activities, unless, for example, the Secretary finds by “clear and convincing evidence” that the permit would violate the Outer Space Treaty.  Bob Zimmerman, What You Need To Know About The Space Law Congress Is Considering, The Federalist (July 11, 2017), http://thefederalist.com/2017/07/11/need-know-space-law-congress-considering/.  Indeed, the policy section of the bill finds that “United States citizens and entities are free to explore and use space, including the utilization of outer space and resources contained therein, without conditions or limitations” and “this freedom is only to be limited when necessary to assure United States national security interests are met” or fulfill treaty obligations.  H.R. Rep No. 2809 (2017), available at https://www.congress.gov/bill/115th-congress/house-bill/2809. [131] Jeff Foust, House bill seeks to streamline oversight of commercial space activities, Space News (June 8, 2017), http://spacenews.com/house-bill-seeks-to-streamline-oversight-of-commercial-space-activities/. [132] Joshua Hampson, The American Space Commerce Free Enterprise Act, Niskanen Center (June 15, 2017), https://niskanencenter.org/blog/american-space-commerce-free-enterprise-act/. [133] Jeff Foust, House bill seeks to streamline oversight of commercial space activities, Space News (June 8, 2017), http://spacenews.com/house-bill-seeks-to-streamline-oversight-of-commercial-space-activities/. [134] Jeff Foust, House bill seeks to streamline oversight of commercial space activities, Space News (June 8, 2017), http://spacenews.com/house-bill-seeks-to-streamline-oversight-of-commercial-space-activities/; Congressional Budget Office Cost Estimate, Congressional Budget Office (July 7, 2017), https://www.cbo.gov/system/files/115th-congress-2017-2018/costestimate/hr2809.pdf. [135] Samuel R. Ramer, Letter from the Office of the Assistant Attorney General, Justice Department (July 17, 2017), https://www.justice.gov/ola/page/file/995646/download. [136] H.R. Rep No. 2809 (2017), available at https://www.congress.gov/bill/115th-congress/house-bill/2809/all-actions. [137] Marcia Smith, New Commercial Space Bill Clears House Committee, Space Policy Online (June 8, 2017), https://spacepolicyonline.com/news/new-commercial-space-bill-clears-house-committee/. [138] Jeffrey Hill, Congressman Babin Hints that Cybersecurity Could be Included in Larger Commercial Space Legislative Package, Satellite Today (Nov. 7, 2017), http://www.satellitetoday.com/government/2017/11/07/cybersecurity-featured-space-commerce-act/. [139] Commerce Department Now Accepting Public Inputs on Regulatory Streamlining, Space Commerce (Oct. 27, 2017), http://www.space.commerce.gov/commerce-department-now-accepting-public-inputs-on-regulatory-streamlining/; Sandy Mazza, Space exploration regulations need overhaul, new report says, Daily Breeze (Dec. 2, 2017), https://www.dailybreeze.com/2017/12/02/space-exploration-regulations-need-overhaul-new-report-says/. [140] Sean Kelly, The new national security strategy prioritizes space, The Hill (Jan. 3, 2018), http://thehill.com/opinion/national-security/367240-the-new-national-security-strategy-prioritizes-space; Jeff Foust, House panel criticizes commercial remote sensing licensing, Space News (Sept. 8, 2016), http://spacenews.com/house-panel-criticizes-commercial-remote-sensing-licensing/.  Critics argue that the NOAA’s approval pace is harming U.S. companies to the benefit of foreign competitors. Randy Showstack, Remote Sensing Regulations Come Under Congressional Scrutiny, EOS (Sept. 14, 2016), https://eos.org/articles/remote-sensing-regulations-come-under-congressional-scrutiny. [141] H.R. Rep No. 6133 (1992), available at https://www.congress.gov/bill/102nd-congress/house-bill/6133. [142] Randy Showstack, Remote Sensing Regulations Come Under Congressional Scrutiny, EOS (Sept. 14, 2016), https://eos.org/articles/remote-sensing-regulations-come-under-congressional-scrutiny.  Indeed, the Commercial Space Launch Competitiveness Act, signed into law in November 2016, requires the Department of Commerce to analyze possible statutory updates to the remote sensing licensing scheme.  Jeff Foust, House panel criticizes commercial remote sensing licensing, Space News (Sept. 8, 2016), http://spacenews.com/house-panel-criticizes-commercial-remote-sensing-licensing/.  The text of the ASCFEA also recognizes that since “the passage of the Land Remote Sensing Policy Act of 1992, the National Oceanic and Atmospheric Administration’s Office of Commercial Remote Sensing has experienced a significant increase in applications for private remote sensing space system licenses . . .”  H.R. Rep No. 2809 (2017), available at https://www.congress.gov/bill/115th-congress/house-bill/2809. [143] Joshua Hampson, The American Space Commerce Free Enterprise Act, Niskanen Center (June 15, 2017), https://niskanencenter.org/blog/american-space-commerce-free-enterprise-act/.  The ASCFEA defines a Space-Based Remote Sensing System as “a space object in Earth orbit that is “(A) designed to image the Earth; or (B) capable of imaging a space object in Earth orbit operated by the Federal Government.”  H.R. Rep No. 2809 (2017), available at https://www.congress.gov/bill/115th-congress/house-bill/2809. [144] Jeff Foust, Commercial remote sensing companies seek streamlined regulations, Space News (Mar. 17, 2017), http://spacenews.com/commercial-remote-sensing-companies-seek-streamlined-regulations/. [145] Id. [146] Jeff Foust, House panel criticizes commercial remote sensing licensing, Space News (Sept. 8, 2016), http://spacenews.com/house-panel-criticizes-commercial-remote-sensing-licensing/. [147] H.R. Rep No. 2809 (2017), available at https://www.congress.gov/bill/115th-congress/house-bill/2809 (Chapter 8012 § 80202(e)(1)). [148] Jeff Foust, Commercial remote sensing companies seek streamlined regulations, Space News (Mar. 17, 2017), http://spacenews.com/commercial-remote-sensing-companies-seek-streamlined-regulations/. [150] H.R. Rep No. 2809 (2017), available at https://www.congress.gov/bill/115th-congress/house-bill/2809 (Chapter 802 § 80201(d)). [151] Reinvigorating America’s Human Space Exploration Program, 82 Fed. Reg. 59501 (Dec. 11, 2017) [152] Nell Greenfieldboyce, President Trump Is Sending NASA Back to the Moon (Dec. 11, 2017) available at https://www.npr.org/sections/thetwo-way/2017/12/11/569936446/president-trump-is-sending-nasa-back-to-the-moon. [153] See Press Release, NASA, New Space Policy Directive Calls for Human Expansion Across Solar System (Dec. 11, 2017); see also NASA, https://www.nasa.gov/mission_pages/apollo/missions/apollo17.html (last visited Jan. 21, 2018). [154] Reinvigorating America’s Human Space Exploration Program, supra note clii. [155] Id. [156] NASA, Commercial Crew Program – The Essentials, available at https://www.nasa.gov/content/commercial-crew-program-the-essentials/#.VjOJ3berRaT. [157] Michael Sheetz, Trump Orders NASA to Send American Astronauts to the Moon, Mars, CNBC (Dec. 11, 2017) available at https://www.cnbc.com/2017/12/11/trump-orders-nasa-to-send-american-astronauts-to-the-moon-mars.html. [158] See New Space Policy Directive Calls for Human Expansion Across Solar System, supra note cv; see also Christian Davenport, Trump Vows Americans Will Return to the Moon.  The Question Is How?, (Dec. 11, 2017) available at https://www.washingtonpost.com/news/the-switch/wp/2017/12/11/trump-vows-americans-will-return-to-the-moon-the-question-is-how/?utm_term=.4ceb20131cdf. [159] The Right Stuff (The Ladd Company 1983). [160] Laurent Thailly and Fiona Schneider, Luxembourg set to become Europe’s commercial space exploration hub with new Space law, Ogier (Jan. 8, 2017), https://www.ogier.com/news/the-luxembourg-space-law. [161] Reuters Staff, Luxembourg sets aside 200 million euros to fund space mining ventures, Reuters (June 3, 2016), https://www.reuters.com/article/us-luxembourg-space-mining/luxembourg-sets-aside-200-million-euros-to-fund-space-mining-ventures-idUSKCN0YP22H; Laurent Thailly and Fiona Schneider, Luxembourg set to become Europe’s commercial space exploration hub with new Space law, Ogier (Jan. 8, 2017), https://www.ogier.com/news/the-luxembourg-space-law.  Luxembourg invested €23 million in U.S. company Planetary Resources, and now owns a 10% share in the company.  Kenneth Chang, If no one owns the moon, can anyone make money up there?, The Independent (Dec. 4, 2017), http://www.independent.co.uk/news/long_reads/if-no-one-owns-the-moon-can-anyone-make-money-up-there-space-astronomy-a8087126.html. [162] In 2015, the U.S. passed the Commercial Space Launch Competitiveness Act, which clarified that companies that extract materials from celestial bodies can own those materials.  Andrew Silver, Luxembourg passes first EU space mining law. One can possess the Spice, The Register (July 14, 2017), https://www.theregister.co.uk/2017/07/14/luxembourg_passes_space_mining_law/. [163] Jeff Foust, Luxembourg adopts space resources law, Space News (July 17, 2017), http://spacenews.com/luxembourg-adopts-space-resources-law/. [164] Jeff Foust, Luxembourg adopts space resources law, Space News (July 17, 2017), http://spacenews.com/luxembourg-adopts-space-resources-law;  Paul Zenners, Press Release, Space Resources (July 13, 2017), http://www.spaceresources.public.lu/content/dam/spaceresources/press-release/2017/2017_07_13%20PressRelease_Law_Space_Resources_EN.pdf. [165] Laurent Thailly and Fiona Schneider, Luxembourg set to become Europe’s commercial space exploration hub with new Space law, Ogier (Jan. 8, 2017), https://www.ogier.com/news/the-luxembourg-space-law.  Reportedly, two American companies already plan to move to Luxembourg:  Deep Space Industries and Planetary Resources. Vasudevan Mukunth, Fiat Luxembourg: How a Tiny European Nation is Leading the Evolution of Space Law, The Wire (July 15, 2017), https://thewire.in/157687/luxembourg-space-asteroid-mining-dsi/. [166] Andrew Silver, Luxembourg passes first EU space mining law. One can possess the Spice, The Register (July 14, 2017), https://www.theregister.co.uk/2017/07/14/luxembourg_passes_space_mining_law/;  Mark Kaufman, Luxembourg’s Asteroid Mining is Legal Says Space Law Expert, inverse.com (Aug. 1, 2017), https://www.inverse.com/article/34935-luxembourg-s-asteroid-mining-is-legal-says-space-law-expert. [167] Antariksh Bhavan, Seeking comments on Draft “Space Activities Bill, 2017” from the stake holders/public-regarding, ISRO (Nov. 21, 2017), https://www.isro.gov.in/update/21-nov-2017/seeking-comments-draft-space-activities-bill-2017-stake-holders-public-regarding;  Special Correspondent, Govt. unveils draft of law to regulate space sector, The Hindu (Nov. 22, 2017), http://www.thehindu.com/sci-tech/science/govt-unveils-draft-of-law-to-regulate-space-sector/article20629386.ece;  Raghu Krishnan & T E Narasimhan, Draft space law gives private firms a grip on rocket, satellite making, Business Standard (Nov. 22, 2017), http://www.business-standard.com/article/economy-policy/draft-space-law-gives-private-firms-a-grip-on-rocket-satellite-making-117112101234_1.html. [168] Antariksh Bhavan, Seeking comments on Draft “Space Activities Bill, 2017” from the stake holders/public-regarding, ISRO (Nov. 21, 2017), https://www.isro.gov.in/update/21-nov-2017/seeking-comments-draft-space-activities-bill-2017-stake-holders-public-regarding. [169] Id. [170] Ellen Barry, India Launches 104 Satellites From a Single Rocket, Ramping Up a Space Race, The New York Times (Feb. 15, 2017), https://www.nytimes.com/2017/02/15/world/asia/india-satellites-rocket.html. [171] Id. [172] Yes, Australia will have a space agency. What does this mean? Experts respond, The Conversation (Sept. 25, 2017), http://theconversation.com/yes-australia-will-have-a-space-agency-what-does-this-mean-experts-respond-84588;  Jordan Chong, Better late than never, Australia heads (back) to space, Australian Aviation (Dec. 29, 2017), http://australianaviation.com.au/2017/12/better-late-than-never-australia-heads-back-to-space/. [173] Andrew Griffin, Australia launches brand new space agency in attempt to flee the Earth, The Independent (Sept. 25, 2017), http://www.independent.co.uk/news/science/australia-space-agency-nasa-earth-roscosmos-malcolm-turnbull-economy-a7966751.html;  Henry Belot, Australian space agency to employ thousands and tap $420b industry, Government says, ABC (Sept. 25, 2017), http://www.abc.net.au/news/2017-09-25/government-to-establish-national-space-agency/8980268. [174]   White House, Critical Infrastructure Security and Resilience, Presidential Policy Directive/PPD-21 (Feb. 12, 2013). [175]   Woodrow Bellamy III, Senators Reintroduce Aircraft Cyber Security Legislation, Aviation Today (Mar. 24, 2017), http://www.aviationtoday.com/2017/03/24/senators-reintroduce-aircraft-cyber-security-legislation/. [176]   The eighteen states that passed UAS legislation in 2017 were Colorado, Connecticut, Florida, Georgia, Indiana, Kentucky, Louisiana, Minnesota, Montana, Nevada, New Jersey, North Carolina, Oregon, South Dakota, Texas, Utah, Virginia and Wyoming. The three states that passed resolutions related to UAS were Alaska, North Dakota and Utah. [177]   Under Section 2202 of the FAA Extension, Safety, and Security Act of 2016, Pub. L. 114-190, Congress directed the FAA to convene industry stakeholders to facilitate the development of consensus standards for identifying operators and UAS owners.  The final report identifies the following as the ARC’s stated objectives: The stated objectives of the ARC charter were: to identify, categorize and recommend available and emerging technology for the remote identification and tracking of UAS; to identify the requirements for meeting the security and public safety needs of the law enforcement, homeland defense, and national security communities for the remote identification and tracking of UAS; and to evaluate the feasibility and affordability of available technical solutions, and determine how well those technologies address the needs of the law enforcement and air traffic control communities. The final ARC report is available at: https://www.faa.gov/regulations_policies/rulemaking/committees/documents/media/UAS%20ID%20ARC%20Final%20Report%20with%20Appendices.pdf. 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March 9, 2018 |
D.C. Circuit Applies U.S. Copyright Law to Video Content Streamed from Abroad

Click for PDF On March 2, 2018, the United States Court of Appeals for the D.C. Circuit decided an important case addressing two separate, still unsettled questions about the scope of copyright infringement liability.  See Spanski Enterprises v. Telewizja Polska, S.A., No. 17-7051 (D.C. Cir. Mar. 2, 2018).  In brief, the court held that the defendant infringed the plaintiff’s exclusive public performance right when, without authorization, it made copyright-protected television programming available to stream inside the United States, even though the stream was hosted outside the United States.  This was the first time a federal court of appeals considered whether streaming content originating extraterritorially is subject to U.S. copyright liability.  Separately, though the defendant insisted that it could not face liability unless it “volitionally” selected the content delivered to each user, the court held that operating a video-on-demand system which allowed members of the public to receive a copyright-protected performance constituted copyright infringement. Spanski Enterprises involved a longstanding licensing agreement between Telewizja Polska (TVP), the national broadcasting company of Poland, and Spanski Enterprises, a Canadian corporation in the business of distributing Polish-language programming.  A 2009 settlement agreement between the parties established that Spanski alone could distribute the programming at issue in North and South America, whether over the Internet or otherwise.  TVP continued to distribute its programming everywhere else in the world, including by offering episodes for streaming on its website, but used geoblocking technology to ensure that no IP address associated with North or South America could access any programming to which Spanski held the license.  However, in 2011 attorneys for Spanski discovered that users in North and South America could still access programming that should have been geoblocked.  Spanski sued TVP for infringement and, after a five-day bench trial, Judge Tanya Chutkan of the United States District Court for the District of Columbia found TVP liable. On appeal, TVP raised two main challenges to the district court’s ruling.  First, it argued that it could not commit copyright infringement because none of its conduct took place within the United States, and the Copyright Act does not apply extraterritorially.  Second, it argued that a defendant only faces copyright liability if its “conduct was volitional.”  Because TVP merely operated an “automatic content delivery system” from which the user “selects the content it will view” without TVP’s involvement in processing that request, TVP insisted it had not violated the law.  The United States filed an amicus brief on behalf of Spanski, urging the court to reject both TVP’s arguments. In an opinion written by Judge Tatel and joined by Judges Griffith and Wilkins, the court of appeals affirmed, holding TVP liable for infringing Spanski’s exclusive rights.  Applying the Copyright Act to TVP’s conduct is not an impermissible extraterritorial application, the Court explained, because “the infringing performances—and consequent violation of Spanski’s copyrights—occurred on the computer screens in the United States on which the episode’s images were shown.”  TVP argued that when a performance originates internationally but is shown to the public within the country, only the domestic viewer was liable for copyright infringement.  The court disagreed, holding that a broadcaster remains liable for “the infringing display of copyrighted images on the viewer’s screen” whenever such a performance occurs “in the United States,” no matter where the broadcaster is located. The court also held that an unauthorized performance via a video-on-demand system like TVP’s infringed Spanski’s exclusive rights, even without proof that TVP took a “volitional” act, because TVP made it possible for end users to select copyright-protected content.  The text of the Copyright Act, the court explained, imposes liability whenever a defendant makes it possible for “members of the public” to “receive[] the performance” of copyrighted content.  The court found it unnecessary to decide whether a “volitional conduct” requirement exists at all or how far it extends, holding that TVP’s conduct constitutes infringement “whatever the scope of any such requirement might otherwise be.” In rejecting TVP’s “volitional conduct” argument, the court of appeals relied heavily on the Supreme Court’s 2014 decision in American Broadcasting Cos. v. Aereo, Inc., 134 S. Ct. 2498 (2014).  In Aereo, the Supreme Court held that an intermediary service that automatically captured and retransmitted broadcast television signals infringed the public performance right, even where the end user and not the service selected which content to capture.  The D.C. Circuit concluded that Aereo “forecloses [TVP’s] argument that the automated nature of its video-on-demand system or the end user’s role in selecting which content to access insulates it from Copyright Act liability.”  The court noted that TVP’s video-on-demand service involved TVP itself even more directly in the infringing performances than did the system in Aereo: unlike in Aereo, TVP itself selected and uploaded the content its system made available. Both holdings are important developments.  No other federal court of appeals has yet squarely held that U.S. copyright law applies to performances originating internationally that can be viewed inside the United States—though, as Professor Nimmer puts it in his copyright treatise, it requires only “a straightforward application of the statute” to hold that such performances are actionable.   5 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 17.02 (rev. ed. 2017).  This holding will prevent would-be infringers from evading liability simply by relocating across a border. Separately, though the court refused to decide whether a “volitional conduct” requirement exists, its application of Aereo to TVP’s on-demand system adds fuel to the ongoing debate over the Copyright Act’s scope.  Several courts of appeals, both before and since the Supreme Court’s Aereo decision, have held that the Copyright Act only applies to “volitional conduct.”  BWP Media USA, Inc. v. T & S Software Associates, Inc., 852 F.3d 436 (5th Cir. 2017); Perfect 10, Inc. v. Giganews, Inc., 847 F.3d 657 (9th Cir. 2017); CoStar Group, Inc. v. LoopNet, Inc., 373 F.3d 544 (4th Cir. 2004); Parker v. Google, Inc., 242 F. App’x 833 (3d Cir. 2007).  In its amicus brief, however, the Government argued that Aereo “rejected” a volitional-conduct argument.  Thus, it will be up to future courts to decide the ultimate fate of the defense. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments.  Please contact the Gibson Dunn lawyer with whom you usually work, or the authors: Howard S. Hogan – Washington, D.C. (+1 202-887-3640, hhogan@gibsondunn.com) Connor S. Sullivan* – New York (+1 212-351-2459, cssullivan@gibsondunn.com) *Prior to joining the firm, Connor Sullivan contributed to an amicus curiae brief filed in this appeal in support of Spanski Enterprises. Please also feel free to contact the following practice group leaders: Intellectual Property Group: Wayne Barsky – Los Angeles (+1 310-552-8500, wbarsky@gibsondunn.com) Josh Krevitt – New York (+1 212-351-4000, jkrevitt@gibsondunn.com) Mark Reiter – Dallas (+1 214-698-3100, mreiter@gibsondunn.com) Media, Entertainment and Technology Group: Scott A. Edelman – Los Angeles (+1 310-557-8061, sedelman@gibsondunn.com) Ruth E. Fisher – Los Angeles (+1 310-557-8057, rfisher@gibsondunn.com) Orin Snyder– New York (+1 212-351-2400, osnyder@gibsondunn.com) Appellate and Constitutional Law Group: Mark A. Perry – Washington, D.C. (+1 202-887-3667, mperry@gibsondunn.com) Caitlin J. Halligan – New York (+1 212-351-4000, challigan@gibsondunn.com) Nicole A. Saharsky – Washington, D.C. (+1 202-887-3669, nsaharsky@gibsondunn.com) Technology Transactions Group: David H. Kennedy – Palo Alto (+1 650-849-5304, dkennedy@gibsondunn.com) Daniel Angel – New York (+1 212-351-2329, dangel@gibsondunn.com) Shaalu Mehra – Palo Alto (+1 650-849-5282, smehra@gibsondunn.com) © 2018 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

January 30, 2018 |
NAURA Technology Group’s Acquisition of Akrion Systems Named Deal of the Year

China Business Law Journal has named the acquisition by NAURA Technology Group of Akrion Systems as one of its Deals of the Year 2017.  Gibson Dunn represented NAURA Technology Group, a Chinese semiconductor company, in the transaction. NAURA Technology Group received CFIUS approval for the purchase of Akrion Systems, a US semiconductor company, in December 2017, which should be the first CFIUS approval for any Chinese acquisition submitted since January 2017.  The full list was published on January 30, 2018.

January 19, 2018 |
Media, Entertainment and Technology Group – 2017 Year-End Update

Click for PDF 2017 was a banner year in the media, entertainment, and technology industries, chock full of deals, regulatory changes, and important copyright, trademark, and First Amendment rulings.  From Disney to DMCA; television royalties to mechanical royalties; fair use to the FCC; pink slime to piracy; and monkey selfies to Dr. Seuss.  It was also the year of the Weinstein scandal, and the ensuing #MeToo and Time’s Up movements, which have already upended the Hollywood order. In our Media, Entertainment & Technology practice group’s 2017 Year-End Update, we have identified those deals, trends, and rulings that are likely to shape an equally active 2018.  And building off our prior semi-annual updates, we continue to follow the arc of developments in the global streaming video industry, the pace of Chinese investment in Hollywood, and eSports, all of which continue to merit a close watch. __________________________ TABLE OF CONTENTS I……. Transaction & Regulatory Overview A.     M&A Watch 1.   Disney Announces Purchase of 21st Century Fox 2.   Discovery Purchasing Scripps 3.   DOJ Tries to Block AT&T-Time Warner Merger 4.   Meredith to Buy Time 5.   Penske Media Takes Majority Stake in Rolling Stone Mag B.     Streaming Industry Pursues a Global Presence with Original and Local Content 1.   Netflix’s Continued Growth 2.   Amazon Expands Presence and Partnerships 3.   Hulu’s Breakthrough & Foray into Foreign Language Content 4.   Disney Ends Netflix Deal & Announces Forthcoming Streaming Service 5.   iflix’s Continuing Emergence C.     The China Outlook 1.   Is The Heyday of Chinese Investments in Hollywood Over, or Just on Hold? D.     Cutting-Edge Deals and Securities Developments 1.   NBCUniversal/Snap’s Mobile-Focused Venture 2.   Royalty Flow Securitizes Eminem Royalties E.      eSports 1.   eSports Continue Electric Growth II….. Regulatory Updates A.     FCC Repeals “Net Neutrality” Rules B.     FCC Ends Rule on Media Co-Ownership III…. Recent Litigation Highlights A.     Hollywood’s Moment of Reckoning: Legal Fallout from the Weinstein Moment and the #MeToo Movement B.     Profit Participation (Film, TV, Music) 1.   MGM Wins Summary Adjudication in Home Video Class Action 2.   Stallone Seeks Demolition Man Profits 3.   A Supernatural Royalties Fight 4.   Members of Spinal Tap Banned From Suit 5.   Quincy Jones Wins $9.4 MM at Trial over Contract with Michael Jackson C.     Copyright Litigation 1.   DMCA Developments 2.   Volitional Conduct Three Years After Aereo 3.   Unmasking of Anonymous Infringers 4.   Hollywood Continues Its Judicial Assault on Piracy 5.   A Fairly Active Fair Use Docket 6.   The “Monkey Selfie” Settlement 7.   The Audio Home Recording Act Hits the Road D.     Trademark Litigation 1.   CGI and Nominative Fair Use 2.   EMPIRE Strikes Back: Ninth Circuit Holds Show’s Name Is Non-Infringing 3.   No Fair Use for Trekkie-Seuss Book 4.   Federal Circuit Finds Ban on “Scandalous and Immoral” Trademarks Unconstitutional E.      1st Amendment Litigation 1.   Defamation: ABC Settles “Pink Slime” Case 2.   “Libel in Fiction”: Greene v. Paramount Pictures 3.   Right of Publicity: Montel Williams v. Advanceable Technology, LLC 4.   Right of Publicity: Can Using a Voice Double Give Rise to Liability? F.      Music Litigation 1.   Mechanical Royalty Rate to Remain Unchanged 2.   Streaming Drives Music Consumption Growth as Lawsuits Continue to Flow 3.   Do “Players Playing” + “Haters Hating” = Copyright Infringement? 4.   Ticketmaster Acquires Songkick in Settlement of Antitrust Suit 5.   Fractional Licensing: Consent Decree No Bar to BMI and ASCAP __________________________ I.     Transaction & Regulatory Overview A.     M&A Watch The second half of 2017 continued the wave of activity in entertainment and media-related mergers and acquisitions, with a number of newly announced deals and others to keep a close eye on as they proceed through regulatory approval. 1.     Disney Announces Purchase of 21st Century Fox On December 14, 2017, The Walt Disney Company announced its acquisition of 21st Century Fox’s film and television studio businesses in an all-stock deal for $52.4 billion.  The transaction, which Disney anticipates will close in 12 to 18 months, values the purchased Fox assets at $66.1 billion.[1]  Disney will not acquire Fox’s news and sports networks, which will be spun off into a newly listed business.[2] The transaction comes at the end of a particularly active year for media deals, including Discovery’s purchase of Scripps, Meredith’s purchase of Time, and the previously announced AT&T-Time Warner merger, marking a distinct trend of consolidation. 2.     Discovery Purchasing Scripps On July 31, 2017, Discovery Communications announced that it would be purchasing Scripps Networks Interactive in an $11.9 billion transaction.  In its press release, Discovery highlighted that the transaction would align the two “complementary content producers” to create “a premier portfolio of real life entertainment brands” by adding Scripps’ HGTV, Food Network, Travel Channel, and DIY Network, among others, to Discovery’s list of TV brands.[3] 3.     DOJ Tries to Block AT&T-Time Warner Merger On November 20, 2017, the Department of Justice, voicing antitrust concerns, sued to block AT&T’s proposed $85.4 billion acquisition of Time Warner, which was first announced in October 2016.[4]  A trial date has been set for March 19, 2018.[5]  (Disclosure: Gibson Dunn represents AT&T and DirecTV in the suit.) 4.     Meredith to Buy Time Following a year of speculation, on November 26, 2017, Meredith Corporation, the owner of numerous local television stations and the publisher of magazines like Parents and Better Homes & Gardens announced that it will buy Time Inc. in an all-cash transaction valued at $2.8 billion, backed by Koch Equity Development.[6]  As a result of the transaction, Meredith will add Time, People, Fortune, and Sports Illustrated and other titles to its stable of publications.[7] 5.     Penske Media Takes Majority Stake in Rolling Stone Mag On December 20, 2017, it was announced that Penske Media Corporation had purchased a majority stake in Wenner Media, owners of Rolling Stone, in a transaction that values Wenner Media at $100 million.[8]  Despite selling a majority stake in the company, Wenner Media will retain control and editorial oversight over Rolling Stone.  Penske plans to revitalize the iconic music magazine, including its digital operations, and add the well-known title to its growing portfolio, which already includes Variety, Indiewire and Robb Report. B.     Streaming Industry Pursues a Global Presence with Original and Local Content 1.     Netflix’s Continued Growth Coming off the momentum of its Chinese market-entry deal in April 2017 with Beijing-based video service iQiyi,[9] Netflix has made continued efforts in 2017 to enter into foreign partnerships and expand its global presence. In September 2017, Netflix renewed and expanded its distribution deal with France’s leading telecom, Orange.[10]  Where the original deal covered Orange’s distribution of Netflix in France and Spain, the expansion made Netflix’s streaming service available to the 29 countries across Europe, Africa and the Middle East where Orange operates.[11]  Orange’s Poland customers will be offered Netflix by the end of the year, and Netflix will launch in the other 28 countries in 2018.[12] In a similar move, Netflix entered into a global partnership with Deutsche Telekom in November 2017, which enabled customers in Germany, Poland and the Netherlands to access Netflix’s streaming content.[13] Previously, Netflix’s content had been available only to German customers who subscribed to Deutsche Telekom’s EntertainTV.[14] Throughout the second half of 2017, Netflix has continued to invest in local content in its effort to expand internationally.  In October 2017, the company premiered its first Italian original series, Suburra; released a German original show, Dark, in December 2017;[15] and will be releasing its first Polish language series and first Swedish original series in 2018.[16] Netflix is also seeking to introduce local content in Latin America, where the biggest competition continues to be prime-time network telenovelas.[17]  In November 2017, the company announced it will be producing its first Columbian original series in partnership with the Narcos production company Dynamo.[18]  Also in November, Netflix announced an upcoming slate of 10 original Argentine productions ranging from series to documentaries.[19] 2.     Amazon Expands Presence and Partnerships In August 2017, Amazon announced it had entered into an overall deal with The Walking Dead creator Robert Kirkman and a first-look deal with Kirkman’s company Skybound Entertainment.[20]  Through the agreements, Kirkman and Skybound will develop television projects exclusively for Amazon Prime Video.[21] In December 2017, Amazon announced that that Amazon Prime Video app would be available to stream on Apple TV in more than 100 countries.[22]  Previously, Prime Video could only be streamed through the Apple AirPlay feature, a less streamlined method than utilizing a native app.[23] 3.     Hulu’s Breakthrough & Foray into Foreign Language Content In September 2017, Hulu’s original series The Handmaid’s Tale became the first streaming show to win the award for Outstanding Drama Series at the Emmys, where the show also picked up four other awards.  Along with expanding original content, Hulu also began its forays abroad by entering into a licensing deal with Studiocanal covering the foreign language Scandinavian dramas Below the Surface and Midnight Sun.[24]  And with the announcement in December 2017 that Disney will acquire 21st Century Fox, Disney will become the majority owner of Hulu, bringing more stability to the co-owned streamer.  Disney CEO Bob Iger stated that “Managing Hulu becomes a little bit more clear, a little bit more efficient,” and said he expects to “flow more content” to Hulu, making it “a more viable competitor to those already out there.”[25] 4.     Disney Ends Netflix Deal & Announces Forthcoming Streaming Service In August 2017, Disney announced it would end its distribution deal with Netflix and launch its own streaming service by 2019.[26]  The deal with Netflix had only gone into effect in 2016.[27]  As a result of the announcement, Netflix will lose access to newly announced Disney and Pixar films such as the sequel to Frozen, a live action version of The Lion King, and Toy Story 4.[28]  Just days after this announcement, Disney lost showrunner Shonda Rhimes to Netflix, who signed a multi-year production deal with the company and ended her 15-year relationship with ABC Studios.  Still, by removing the content stronghold of Pixar from Netflix, plus the popular content from Marvel Entertainment and Lucasfilm, and with the availability of even more content available through the 21st Century Fox deal, Disney’s streaming service, once launched, stands to become an immediate competitor in the streaming field. 5.     iflix’s Continuing Emergence iflix, a streaming service that launched in Asia in 2015, continues to grow as a low-cost alternative to Netflix in emerging markets.[29] The organization now boasts a subscriber base of over 5 million, and announced that it received $133 million in a round of funding led by Hearst Corporation.[30] Additional investors include Catcha Group, Evolution Media, John C. Malone’s Liberty Global and Sky.[31] With this latest funding round, iflix has raised more than $220 million through funding rounds in 2017.[32] C.     The China Outlook 1.     Is The Heyday of Chinese Investments in Hollywood Over, or Just on Hold? In the second half of 2017, Chinese investments in Hollywood continued their downward trend.  In August 2017, the Chinese State Council and the National Development and Reform Commission issued guidelines on foreign investments, which categorized investments in film, entertainment and sports as “restricted industries,” thereby placing increased scrutiny on Chinese investments in the media and entertainment industry.[33] These regulations are cited as a driving factor behind the multiple failed deals with Chinese investors throughout the year.[34]  In 2017, there has been a precipitous drop in the amount of Chinese investments in the U.S. entertainment industry, which, as of September 30, 2017, was at an aggregate of $489 million, compared to the $4.78 billion in 2016, according to a study by the Rhodium Group.[35] One of the most widely publicized deals that fell victim to the Chinese government’s tightening of capital controls was the slate financing agreement between Paramount, Huahua Media and Shanghai Film Co., by which Huahua Media and Shanghai Film Co. were intended to finance twenty-five percent of Paramount’s slate of films.[36] The $1 billion price tag on the deal was double the cost of any other slate deal between Chinese investors and Hollywood to date.[37]  On November 7, 2017, it was announced that the three were parting ways, citing the Chinese government’s new policies on foreign investments.[38] And Paramount then announced that it would instead enter into deals with Hasbro, Skydance Media and SEGA to create “a more flexible and tailored financing model going forward.”[39] The Paramount slate financing deal was not the only deal to falter in the second half of 2017.  In late summer, Recon Holdings, a Chinese media investment firm, terminated its $100 million bid to acquire a controlling stake in Millennium Films, a deal that had been announced in February 2017.[40] Additionally, the merger of Legendary Entertainment into the publicly traded Wanda Cinema Line, which was projected in 2016 to be a major windfall for investors, was stopped in its tracks shortly after the Chinese government’s new capital controls were issued.[41] While the frenzy of Chinese investments in the U.S. media, entertainment and technology industries has been reined in by the Chinese government, China’s own media, entertainment and technology industry has continued to see upward growth.  In November 2017, Tencent became the first Asian technology firm to reach a valuation over $500 billion.[42] The day after Tencent reached this milestone, it surpassed Facebook’s market valuation and was approaching that of Amazon.[43] Tencent owns China’s most popular messaging service, WeChat, which reaches nearly 1 billion users, and has made continuous efforts to expand its reach outside of China.[44] In taking steps toward becoming a global player, Tencent acquired a 5% interest in Tesla for $1.78 billion[45]  and a 12% interest in Snap Inc., for $2 billion.[46] Tencent’s investment in Snap Inc., the parent company of social media platform Snapchat, is the fifth largest investment in a U.S. tech firm involving a Chinese firm.[47] D.     Cutting-Edge Deals and Securities Developments 1.     NBCUniversal/Snap’s Mobile-Focused Venture In October 2017, Snap Inc. and NBCUniversal announced the formation of a new 50/50 joint venture to create original scripted content designed for viewing on mobile and social-media platforms.[48]  Although Snap has inked several studio deals for short-form content over the past year, the joint venture marks the continuation of a flourishing partnership between Snap and NBCUniversal.[49]  NBCUniversal invested $500 million in Snap’s March 2017 IPO and has produced a number of short-form programs for the Snapchat platform (including an Emmy-nominated The Voice offshoot).[50] 2.     Royalty Flow Securitizes Eminem Royalties Royalty Flow, a subsidiary of Royalty Exchange, has launched an IPO to raise between $11 million and $50 million that, if successful, will fund Royalty Flow’s purchase of income streams derived from rap artist Eminem’s music.[51]  The concept of Royalty Flow is to allow fans, as shareholders in Royalty Flow, to share in income from royalties for artists’ music through dividends paid by Royalty Flow, which currently holds an option to purchase 15 or 25 percent of royalty stream income from Eminem’s albums released between 1999 and 2013.[52]  Royalty Flow intends to acquire royalty streams from artists other than Eminem, though specific artists have not yet been named.[53]  Royalty Flow follows in the footsteps of other celebrity-related securities, including “Bowie Bonds” which allowed holders to share in revenues generated by artist David Bowie’s pre-1990 albums. E.     eSports 1.     eSports Continue Electric Growth We began our discussion of the growth of eSports—the professional competitive video gaming industry—in our 2017 Mid-Year Update, and the industry continues to see rapid growth and mainstream adoption.  However, with the maturation of the industry comes an increased focus on legal issues, as investors and gamers alike face the challenges of the growing sector. As major game developers such as Riot Games and Activision Blizzard have adopted traditional franchise models for their competitive eSports leagues, competitors are now realizing their role as professionals and viewing tournament play as a career, rather than a secondary source of income.[54]  Riot has commented that it would support the development of an independent players association for league members.[55]  However, players and coaches alike are already seeking legal counsel to protect their interests, as some players as young as 17 years old are now seeing contracts reach over six figures and have the opportunity to partake in tournament bonus pools reaching, in the case of Blizzard’s Overwatch League, $3.5 million.[56] eSports is also seeing growing investment from traditional sports organizations and owners.  In addition to the launch of the NBA 2K eSports league, which ties current NBA franchises to their respective eSports league teams, teams from Blizzard’s Overwatch League have received investments from traditional sports team owners including New England Patriots Owner Robert Kraft and New York Mets COO Jeff Wilpon.[57]  U.S.-based eSports franchise compLexity Gaming also recently sold a majority stake to Dallas Cowboys owner Jerry Jones.[58] II.     Regulatory Updates During the first year of the Trump administration, the Republican-controlled Federal Communications Commission (“FCC”) has approved sweeping rollbacks of regulations of internet service providers (“ISPs”) and local broadcasters that were implemented during the Obama administration.  These developments and the ongoing court challenges merit a close watch in the coming year, as states, businesses, and consumers react and adjust to the FCC’s recent moves. A.     FCC Repeals “Net Neutrality” Rules In early December 2017, the FCC voted 3-2 to repeal Obama-era rules concerning the regulation of ISPs—policies described by proponents as “net neutrality”—setting up a legal battle that could reshape how consumers pay for internet access.[59]  The original rules went into effect in 2015, and laid out a regulatory plan that considered broadband service a utility under Title II of the Communications Act, giving the FCC broad power over ISPs.[60]  Under those original rules, regulations were imposed on ISPs dictating how they could and could not provide internet broadband services, including a prohibition on regulating broadband delivery speeds for different categories of content. By repealing these rules, the FCC will no longer regulate high-speed internet delivery as if it is a utility.  Broadband providers will now have the option to offer a wider variety of service options.  Critics of these changes claim that consumers may have to pay more to access high-trafficked content.  In response, ISPs have reiterated their commitment to an open internet, and have stated that they currently have no plans to block or “throttle” sites, and will not engage in most forms of paid prioritization.[61] FCC Chairman Ajit Pai has defended the repeal.  “We are helping consumers and promoting competition,” Mr. Pai said.  “Broadband providers will have more incentive to build networks, especially to underserved areas.”[62]  Immediately following the vote, Senator Edward J. Markey (D-Mass.) and other Democrats on Capitol Hill vowed to introduce legislation to overturn the action.[63]  Multiple state attorney generals vowed to file suit against the FCC after the rules become official in January 2018,[64] and on January 16, 2018, 21 states and the District of Columbia filed suit against the FCC, alleging violation of the Administrative Procedure Act in repealing the “net neutrality” rules.[65]  The legal challenges to the repeal of these FCC regulations will surely be a hotly discussed issue over the coming year. B.     FCC Ends Rule on Media Co-Ownership The FCC voted 3-2, in November 2017, to eliminate the broadcast ownership rules that limited a single entity’s ownership of television, radio and newspaper properties within a local market.[66]  As part of the vote, the FCC provided increased flexibility for media owners, including raising the number of television stations a company can own in a local market from one of the largest four stations to two, and allowing for ownership of a newspaper and broadcast station in the same market.[67]  Like the legal battles over net neutrality rules, the FCC commissioners acknowledged that the FCC’s vote may face challenges in court. III.     Recent Litigation Highlights A.     Hollywood’s Moment of Reckoning: Legal Fallout from the Weinstein Moment and the #MeToo Movement On October 5, 2017, the New York Times broke a long-simmering story that Harvey Weinstein, head of The Weinstein Company and former head of Miramax, had reached settlements with at least eight women over the course of three decades after being accused of sexual misconduct and assault.[68]  Since then, dozens more women have come forward with similar allegations against Mr. Weinstein.[69]  Mr. Weinstein has since been forced out of The Weinstein Company, and has been the subject of civil suits and criminal investigations in connection with his conduct.[70] As of the end of 2017, at least seven civil suits have been filed against Harvey Weinstein, The Weinstein Company, Miramax, and their various board members in courts in California and New York in connection with these allegations.[71]  In addition to asserting claims for, among other things, sexual assault and battery against Mr. Weinstein himself, the plaintiffs are seeking to hold Miramax, The Weinstein Company, and their directors liable in connection with Mr. Weinstein’s actions. For example, two actions filed in Los Angeles Superior Court, one by actress Dominique Huett and another by an anonymous plaintiff, seek recovery against The Weinstein Company for negligent supervision and retention of Mr. Weinstein on the basis that the company knew or had reason to know of Mr. Weinstein’s propensity to use business meetings as a cover to lure actresses into compromising situations.[72] Meanwhile, in the Southern District of New York, a suit filed by six women is seeking class certification on behalf of women who claim to have met with Mr. Weinstein to discuss professional prospects and were instead subject to abuse.[73]  Among the 14 allegations in the complaint are claims that Miramax, The Weinstein Company, and their directors and employees, along with a network of professional and business intelligence firms, private investigators, law firms, journalists, and members of the entertainment industry effectively formed an organization engaged in racketeering by using threats, harassment, extortion, and misrepresentation to prevent disclosure of Mr. Weinstein’s deeds.[74]  Another suit accuses The Weinstein Company of sex trafficking on the basis that it facilitated foreign travel during which Mr. Weinstein would subject women to abuse.[75] Other suits have been filed elsewhere,[76] and these early suits are unlikely to be the last.[77]  In addition to private suits, the New York Attorney General has opened an investigation of The Weinstein Company, seeking to determine whether officials at the company violated state civil rights and New York City human rights laws.[78]  Finally, after separating from The Weinstein Company, Mr. Weinstein himself brought suit against his former company seeking documents to defend himself against claims, and is considering an action for wrongful termination.[79] These claims, and the public relations firestorm surrounding them, have already had serious implications for The Weinstein Company.  After the allegations surfaced, many of the company’s business partners cut ties,[80] requiring it to seek an emergency loan while it reportedly seeks buyers.[81]  Other reports say that executives at The Weinstein Company are attempting to rename the business and scrub Weinstein’s name in an attempt to save the company.[82]  Another reported plan involves a proposal for an outside group to buy the company outright, rename it, hire a majority-female board, and set up a mediation process and litigation fund to compensate victims.[83]  Regardless of the outcome, the scandal that has put the company at risk and rocked Hollywood has started a movement across industries in which reports of sexual misconduct against high-profile individuals are being reported on a near daily pace. The public reaction to these allegations has been widespread.  After the allegations against Mr. Weinstein were made public, the steadily increasing volume of sexual assault allegations making their way into the public consciousness this year turned into a veritable flood, leading some to dub it the “Weinstein Moment” or the #MeToo movement.[84]  Dozens of other prominent figures in the media (and elsewhere) have since been accused of sexual misconduct.[85]  In addition to the increased attention in the media being paid to issues of sexual assault, several changes to the business and legal landscape have been proposed. Business commentators are advocating for leaders to strongly endorse zero-tolerance policies and clear reporting and investigation of claims of harassment.[86]  There is also evidence that insurance covering claims arising from sexual harassment is increasing in popularity.[87]  Morals clauses in industry agreements are likely to take on additional importance as well. A spotlight has also been shone on non-disclosure agreements, which have come under criticism for silencing alleged victims.  In the New York legislature, one proposed law would “bar organizations from making contractual provisions with the effect of concealing claims of discrimination, harassment, or other violations of public policy” in an attempt to short circuit the ability of predators to hide their actions from scrutiny using non-disclosure or non-disparagement agreements clauses.[88]  Similarly, “[a] California state senator says she intends to introduce a bill next year to ban confidentiality provisions in monetary settlements stemming from sexual harassment, assault and discrimination cases.”[89] Another area to watch for change includes legislation creating rights of action against harassers.  For example, after accusations that prominent venture capitalists sexually harassed female entrepreneurs seeking investments surfaced earlier this year, the California legislature is considering whether to add “investors” to the list of professionals who can be held liable for harassment of non-employers.[90]  Another proposal in New York seeks to address harassment in the fashion industry by assigning responsibility for workplace-related harassment to the client hiring the model.[91] Other companies—perhaps especially those with high-profile executives or employees—should take note.  Indeed, in addition to Mr. Weinstein, dozens of other powerful men in media (and elsewhere) have been accused of sexual harassment or misconduct this year resulting in their termination or resignation and attendant abrupt changes in their organizations.  And in addition to claims from victims and public scorn directed at companies and employers, boards of directors may find themselves the targets of shareholder suits.[92] B.     Profit Participation (Film, TV, Music) As headline-consuming as the sexual harassment scandals have been, other legal developments moved at a breakneck pace in 2017 in the entertainment industry.  High-stakes profit participation battles continued this year, with developments from cases filed over the past few years and new filings as well.  California state and federal courts remain popular venues for these suits, although one notable case is proceeding in arbitration. 1.     MGM Wins Summary Adjudication in Home Video Class Action Starting in January 2013, various individuals and entities—including directors, stuntmen, loan-out companies, and their successors—filed a series of class actions against six Hollywood studios[93] alleging that the studios were improperly reporting and underpaying putative class members’ share of contingent compensation related to home video, going back to 1999.[94]  The nearly identical complaints generally alleged that the studios breached their contracts with putative class members by calculating each participant’s share of contingent compensation on 20% of revenues earned from the distribution of home video instead of 100% of gross receipts as plaintiffs claim was required by the contracts. In September 2017, MGM moved for summary adjudication, arguing that most of the plaintiff’s claims were time-barred by a two-year contractual limitations provision contained in the operative contract or by the applicable statute of limitations.  On January 8, 2018, the court granted MGM’s motion, significantly narrowing the plaintiff’s contractual and quasi-contractual causes of action to exclude any claims based on participation statements issued prior to two years preceding the filing of the lawsuit, and also entering judgment for MGM on the open book accounting and California UCL claims because they were unavailable under New York law, which governs the contract.  Plaintiff agreed that its conversion claim should be dismissed and the Court entered judgment in favor of MGM on that claim as well.  (Disclosure: Gibson Dunn represents MGM in this case.) 2.     Stallone Seeks Demolition Man Profits In April 2017, Sylvester Stallone (through his loan-out company Rogue Marble) filed suit in Los Angeles Superior Court against Warner Bros. Entertainment Inc., alleging the company failed to pay him revenue from the 1993 film Demolition Man.  Stallone alleges that when he contacted Warner Bros., the company first responded by issuing a statement purporting to indicate the film had over a $66 million deficit, and then sent a lump sum payment of $2.8 million.  Stallone alleges breach of contract, fraud, accounting, and other claims.[95]  In September 2017, the court overruled Warner Bros.’ demurrer, finding plaintiffs’ claims (including its fraud claim) adequately pleaded, and took the step of ordering Warner Bros. to produce documents pertaining to the film’s other profit participants.[96] 3.     A Supernatural Royalties Fight Warner Bros. recently became engaged in arbitration with Eric Kripke, creator of the CW’s long-running show Supernatural, over the show’s profits.[97]  Kripke alleges Warner Bros. has reported a deficit despite the show running for 13 seasons, and also has challenged Warner Bros.’ licensing agreements with the CW (co-owned by Warner Bros. and CBS), which he claims have depressed gross receipts by over $100 million.  He also raises concerns with license fees from affiliated on-demand services, as well as from Netflix and Hulu.  Warner Bros. has responded that Kripke’s protest is baseless because “Kripke granted WBTV absolute discretion and control over how and whether to distribute and exploit the Series, including by authorizing WBTV to license the show to an affiliated company” and has still received millions in fees.[98]  Kripke’s counsel has reportedly been particularly aggressive about challenging JAMS and its arbitrators, seeking detailed disclosures regarding their prior business for the studio.[99] 4.     Members of Spinal Tap Banned from Suit In September 2017, all but one of the co-creators of the 1984 rock “mockumentary” This Is Spinal Tap were dismissed from a suit in California federal court against Vivendi S.A., its subsidiary (Studiocanal S.A.S.) and one of its executives (Ron Halpern).  The court also dismissed a fraud claim for failure to plead a sufficient factual basis, with leave to amend.[100]  The Plaintiffs had included Christopher Guest and the loan-out companies of Harry Shearer, Rob Reiner, and Michael McKean, as well as Spinal Tap Productions (a defunct corporation owned by the three loan-outs and Guest).[101]  The suit asserts that Vivendi has not paid plaintiffs all film profits as required by contract, alleging that despite the film’s decades of success as a cult classic, the plaintiffs allegedly received only $81 in merchandizing and $98 in musical income.[102]  The court held that the three loan-out companies lacked standing to sue to enforce the contracts, which were formed between Vivendi’s predecessor and Spinal Tap Productions, because the loan-outs were not intended third-party beneficiaries.[103]  Guest, however, had standing and remains in the suit, and leave was granted to add his fellow co-creators or to allege additional facts.[104] 5.     Quincy Jones Wins $9.4 MM at Trial over Contract with Michael Jackson In 2013, Quincy Jones filed a lawsuit against MJJ Productions, the music label founded by Michael Jackson, alleging that Jones was owed $30 million in unpaid royalties, including on revenues from a joint venture between Sony and MJJ, the posthumous documentary This Is It, and Cirque due Soleil shows that featured Jackson’s music.[105]  In addition, Jones argued that contracts he formed with Jackson in 1978 and 1985 entitled him to royalty payments for the commercial exploitation of the albums Jones produced such as Off The Wall and Thriller.[106]  Following a July 2017 trial, a jury awarded Jones $9.4 million in damages.[107]  The court rejected MJJ’s attempt to reduce the verdict award, denying defendants’ motion for judgment notwithstanding the verdict,[108] and an appeal has been docketed with opening briefs yet to be filed. The court deferred consideration of MJJ’s separate equitable defenses, and briefing of its estoppel defense remains ongoing.  MJJ argues in part that Jones waived his rights regarding the royalty rate, because he audited the royalty reports every year since the joint venture with Sony was formed in 1991 and renegotiated in 2009, without raising these issues.[109]  The court has yet to rule on these equitable defenses. C.     Copyright Litigation 1.     DMCA Developments The Digital Millennium Copyright Act (“DMCA”) featured prominently in copyright litigation in 2017.  Although the DMCA was enacted over 19 years ago, the statute continues to generate disputes and key rulings regarding the meaning and interpretation of the law. a.     Safe Harbor & “Repeat Infringers” The DMCA establishes a “safe harbor” from copyright liability for Internet Service Providers (“ISPs”) that create a forum for third-party users to post content, as long as those ISPs meet certain conditions.  Throughout 2017, copyright holders and ISPs continued to fight about just how far the DMCA’s safe harbor provisions extend.  For instance, the DMCA requires ISPs to “adopt and reasonably implement . . . a policy that provides for the termination in appropriate circumstances of subscribers and account holders of the service provider’s system or network who are repeat infringers.”[110]  If ISPs fail to adopt such procedures, they may lose their safe harbor protection from liability. A recurring issue is what standards govern the determination of who should be considered a repeat infringer for the purposes of determining whether an ISP has taken sufficient steps to qualify for the safe harbor defense.  In the 2016 case, EMI Christian Music Group, Inc. v. MP3tunes, LLC, record companies and music publishers brought a copyright infringement action against two websites, Sideload.com and MP3tunes.com.  On Sideload.com, users could search for and download free music on the Internet.  When they did so, those songs became part of an index of searchable songs for other users to stream and download.  A sister site, MP3tunes.com, allowed users to store music for free in a virtual locker.  If a user reached his capacity, he could purchase more space for his virtual locker.  Before a jury trial, the district court had entered partial summary judgment for the ISPs, finding they had reasonably implemented a repeat infringer policy, which the court determined meant willful infringers.[111]  The music companies appealed to the Second Circuit, which reversed, finding that the lower court’s definition of “repeat infringer” was too narrow.[112]  The Second Circuit explained that a “repeat infringer does not need to know the infringing nature of its online activities,” given that copyright infringement is a strict-liability offense and does not require a showing of specific intent to infringe.[113] The issue of repeat infringers remains pending in other courts.  In October 2017, the Fourth Circuit held oral arguments in BMG Rights Management (US) LLC v. Cox Communications, Inc. et al.  BMG, which holds and administers numerous copyrights in musical works, sued Cox in 2014 for Cox’s failure to prevent repeat infringement by its customers of BMG’s copyrights.  In 2015, a judge in the Eastern District of Virginia entered partial summary judgment in favor of BMG, finding that Cox’s efforts to terminate repeat infringers were inadequate and that Cox had lost safe harbor protection.[114]  The Court explained in rejecting Cox’s argument that “repeat infringers” include those who are accused of infringement.[115] Following the district court’s partial summary judgment ruling, a trial was held and the jury assessed a $25 million infringement verdict against Cox, which appealed.  On appeal to the Fourth Circuit, Cox argued that a repeat infringer can only be one who is adjudicated and found liable of infringement.  BMG, in contrast, argued that Congress did not restrict repeat infringers to adjudicated infringers in the DMCA, and that no court has ever adopted this interpretation.  The Fourth Circuit’s decision is expected in the coming months. b.     Safe Harbor & Pre-1972 Copyrights In June 2016, on an interlocutory appeal from a summary judgment order in the Southern District of New York, the Second Circuit held that the safe harbor provisions of the DMCA protect internet service providers from claims of infringement when users post works protected by state copyright law.[116]  In the underlying case, Capitol Records, LLC and several other record and music publishing companies alleged that their copyrights were infringed by Vimeo, a website that allows users to post and share videos online.[117]  Some of the works in question predated 1972, when Congress updated the Copyright Act to make clear that federal copyright law would preempt state copyright law going forward.  Because Congress did not make those provisions retroactive, certain pre-1972 state law provisions governing sound recordings remained in force for then-existing works.[118] Vimeo claimed it was protected by the safe-harbor provision of the DMCA.  The district court, relying in part on a 2011 report from the Copyright Office, held that the DMCA does not apply to recordings not protected by federal law, reasoning that the term “infringement of copyright” is defined in the DMCA with reference to federal law, apparently excluding protection from infringement under state law.[119]  The Second Circuit disagreed, holding that nothing in the statute suggests that federal law is the exclusive source of “infringement” from which the safe harbor guards from liability, reasoning that any other interpretation would eviscerate the purpose of the statute, which is to free ISPs from engaging in prohibitively expensive monitoring.[120]  The Court of Appeals wrote that “to construe § 512(c) as leaving service providers subject to liability under state copyright laws for postings by users of infringements of which the service providers were unaware would defeat the very purpose Congress sought to achieve in passing the [DMCA].  Service providers would be compelled either to incur heavy costs of monitoring every posting to be sure it did not contain infringing pre-1972 recordings, or incurring potentially crushing liabilities under state copyright laws.”[121]  The court then specifically pointed to the volume of pre-1972 recordings that are still popular, including the work of The Beatles, among others.[122] The Supreme Court denied plaintiffs’ petition for a writ of certiorari in March 2017.[123] 2.     Volitional Conduct Three Years After Aereo After the Supreme Court’s 2014 decision in American Broadcasting Cos., Inc. v. Aereo, Inc., courts nationwide have wrestled with the question of whether Aereo eliminated the requirement of volitional conduct as a prima facie element of a copyright infringement case against an ISP.  Decisions rendered this year by the Ninth and Fifth Circuits answered that question in the negative, finding volitional conduct remains an essential element, and the Supreme Court denied certiorari of both cases, seemingly settling the question. Perfect 10, Inc. v. Giganews, Inc.: In 2011, the adult magazine Perfect 10 filed a lawsuit against the ISPs Giganews and Livewire, claiming the companies were engaged in indirect and direct copyright infringement.  The case revolves around Usenet, “an international collection of organizations and individuals … whose computers connect to one another and exchange messages….”[124]  Giganews is a Usenet provider.  It stores content on its own servers and also provides access to content stored on servers of other Usenet providers.[125]  Giganews, in exchange for a monthly fee, gives its users access to certain content via Usenet.  This content allegedly included Perfect 10’s images.  On summary judgment, however, the district court found that Giganews did not select or post any of the infringing images, and held that Giganews had not infringed Perfect 10’s copyrights.[126] Perfect 10 appealed to the Ninth Circuit, which affirmed in January 2017, finding that Giganews did not engage in “volitional conduct” (i.e., was not the direct cause of infringement) because its users are the ones who accessed Perfect 10’s images and they merely did so using Giganews’ platform.[127]  The Court of Appeals found its decision to be consistent with Aereo, in which the defendant (Aereo) had been a more active participant in the infringement by facilitating a public performance of the works in question.  The Ninth Circuit panel wrote that “[b]ecause Aereo did not expressly address the volitional-conduct requirement,” the Supreme Court’s decision could not have altered the widely accepted standard.[128]  Perfect 10’s petition for writ of certiorari was denied on December 4, 2017.[129] BWP Media USA, Inc. v. T&S Software Associates, Inc.:  In BWP Media USA, Inc. v. T&S Software Associates, Inc., the Fifth Circuit also confronted the volitional conduct requirement after Aereo.  T&S is a website that hosted an online forum, on which users could post content and add comments.  While there was a warning on the website not to post copyrighted images, many users posted images of celebrities.  BWP, which owns the copyrights to those photographs, sued T&S for infringement.  The Fifth Circuit held there was no infringement because there was no volitional conduct, and also that the DMCA had not abrogated the volitional-conduct requirement.[130]  Like the Ninth Circuit in Perfect 10, the Fifth Circuit considered and distinguished Aereo.[131]  The Court of Appeals explained that “although Aereo and T&S both provided a service that others could use to infringe, only Aereo played an active role in the infringement.  That role was to route infringing content to its users.”[132]  The Fifth Circuit continued, “T&S hosts the forum on which infringing content was posted, but its connection to the infringement ends there.”[133]  The Supreme Court denied BWP’s petition for writ of certiorari in October 2017. 3.     Unmasking of Anonymous Infringers In Signature Management Team, LLC v. John Doe, the U.S. Court of Appeals for the Sixth Circuit considered the question of whether ISPs can be compelled to disclose the identity of individuals who have been adjudicated to have infringed a plaintiff’s copyrights.[134]  The Court of Appeals held “that like the general presumption of open judicial records, there is a presumption in favor of unmasking anonymous defendants when judgment has been entered for a plaintiff.”[135] Doe had posted a hyperlink on his blog to a downloadable copy of the entirety of a volume of a book subject to a copyright held by Signature Management Team (“Team”).[136]  Team served the blog’s hosting service with a DMCA take-down notice and Doe removed the hyperlink to the work.  Team then filed suit seeking an order (1) unmasking Doe, and (2) requiring him to destroy all copies of the protected work in his possession and cease all infringing use of the protected work.[137]  The District Court granted summary judgment for Team and ordered Doe to destroy all copies of the infringing work, but, in a follow-on motion, denied discovery that would reveal Doe’s identity based on the balancing test from Art of Living Found. v. Does 1-10, No. 10-CV-05022, 2011 WL 5444622 (N.D. Cal. Nov. 9, 2011).  The Court did, however, compel Doe’s unmasking to the court and to Team’s counsel, pursuant to a protective order. Team appealed to the Sixth Circuit only as to the denial of the motion to unmask Doe.  The Court of Appeals noted that “[n]o case has considered the issue” of post-judgment unmasking, finding it to be “an important distinction,” and comparing it to the frequent pre-judgment unmasking cases in connection with effecting service of process.[138]  The Court found that “entry of judgment against a Doe defendant largely eliminates [concerns about unmasking potentially nonliable defendants] because the plaintiff will have established liability.”[139]  At the same time, the Court noted that where a Doe defendant has complied with a court’s order, the need to unmask is lessened.[140]  The Sixth Circuit held that “there is a presumption in favor of unmasking anonymous defendants when judgment has been entered for a plaintiff,” and notably did not cabin its holding to the copyright context, suggesting that litigants seeking to unmask anonymous defendants in other contexts will be able to rely on the precedent.[141] The Court of Appeals also wrote that “[a]lthough Doe’s infringing speech is not entitled to First Amendment protection, that speech occurred in the context of anonymous blogging activities that are entitled to such protection,” and stated that unmasking decisions should consider whether “other, non-infringing anonymous speech . . . would be chilled if [the Doe’s] identity were revealed.”[142]  The Court of Appeals sent the case back on remand for a decision on unmasking in accordance with its holding and the balancing test it articulated.  Judge Suhrheinrich filed a dissenting opinion, stating that an infringer should not be entitled to anonymity generally—”Doe should not be shielded from the consequences of his own actions, since he could have preserved his right to speak freely and anonymously by simply refraining from copyright infringement.”[143] 4.     Hollywood Continues Its Judicial Assault on Piracy In 2017, content owners and creators continued to band together to pursue online piracy via lawsuits, a tactic that has seen judicial success in recent years.  And in June 2017, a group of thirty studios, television networks, and online gaming companies announced the formation of a new trade organization to fight online piracy, The Alliance for Creativity and Entertainment (“ACE”), signaling a commitment to pursue copyright infringers in the years to come.[144] a.     Time’s Up for TickBox TV? ACE’s first lawsuit was filed in October 2017, on behalf of studios (Universal, Columbia, Disney, Twentieth Century Fox, Paramount, Warner Brothers) and streamers (Amazon, Netflix) against TickBox TV, a Georgia-based company that sells set-top boxes it markets as providing free streaming content to users, but that the studios and streamers claim facilitates piracy.[145]  According to the lawsuit, TickBox’s website claims that users can “plug the TickBox TV into your current television and enjoy unlimited access to all the hottest TV shows, Hollywood blockbusters and live sporting events in one convenient little device … absolutely free.”[146]  If that sounds too good to be true, the studios and streamers would agree.  TickBox TV operates using an open-source software called Kodi, which, along with available add-ons, allows users to search the internet for and watch non-licensed versions of films and shows, including those that are allegedly not available on SVOD platforms. The lawsuit asserts that TickBox is secondarily liable for its users’ acts of infringement on a theory that TickBox intentionally induced the infringement or otherwise engaged in contributory infringement.[147] Set-top box piracy is becoming increasingly problematic for Hollywood, as companies continue to offer consumers a purported ability to purchase unlicensed, pre-loaded set-top boxes.[148]  Last year, a man in the United Kingdom was sentenced to four years in prison for selling set-top boxes “modified for copyright theft.”[149]  The seriousness of this threat, many explain, is that “it is less cumbersome than traditional pirate sites … [it] tends to attract older users and families … [and i]t even looks more legitimate.”[150] 5.     A Fairly Active Fair Use Docket a.     VidAngel’s Wings Get Clipped In August 2017, movie studios won a victory at the Ninth Circuit over VidAngel, a service launched in 2014 that takes DVDs sold by the studios, copies the content, and then sells consumers the ability to edit out purportedly objectionable material, such as violence or nudity.  In December 2016, the studios won a preliminary injunction shutting down VidAngel, after a California federal judge found that plaintiffs had established a likelihood of success in showing that VidAngel was engaged in copyright infringement and violating the DMCA’s ban on the circumvention of digital encryption measures.[151]  Though VidAngel requires the user to purchase a physical DVD, Judge Andre Birotte found the service still illegally bypassed locks on the disc in order to upload it and stream it to those users: “The purchase of a DVD only conveys the authority to view the DVD, not to decrypt it.”[152]  After VidAngel’s motion to the Ninth Circuit for an emergency stay pending appeal of the preliminary injunction was denied,[153] the Ninth Circuit held oral argument in June 2017.[154] On August 24, 2017, the Ninth Circuit issued its decision against VidAngel.[155]  First, the panel held that VidAngel could not claim the protections of the Family Home Movie Act, as it “would create a giant loophole in copyright law, sanctioning infringement so long as it filters some content and a copy of the work was lawfully purchased at some point.”[156]  The panel thought it was “quite unlikely that Congress contemplated such a result.”[157]  Rather, the statute was enacted to let people edit objectionable content, but only to “authorized” copies.  VidAngel, in contrast, operates by streaming from a copy it ripped from a DVD, which constitutes unlawful copying.[158] Second, the panel rejected VidAngel’s claim that its service amounts to a fair use, upholding the district court’s finding that VidAngel’s use was not transformative:  VidAngel “does not add anything to Plaintiff’s works,”[159] it simply “retransmit[s] [the original work] in a different medium.”[160]  The panel put it in universal terms: “Star Wars is still Star Wars, even without Princess Leia’s bikini scene.”[161]  Finally, the panel upheld the district court’s ruling that VidAngel violated the DMCA’s protections for digital encryption when it ripped the movies to its servers.[162]  A few months after this ruling, VidAngel filed for bankruptcy in Utah.[163] b.     What is Art? What is Infringement?: Graham v. Prince In our 2016 Year-End Update, we wrote about a then-newly filed copyright suit against the famous appropriation artist Richard Prince.  This year, a federal court in New York rejected Prince’s request to dismiss the suit over an exhibit of photos he pulled from Instagram without permission, saying it was too early to decide if the works were protected by the fair use doctrine.[164]  Prince had been sued for his work “Rastafarian Smoking a Joint”—part of an installation that consisted of screenshots of Instagram posts that Prince had commented on using his account “richardprince4” and then enlarged.[165]  Prince moved for a ruling that the exhibit was protected by fair use, arguing that the case was an attempt to relitigate the principles of a landmark 2013 fair use ruling from the Second Circuit that Prince had won.[166] In the pending case, Graham v. Prince, Judge Sidney H. Stein found the issue of fair use too complex to be answered at the motion to dismiss stage.[167]  But the judge did note that, at this early stage, the fair use factors did not favor Prince:  Prince had copied “the entirety of Graham’s photograph” and did so “without significant aesthetic alterations,” all for “a distinctly commercial purpose” that would usurp the primary market for the original photo—all strikes against a finding of fair use.[168] c.     Can Classics Be Adapted to Children’s Books? In September 2017, a court ruled that “children’s versions” of classic books still under copyright protection like The Old Man and the Sea were not protected by the fair use doctrine.[169]  In the case, Penguin Random House LLC v. Colting, the author claimed his “KinderGuides” to the novels of Ernest Hemingway, Jack Kerouac, and other iconic authors transformed the classic works enough to count as fair use, likening them to Cliffs Notes for kids, while the authors’ estates and publishers disagreed, claiming the books brazenly violated the copyrights to the classic novels.[170]  Judge Rakoff agreed with the plaintiffs, holding that Colting’s books were infringing derivatives: “Fair use [] is not a jacket to be worn over an otherwise infringing outfit.”[171]  That Colting “tack[ed] on” a few pages of commentary does not provide “safe harbor for an otherwise infringing work.”[172]  The Judge went so far as to say that Colting only included the commentary in hopes that fair use would legalize a line of “clearly infringing” books.[173] 6.      The “Monkey Selfie” Settlement To the chagrin of legal reporters and punning headline writers everywhere, in September 2017, People for the Ethical Treatment of Animals (PETA) and the photographer David Slater reached a settlement to end a highly publicized lawsuit over PETA’s claim that a crested macaque was entitled to copyright protection for a “monkey selfie.”[174]  While the case was pending at the Ninth Circuit, and following oral argument, the parties announced the resolution of the case, and therefore the Court of Appeals will not issue a ruling at the center of a bizarre suit asking whether Naruto, the primate that snapped the viral image, has standing to file a copyright lawsuit in court. PETA filed the publicity garnering suit in 2015 against Slater, whose camera Naruto used to snap the image.[175]  The suit claimed that the monkey had the same rights in the photo as any human would, and that Slater had infringed them by publishing a book centered on the now-famous image.[176]  In January 2016, a district judge held that Naruto—again, a primate—did not have standing, and that there was simply no indication that Congress intended to give animals standing to sue for copyright infringement.[177]  PETA appealed the decision to the Ninth Circuit, where it was met with a skeptical panel at oral argument in July.  Under the terms of the settlement, PETA agreed to dismiss the infringement claims in return for Slater contributing 25% of future proceeds from the “selfie” toward conservation-related charities.[178] 7.     The Audio Home Recording Act Hits the Road In 2014, a music industry group, the Alliance of Artists and Recording Companies, brought suit against General Motors, Ford, and other car manufacturers over the use of copyright-protected works in in-car entertainment systems.  On October 24, 2017, during a hearing on cross motions for summary judgment, the federal judge presiding over the case expressed skepticism that the systems qualify as digital recording devices under the law.[179]  The group’s lawsuit alleges that the car companies sold vehicles with music and navigation systems that record songs, but that they had not paid royalties to artists.[180]  Whether the systems qualify as “digital audio recording devices” under the 1992 Audio Home Recording Act turns on the question of whether they create “digital music recordings,” as required by the Act.[181]  The Act defines a digital music recording as a “material object,” such as a compact disk or audio tape, that contains “only sounds, and material, statements, or instructions incidental to those fixed sounds.”[182]  Defendants argued that the cars’ internal hard drives do not meet that definition because they contain GPS systems and other programs unrelated to music.[183]  In response, plaintiff argued that a specific physical portion of the hard drive known as the “partition” satisfies the criteria for a digital music recording, and therefore opens the car companies up to copyright royalty liability under the AHRA.[184]  During the October 24 hearing, Judge Ketanji Brown Jackson was described as appearing unconvinced by the plaintiff’s arguments about the physical construction of the hard drive, and an opinion is expected in the coming months.[185] D.     Trademark Litigation 1.     CGI and Nominative Fair Use In July 2017, Rearden LLC, a computer-generated imagery (CGI) software company, accused The Walt Disney Co. of using its intellectual property to animate characters in some of its highest-grossing productions of the last few years, as well as to advertise and promote the films.[186]  Rearden alleges that it owns registered trademarks, copyrights, and patents that are embodied in its Oscar-winning visual effects technology called MOVA Contour Reality Capture.  Rearden claims that Disney knowingly contracted with parties who stole and falsely claimed ownership of the MOVA system and related IP assets to create film productions such as Beauty and the Beast and Guardians of the Galaxy.  Rearden separately pursued relief against the company providing these services, a Chinese company called Shenzhenshi Haitiecheng Science and Technology. In the lawsuits against Disney and the other studios, Rearden claims they knowingly used an unauthorized version of the MOVA software.  The studio defendants have moved to dismiss the claims, arguing that none of the alleged uses of the “MOVA” mark in press interviews, “featurette” material, or in movie credits constitutes infringement.[187]  They argue that “Rearden’s various trademark allegations fail for several reasons: in some cases, the marks are not even used; in others, the alleged use was by a third party; in others, the use plainly constitutes nominative fair use.”[188]  Relying on New Kids on the Block v. News Am. Pub’g, Inc., 971 F.2d 302, 308 (9th Cir. 1992), the studios argue that the use of “MOVA”—to describe the technology that captured actors’ facial performances, to describe a company (not a technology) in film credits, and to describe visual effects artists—meets the requirements for the nominative fair use affirmative defense, which allows use of another’s trademark as a descriptor or identifier when meeting the Ninth Circuit’s test in New Kids.[189]  As of the date of this writing, the court has yet to decide this motion to dismiss. 2.     EMPIRE Strikes Back: Ninth Circuit Holds Show’s Name Is Non-Infringing On November 16, 2017, a Ninth Circuit panel affirmed summary judgment in favor of Twentieth Century Fox Television and Fox Broadcasting Company for the use of the name “Empire” as protected by the First Amendment.[190]  A federal court in the Central District of California had applied the test derived from Rogers v. Grimaldi[191] to determine whether the protection of the trademark held by a music recording and publishing company—Empire Distribution—should give way to expressive speech protected by the First Amendment.[192]  Under the Rogers test, an artistic work’s use of a trademark is not actionable unless (1) the use has no artistic relevance to the underlying work whatsoever, or (2) it explicitly misleads as to the source or the content of the work if it has some artistic relevance.[193]  The district court held (1) that Fox’s “Empire” television series, which tells the fictional story of a feuding entertainment industry family in New York, made an artistically relevant use of the word “Empire” for its expressive work and (2) that Fox has not explicitly misled consumers about its affiliation with Empire Distribution. The Ninth Circuit upheld the lower court’s use of the Rogers test to determine whether the Lanham Act applies, and concluded that both prongs of the test were satisfied.  Judge Milan Smith explained “how a work fails the first prong of the Rogers test” is that it “bear[s] a title which has no artistic relevance to the work.”[194]  Judge Smith drew a contrast between ways courts had applied the first prong of the test in prior cases.  In one earlier action brought by Mattel over the song “Barbie Girl,” Judge Smith noted that the court had found the title to be artistically relevant, as the song was commenting on materialism associated with the doll.  In contrast, Judge Smith pointed to a case concerning Outkast’s song “Rosa Parks,” where the court found a title not to be artistically relevant, because the composers did not intend the song to be about Parks.  Ninth Circuit subsequently denied Empire Distribution’s petition for panel rehearing and rehearing en banc. 3.     No Fair Use for Trekkie-Seuss Book ComicMix LLC created a book entitled Oh, the Places You’ll Boldly Go! that combines creative elements from the Star Trek science-fiction franchise with the underlying Dr. Seuss classic Oh, the Places You’ll Go! (OTPYG).  Dr. Seuss Enterprises brought a trademark, copyright infringement and unfair competition action against ComicMix for the unauthorized exploitation of Dr. Seuss’s works.[195]  Dr. Seuss Enterprises alleges that the new book misappropriates key protected elements of OTPYG, including its trademarks. On December 7, 2017, the district court denied ComicMix’s motion to dismiss the amended complaint on the basis that the book is protected by fair use and nominative fair use doctrines.[196]  As to the trademarks at issue, the court held the Seuss book’s title is protected under section 43(a) of the Lanham Act, declined to determine whether trademark rights may be claimed in the fonts used in the Dr. Seuss book, and found that the general illustration style is not protectable.  Applying the nominative fair use analysis in a narrowed inquiry involving only the OTPYG title, the court found that ComicMix was not able to satisfy each factor of the defense.  In particular, the Court concluded that the Trekkie book is not protected because, even though Dr. Seuss’s work is not readily identifiable without the use of the trademark, ComicMix’s use of the mark—incorporating all of the words and even the look of the lettering—is more than reasonably necessary to identify the Dr. Seuss work as the object of the parody. 4.     Federal Circuit Finds Ban on “Scandalous and Immoral” Trademarks Unconstitutional In December 2017, the Federal Circuit held that the Lanham Act’s ban on “scandalous and immoral” trademarks is unconstitutional,[197] just months after the Supreme Court unanimously held in Matal v. Tam, 137 S.Ct. 1744 (2017), that the statute’s ban on “disparaging” marks was a facially unconstitutional restriction on speech.  The government attempted to distinguish Tam by arguing the scandalous and immoral ban is viewpoint neutral, but Judge Moore, who wrote the Federal Circuit’s original decision that was upheld in Tam, rejected the distinction. The case concerned a registrant’s request to trademark the name of his clothing brand entitled “FUCT.”[198]  The U.S. Patent and Trademark Office (“USPTO”) refused to register the mark on the ground that it amounts to the past tense of a vulgar word, and therefore concerns scandalous matters.[199]  The Trademark Trial and Appeal Board (the “Board”) affirmed.  The registrant appealed to the Federal Circuit, arguing (1) that the USPTO erred in concluding the mark comprises immoral or scandalous matter, and (2) whether the ban on registering immoral or scandalous marks is a constitutional restriction of free speech. The Federal Circuit first affirmed the Board’s decision that there was substantial evidence supporting the USPTO’s finding that the mark “FUCT” is vulgar and not registrable.[200]  They concluded that there was “no definition of scandalous, that in light of the PTO’s fact findings, would exempt [the registrant’s] mark.”[201] Second, the Federal Circuit determined that, “[i]ndependent of whether the immoral or scandalous provision is viewpoint discriminatory,” “the provision impermissibly discriminates based on content in violation of the First Amendment.”[202]  The court rejected the government’s argument that the federal trademark registration program amounted to a limited public forum, subjecting the Lanham Act’s content-based restriction on marks comprising immoral or scandalous matter to a less demanding degree of scrutiny.[203]  The Federal Circuit explained that “[b]ecause trademarks are by definition used in commerce, the trademark registration program bears no resemblance to [] limited public forums.”  The court further noted that “[t]he speech that flows from trademark registration is not tethered to a public school, federal workplace, or any other government property.”[204] Because the prohibition on the registration of immoral or scandalous trademarks targets the expressive content of speech, the Federal Circuit found it to be subject to strict scrutiny.[205]  The Federal Circuit concluded by stating that “[t]he First Amendment . . .  protects private expression, even private expression which is offensive to a substantial composite of the general public.”[206] E.     1st Amendment Litigation 1.     Defamation: ABC Settles “Pink Slime” Case On June 28, 2017, in the midst of trial, meat producer Beef Products, Inc. settled claims it brought against ABC News in South Dakota for defamation over reports about a processed lean beef product dubbed “pink slime.”[207]  In 2012, ABC News correspondent Jim Avila reported that questions had been raised about the safety of the product.  ABC News ultimately repeated the term “pink slime” over 350 times across six different media platforms, which Beef Products, Inc. claimed was a turn-off to consumers.  Following the reports, sales allegedly fell nearly 80%, and the South Dakota company closed three plants and laid off 700 workers.  The company sought $1.9 billion in actual damages, and an award of up to $5.7 billion under South Dakota law.[208] ABC News argued throughout the suit that its reports were accurate and that it was entitled to protection under the First Amendment’s free speech and free press clauses.  Beef Products, Inc. denied the accuracy of the reports, and asserted that the damage done by false reporting by a news outlet with such a widespread reach was particularly devastating to its business.[209]  The case reportedly settled for $177 million.  In a statement released following the settlement, ABC News said that it decided to settle because “continued litigation of this case is not in the company’s interests.”[210]  It did not retract or apologize for the reports, and continued to affirm their accuracy.  Although the settlement of the suit means that it will not set precedent for future defamation claims, the case nonetheless highlights the risks in the current legal landscape surrounding reporting, particularly reporting regarding substantial commercial interests. 2.     “Libel in Fiction”: Greene v. Paramount Pictures On February 18, 2014, relying on a little known subspecies of defamation law referred to as “libel in fiction,” the former general counsel at the now infamous brokerage firm Stratton Oakmont sued the producers of the movie The Wolf of Wall Street for publishing allegedly defamatory statements about him.[211]  In particular, Andrew Greene claims that the character of Nicky Koskoff was based on him, and that the defendants—Paramount Pictures, Red Granite, Martin Scorsese’s Sikelia Productions, and Leonardo DiCaprio’s Appian Way—acted with “actual malice” in making the false statements, via their depiction of Koskoff, that Greene was responsible for Stratton Oakmont’s illegal acts and that he engaged in illicit drug use and sexual misconduct.[212] Because Greene is alleging libel in fiction, he must show that the Koskoff character can reasonably be understood by viewers of the film to be a depiction of him.  In an October 13, 2017 letter to the Court requesting a pre-motion conference, defendants argued that this could not possibly be the case because the film used a fictional name and the character was actually based on a composite of other individuals who worked at Stratton Oakmont.[213]  Defendants also assert that Greene cannot meet his burden to show the statements in the film were false, pointing to evidence that Greene in fact engaged in drug use, sexual misconduct, and was a co-conspirator in the company’s money laundering scheme and other illicit activities.[214]  Finally, defendants contend that Greene cannot demonstrate actual malice—i.e., knowledge of falsity or reckless disregard for the truth:  “Defendants believed that the statements about Nicky Koskoff could not be ‘false’ because they were of and concerning a fictional character named Nicky Koskoff, and no reasonable viewer would believe that Koskoff was really Greene.”[215]  The Court has set a briefing schedule and an order should be issued in the coming months.[216] 3.     Right of Publicity: Montel Williams v. Advanceable Technology, LLC Former Emmy-winning talk show host turned medical marijuana advocate Montel Williams has filed suit against several medical marijuana retailers, alleging that they unlawfully used his name, image, reputation, identity, and persona in “fake news or blog posts” promoting their nonmedical cannabidiol oils.[217] The complaint alleges the following facts: Williams was diagnosed with multiple sclerosis in 2000.[218]  After finding prescription medications to be ineffective at treating his symptoms, Williams tried medical marijuana at the urging of his doctor.[219]  He allegedly found the products so effective that he thereafter became an advocate for medical cannabis reform law and founded his own company that produces medical marijuana products.[220]  In an April 20, 2017 Forbes article, however, Williams “warned about medical cannabis companies that ‘don’t do the research’ and whose products you would not call medicine.”  According to the complaint, a number of those very same companies allegedly used Williams’ name and identity in online marketing schemes to sell their products, copying content from the Forbes article and even adding “completely fabricated quotes and content that they attribute to Williams, which content falsely indicates that Williams is affiliated with and endorses Defendants’ Infringing Products.”[221] Williams asserted claims for, amongst other things, violation of the right of publicity and right of privacy under Florida law and violation of the common law right of publicity, arguing that the retailers have damaged his reputation by using his name and likeness for commercial gain.[222]  Williams has thus far been granted limited third party discovery for the purpose of determining the identities of unknown defendants who participated in the purportedly unlawful acts.[223] 4.     Right of Publicity: Can Using a Voice Double Give Rise to Liability? On October 18, 2017, the California Court of Appeal affirmed a trial court’s order partially granting an anti-SLAPP motion against the actress Paz de la Huerta.[224]  De la Huerta was hit by a moving ambulance while performing a stunt during the filming of the movie Nurse 3D.[225]  In post-production, de la Huerta recorded 27 off-screen voiceover narration parts, but those parts were later re-recorded using a voice double without her knowledge.[226]  In 2014, de la Huerta filed suit against Lions Gate Entertainment and individuals involved in the filming, alleging a number of claims related to both her injury and the voice dubbing, including claims for breach of contract, common law and statutory right to publicity, and trademark infringement.  De la Huerta’s central complaint as to the voice dubbing was that the voice double’s performance was “inferior” to her own and that viewers mistakenly attributed those aspects of the performance to her.[227]  The trial court granted the defendants’ anti-SLAPP motion with respect to de la Huerta’s dubbing claims. Under the anti-SLAPP statute, a cause of action arising from the constitutionally protected right of free speech may be stricken unless the plaintiff can demonstrate that she is likely to prevail on the merits of her claims.[228]  Here, the Court of Appeal held that the dubbing of plaintiff’s voice was a “protected artistic activity.”[229]  Specifically, the Court held that de la Huerta’s claims “arise from the decision to use a voice double to rerecord lines originally read by a well-known lead actress in a widely reviewed film.  That is a creative decision implicating a matter of public interest and hence within the scope of the anti-SLAPP statute.”[230]  The Court thereafter determined that de la Huerta had failed to establish a likelihood of success on any of her dubbing claims.  Notably, the Court held that de la Huerta’s right of publicity claim—in which she asserted that defendants had misappropriated her name or voice, or misused her persona, when they distributed the film after using a voice double—would necessarily fail, as defendants did not use de la Huerta’s name or voice independently of her performance in the film, and she had expressly consented to the use of her name or likeness in relation to the film.[231] The Court of Appeal also affirmed the sustaining of defendants’ demurrer to de la Huerta’s claims related to her stunt injuries, thereby affirming the disposal of the case in its entirety.[232] F.     Music Litigation 1.     Mechanical Royalty Rate to Remain Unchanged On March 28, 2017, the Copyright Royalty Board adopted a final rule that sets continued, unaltered rates and terms for statutory licenses to use and distribute physical recordings and permanent digital downloads (“Mechanical Licenses”) under subpart A of 37 C.F.R. 385.[233]  The mechanical royalty rate, which is 9.1 cents for recordings of five minutes or less and 1.75 cents per minute of those over five minutes, was first set on January 1, 2006.[234]  The Copyright Royalty Board noted that, although the originally proposed rule limited the rates to a time period ending in 2022, the rule as adopted will remain in effect until superseded by a subsequent rulemaking. 2.     Streaming Drives Music Consumption Growth as Lawsuits Continue to Flow Music streaming continued to see big growth in 2017, with over 618 billion on-demand streams throughout the year, an increase of 43 percent from 2016.[235]  Overall, music consumption was up 12.5 percent in 2017, with streaming a big driver of that growth.[236]  That growth has come with litigation pains, and mechanical royalties have been the subject of much litigation over the past year. In May, Spotify proposed a $43 million settlement in a class action lawsuit brought by singer-songwriter Melissa Ferrick, who had alleged that the streaming service infringed thousands of songwriters’ copyrights rather than follow the proper procedures to obtain mechanical royalties.  After attorney fees, $28.7 million of that settlement figure is proposed to compensate songwriters and publishers.[237]  Hundreds of musicians and music publishers have objected to the proposal,[238] and the Court held a fairness hearing on December 1, 2017, but has yet to approve the proposed settlement. In July 2017, two separate lawsuits were filed in Nashville against Spotify, each alleging that the streamer had not obtained necessary licenses:  one was filed by Bluewater Music, an independent publisher and copyright administration company, and the other by Robert Gaudio and his musical group Frankie Valli and the Four Seasons, among other plaintiffs.[239]  In response, Spotify has argued that music streams should be considered akin to public performances such that streamers need not obtain mechanical licenses from music publishers.[240] Most recently, on December 29, 2017, Wixen Music publishing—which licenses music from artists including Tom Petty, Neil Young, the Beach Boys, and Janis Joplin—sued Spotify in California, seeking damages of $1.6 billion, alleging that Spotify has been streaming works without the correct license.[241]  That same day, Spotify filed court papers questioning whether Wixen’s clients had authorized Wixen to take legal action against Spotify, arguing that it had given its clients only a brief opt-out period before their names would be included in the lawsuit.[242]  Wixen admitted that it filed its suit before the end of the year due to the introduction in the House of Representatives of the bi-partisan sponsored Music Modernization Act, which would protect streamers against such suits.[243] In other Spotify news, it was reported on January 3, 2018 that the company had filed papers with the SEC for its long-rumored IPO.[244] 3.     Do “Players Playing” + “Haters Hating” = Copyright Infringement? On September 18, 2017, Sean Hall and Nathan Butler sued Taylor Swift, among others, alleging that Swift’s hit song “Shake it Off” infringes plaintiffs’ copyright in the 2001 song “Playas Gon’ Play” by the group 3LW, which Hall and Butler co-authored.[245]  Specifically, Hall and Butler’s song includes the lyrics “Playas, they gonna play / And haters, they gonna hate,” which they allege are embodied in Swift’s lyrics “Cause the players gonna play, play, play, play, play and the haters gonna hate, hate, hate, hate, hate.”[246]  The complaint attempts to establish that it was the industry norm for Swift to have cleared her lyrics with Hall and Butler, citing several instances where artists have cleared the use of lyrics that are similar to, but not verbatim, songs by other artists.[247] On January 3, 2018, Swift and co-defendants moved to dismiss, arguing “there is no copyright protection in plaintiffs’ alleged decision to combine players playing with haters hating,” because the combined phrases are public domain elements.[248]  The Central District of California dismissed similar allegations against Swift in 2015 after screening the complaint in forma pauperis of Jessie Braham, who alleged that Swift infringed his song “Haters Gone Hate.”[249] 4.     Ticketmaster Acquires Songkick in Settlement of Antitrust Suit In December 2015, Songkick sued Ticketmaster and Live Nation, accusing them of antitrust violations in the market for live-concert ticket sales.  Songkick, which recently shut down its ticketing business, citing pressure from the defendants,[250] was in the business of “artist presale” ticketing, in which artists sell (typically at a reduced price) a reserved portion of concert tickets to dedicated fans in advance of general ticket sales.[251]  Songkick alleges that Ticketmaster and Live Nation, which merged in 2010, used their control of the majority of the concert ticket-sales market via exclusive contracts with venues, to prevent other parties like Songkick from engaging in “artist presale” ticketing.[252] On October 16, 2017, the court denied defendants’ motion for summary judgment, finding numerous material factual disputes in what it described as “an enormous gulf” between the proposed inferences from the known facts, but noting that “[t]here is no question that there is a restraint of trade involved.”[253]  Noting that the “[d]efendants certainly have potentially meritorious defenses,” the court nonetheless found that the case could not be resolved by summary judgment.[254]  With a trial date looming, on January 12, 2018, Songkick and Ticketmaster announced that they had reached a settlement in which Ticketmaster will pay $110 million to acquire Songkick’s assets.[255] 5.     Fractional Licensing: Consent Decree No Bar to BMI and ASCAP On December 19, 2017, the Court of Appeals for the Second Circuit affirmed that consent decrees that have been in place since 1941 do not prevent Broadcast Music Inc. (BMI) and the American Society of Composers, Authors and Publishers (ASCAP) from granting fractional licenses or from licensing works in which BMI and ASCAP do not have the authority to grant full rights—such as when a work has multiple authors.[256]  The United States District Court for the Southern District of New York ruled in favor of BMI last year, deciding that the consent decrees were silent as to fractional licensing.[257]  The Second Circuit agreed, finding that the “appeal begins and ends with the language of the consent decree.”[258]  The court also rejected the DOJ’s argument that allowing fractional licenses undermines the procompetitive objectives of the consent decree, finding that the government should seek to amend the decree or sue under the Sherman Act if it finds there are “unresolved competitive concerns.”[259]  BMI President Mike O’Neill praised the decision, stating that BMI is “incredibly gratified that Judge (Louis) Stanton and the Second Circuit agreed with [their] position.”[260]    [1]   Dana Feldman, What the Disney-Fox Merger Means for Consumers, Forbes (Dec. 15, 2017), https://www.forbes.com/sites/danafeldman/2017/12/15/what-the-disney-fox-52-4b-merger-means-to-the-consumer/#4c204cd317c8.    [2]   Benjamin Horney, Disney Buys 21st Century Fox Assets in $52.4B Blockbuster, Law360 (Dec. 14, 2017), https://www.law360.com/articles/994773.    [3]   Press Release, Discovery Communications (July 31, 2017), https://corporate.discovery.com/wp-content/uploads/2017/07/Final-Infographic.pdf.    [4]   Brian Fung, The Justice Department is Suing AT&T to Block its $85 Billion Bid for Time Warner, The Washington Post (Nov. 20, 2017), https://www.washingtonpost.com/news/the-switch/wp/2017/11/20/the-justice-department-just-sued-att-to-block-its-85-billion-bid-for-time-warner/.    [5]   Hadas Gold, Judge Sets March 19 trial date for AT&T, Time Warner case, CNN (Dec. 7, 2017), http://money.cnn.com/2017/12/07/media/doj-att-trial-date/index.html.    [6]   Press Release, Meredith Corporation, Meredith Corporation To Acquire Time Inc. to Create Premier Media and Marketing Company Serving Nearly 200 Million American Consumers (Nov. 26, 2017), https://ir.meredith.com/news-releases/press-release-details/2017/Meredith-Corporation-To-Acquire-Time-Inc-To-Create-Premier-Media-And-Marketing-Company-Serving-Nearly-200-Million-American-Consumers/default.aspx.    [7]   Id.    [8]   Variety Staff, Penske Media, Wenner Media Invest in Rolling Stone at $100 Million-Plus Valuation, Variety (Dec. 20, 2017), http://variety.com/2017/biz/news/penske-media-buys-majority-stake-in-rolling-stone-owner-wenner-media-for-over-100-million-1202646580/.    [9]   Patrick Brzeski, Netflix Signs Licensing Deal with China’s iQiyi, The Hollywood Rep. (Apr. 24, 2017), http://www.hollywoodreporter.com/news/netflix-signs-licensing-deal-chinas-iqiyi-997071. [10]   Elsa Keslassy, Netflix Renews and Expands International Deal With Orange, Variety (Sept. 14, 2017), http://variety.com/2017/digital/news/netflix-orange-1202558781/. [11]   Id. [12]   Id. [13]   Elsa Keslassy, Netflix, Deutsche Telekom Ink Global Partnership, Variety (Nov. 23, 2017), http://variety.com/2017/film/global/netflix-deutsche-telekom-ink-global-partnership-1202622357/. [14]   Id. [15]   Aaron Hemsworth, Netflix: Growing Its Business through Innovation, Market Realist (Nov. 7, 2017), http://marketrealist.com/2017/11/local-contents-gain-european-presence-netflix/. [16]   Id. [17]   Mac Margolis, Netflix Woos Latin American Viewers by Going Local, Bloomberg (Aug. 11, 2017), https://www.bloomberg.com/view/articles/2017-08-11/netflix-woos-latin-american-viewers-by-going-local. [18]   Denise Petski, Netflix Greenlights Colombian Original Series From ‘Narcos’ Producer, Deadline (Nov. 22, 2017), http://deadline.com/2017/11/netflix-colombian-original-series-narcos-producer-ciro-guerra-1202213839/. [19]   Manual Bentancourt, Netflix is Releasing 10 Argentine Series, Including a Musical Teen Novela, Remezcla (Nov. 29, 2017), http://remezcla.com/film/netflix-expanded-slate-argentine-productions/. [20]   Joe Otterson, ‘Walking Dead’ Creator Robert Kirkman Sets New Deal with Amazon, Variety (Aug. 11, 2017), http://variety.com/2017/tv/news/robert-kirkman-skybound-entertainment-amazon-1202523592/. [21]   Id. [22]   Todd Spangler, Apple TV Adds Amazon Prime Video After Years of Haggling, Variety (Dec. 6, 2017), http://variety.com/2017/digital/news/apple-tv-amazon-prime-video-launch-1202631975/. [23]   Id. [24]   Peter White, Hulu Strikes Foreign-Language TV Deal with Studiocanal, Deadline (Nov. 27, 2017), http://deadline.com/2017/11/hulu-studiocanal-deal-1202214791/. [25]   Lucas Shaw, Disney’s Deal With Fox Could Solve Hulu’s Ownership Headache, Bloomberg (Dec. 14, 2017), https://www.bloomberg.com/news/articles/2017-12-14/disney-s-deal-with-fox-could-solve-hulu-s-ownership-headache. [26]   Jacob Kastrenakes, Disney to End Netflix Deal and Launch Its Own Streaming Service, The Verge (Aug. 8, 2017), https://www.theverge.com/2017/8/8/16115254/disney-launching-streaming-service-ending-netflix-deal. [27]   Id. [28]   Brooks Barnes, How Disney Wants to Take on Netflix With Its Own Streaming Services, N.Y. Times (Aug. 8, 2017), https://www.nytimes.com/2017/08/08/business/media/disney-streaming-service.html. [29]   Chad Bray, Iflix Video-Streaming Service Secures $144 Million in Funding, N.Y. Times (Aug. 7, 2017), https://www.nytimes.com/2017/08/07/business/dealbook/iflix-streaming-hearst-netflix.html. [30]   Id. [31]   Id. [32]   Id. [33]   Sara Hsu, China’s New Capital Controls Expected to Slow Real Estate, But Improve Country’s Economic Health, Forbes (Aug. 28, 2017), https://www.forbes.com/sites/sarahsu/2017/08/28/chinas-new-capital-controls-expected-to-slow-real-estate-but-improve-countrys-economic-health/#13398af166fd. [34]   Ryan Faughnder & James Rufus Koren, As China Cools on Hollywood, the Movie Business Looks Close to Home for Money, L.A. Times (Nov. 12, 2017), http://beta.latimes.com/business/hollywood/la-fi-ct-china-hollywood-foreign-investment-20171112-htmlstory.html. [35]   Id. [36]   Brent Lang, Paramount Loses Slate Financing Deal with China’s Huahua, Variety (Nov. 7, 2017), http://variety.com/2017/film/news/paramount-china-huahua-1202609480/. [37]   Meg James & Ryan Faughnder, Paramount Pictures loses Huahua Media slate film financing deal, L.A. Times (Nov. 7, 2017), http://beta.latimes.com/business/hollywood/la-fi-ct-paramount-huahua-film-financing-20171107-story.html. [38]   Id. [39]   Lang, supra note 37. [40]   Patrick Frater, China’s Recon Abandons Millennium Takeover Deal, Variety (Aug. 30 2017), http://variety.com/2017/biz/asia/chinas-recon-abandons-millennium-takeover-deal-1202543634/. [41]   Patrick Brzeski, Chinese Investors Unload Stakes in Wanda’s Legendary Entertainment, The Hollywood Rep. (Sept. 27, 2017), https://www.hollywoodreporter.com/news/chinese-investors-unload-stakes-wandas-legendary-entertainment-1043522. [42]   Arjun Kharpal, China’s Tencent surpasses Facebook in valuation a day after breaking $500 billion barrier, CNBC (Nov. 21, 2017), https://www.cnbc.com/2017/11/21/tencent-surpasses-facebook-in-valuation.html. [43]   Id. [44]   Id. [45]   Meghan Reeder, Tesla Deals Boosts Chinese Presence in US Auto Tech, CNBC (Mar. 28, 2017), https://www.cnbc.com/2017/03/28/messaging-app-parent-tencent-takes-stake-in-tesla.html. [46]   Samantha Masunaga and David Pierson, What will Tencent get out of its 12% stake in Snap Inc.?, L.A. Times (Nov. 8, 2017), http://beta.latimes.com/business/technology/la-fi-tn-tencent-snap-20171108-story.html. [47]   Id. [48]   Todd Spangler, Snap, NBCUniversal Form Studio Joint Venture, Tap Duplass Brothers for Original Shows, Variety (Oct. 16, 2017), http://variety.com/2017/digital/news/snap-nbcuniversal-studio-venture-duplass-brothers-shows-1202591040/. [49]   Id.; see also Stephen Battaglio, NBCUniversal and Snap Form a New Venture to Produce Scripted Shows for Mobile Users, L.A. Times (Oct. 17, 2017), http://www.latimes.com/business/hollywood/la-fi-ct-snap-nbc-20171017-story.html. [50]   Spangler, supra note 49. [51]   Billboard Staff, Royalty Flow Launches IPO, Offering Fans a Slice of Eminem Royalties, Billboard (Nov. 27, 2017), https://www.billboard.com/articles/business/8046992/royalty-flow-ipo-eminem-royalties-nasdaq. [52]   Id. [53]   Id. [54]   Zachary Zagger, 5 Esports Issues Attorneys Should Watch, Law360 (July 20, 2017), https://www.law360.com/media/articles/946025/5-esports-issues-attorneys-should-watch. [55]   Id. [56]   Id.; Sabiq Shah, Overwatch’s Highest-Paid Pro Lands $150,000 Salary Deal, Engadget (Sept. 4, 2017), https://www.engadget.com/2017/09/04/overwatch-s-highest-paid-pro-lands-150-000-salary-deal/. [57]   Press Release, Activision Blizzard, The Overwatch League Partners With Sports, eSports Leaders to Build Teams for Major Cities Worldwide, (July 12, 2017), http://investor.activision.com/releasedetail.cfm?releaseid=1032873. [58]   Jacob Wolf, Jerry Jones, John Goff Buy Majority Stake in compLexity Gaming, ESPN (Nov. 6, 2017), http://www.espn.com/esports/story/_/id/21309068/dallas-cowboys-owner-jerry-jones-john-goff-buy-majority-stake-complexity-gaming. [59]   Cecilia Kang, F.C.C. Repeals Net Neutrality Rules, N.Y. Times (Dec. 14, 2017), https://www.nytimes.com/2017/12/14/technology/net-neutrality-repeal-vote.html. [60]   Keith Collins, Why Net Neutrality Was Repealed and How It Affected You, N.Y. Times (Dec. 14, 2017), https://www.nytimes.com/2017/12/14/technology/net-neutrality-rules.html. [61]   Id. [62]   Cecilia Kang, F.C.C. Repeals Net Neutrality Rules, N.Y. Times (Dec. 14, 2017), https://www.nytimes.com/2017/12/14/technology/net-neutrality-repeal-vote.html. [63]   Brian Fung, The never ending battle over net neutrality is far from over.  Here’s what’s coming next., Wash. Post (Dec. 15, 2017), https://www.washingtonpost.com/news/the-switch/wp/2017/12/15/the-never-ending-battle-over-net-neutrality-is-far-from-over-heres-whats-coming-next/. [64]   Id. [65]   Cecilia Kang, Flurry of Lawsuits Filed to Fight Repeal of Net Neutrality, N.Y. Times (Jan. 16, 2018), https://www.nytimes.com/2018/01/16/technology/net-neutrality-lawsuit-attorneys-general.html. [66]   Cecilia Kang, F.C.C. Opens Door to More Consolidation in TV Business, N.Y. Times (Nov. 16, 2017), https://www.nytimes.com/2017/11/16/business/media/fcc-local-tv.html. [67]   David Shepardson, FCC to loosen TV, newspaper ownership rules, Reuters (Oct. 25, 2017), https://www.reuters.com/article/us-usa-fcc-media/fcc-to-loosen-tv-newspaper-ownership-rules-idUSKBN1CU2TD. [68]   Jodi Kantor and Megan Twohey, Harvey Weinstein Paid Off Sexual Harassment Accusers for Decades, N.Y. Times (Oct. 5, 2017), https://www.nytimes.com/2017/10/05/us/harvey-weinstein-harassment-allegations.html. [69]   E.g., Carla Herreria, Gwyneth Paltrow: Harvey Weinstein Lied About Having Sex With Me to Lure Women, Huffington Post (Dec. 5, 2017), https://www.huffingtonpost.com/entry/gwyneth-paltrow-harvey-weinstein-lied-sex_us_5a273869e4b0c2117626a8b0. [70]   Maya Salam, 6 Women Sue Harvey Weinstein and His Former Businesses in Proposed Class Action, N.Y. Times (Dec. 6, 2017), https://www.nytimes.com/2017/12/06/business/harvey-weinstein-class-action.html; Yohana Desta, Inside Harvey Weinstein’s Growing Legal Nightmare, Vanity Fair (Dec. 6, 2017), https://www.vanityfair.com/hollywood/2017/12/harvey-weinstein-lawsuits. [71]   Complaint, Huett v. The Weinstein Company, LLC, Case No. BC680869 (L.A. Super. Ct. Oct. 24, 2017) (hereinafter Huett Complaint); Complaint, Ackers v. Harvey Weinstein, Case No. BC681850 (L.A. Super Ct. Nov. 2, 2017) (hereinafter Ackers Complaint);  Complaint, Jane Doe 1 v. The Weinstein Co. Holdings, LLC, C.A. No. 17 Civ. 8323 (C.D. Cal. Nov. 15, 2017) (closed);  Complaint, Jane Doe. v. The Weinstein Co. LLC, Case No. BC683411 (L.A. Super Ct. Nov. 14, 2017) (hereinafter Jane Doe Complaint); Complaint, Geiss v. The Weinstein Co. Holdings LLC, C.A. No. 17 Civ. 9554 (S.D.N.Y. Dec. 6, 2017) (hereinafter Geiss Complaint); Complaint, Noble v. Weinstein, C.A. No. 17 Civ. 9260 (S.D.N.Y. Nov. 27, 2017) (hereinafter Noble Complaint). [72]   Huett Complaint ¶¶ 11-15, 18; Jane Doe Complaint ¶¶ 18-2, 29. [73]   Geiss Complaint ¶ 183-191. [74]   Geiss Complaint ¶ 192-218. [75]   Noble Complaint. [76]   Desta, supra note 71. [77]   E.g., Gene Maddus, Harvey Weinstein’s Former Assistant Prepping Sexual Harassment Suit, Variety (Dec. 6, 2017), http://variety.com/2017/biz/news/harvey-weinstein-assistant-erectile-dysfunction-drugs-1202631811/. [78]   Josefa Velasquez, The Weinstein Company Now Probed by AG Schneiderman, N.Y.L.J. (Oct. 23, 2017), https://www.law.com/newyorklawjournal/sites/newyorklawjournal/2017/10/23/102317ny_weinstein/. [79]   Ryan Faughnder, Harvey Weinstein Sues His Own Company for Documents To Defend Himself Against Claims of Sexual Abuse, L.A. Times (Oct. 26, 2017), http://www.latimes.com/business/hollywood/la-fi-ct-harvey-weinstein-lawsuit-20171026-story.html. [80]   Ryan Faughnder and Samantha Masunaga, Harvey Weinstein’s Company Gets A Financial Lifeline as He Faces New Criminal Probe, L.A. Times (Oct. 16, 2017), http://www.latimes.com/business/hollywood/la-fi-ct-weinstein-colony-capital-20171016-story.html. [81]   Chris Lee, Is The Weinstein Company Firing Bob Weinstein, Too?, N.Y Mag. (Oct. 29, 2017), http://www.vulture.com/2017/10/is-the-weinstein-company-firing-bob-weinstein-too.html. [82]   David Ng and Ryan Faughnder, Can Weinstein Co. Survive Without Harvey Weinstein?, L.A. Times (Oct. 9, 2017), http://www.latimes.com/business/hollywood/la-fi-ct-weinstein-future-20171010-story.html. [83]   Ryan Faughnder, Can Former SBA Head Maria Contreras-Sweet Save Weinstein Co.?, L.A. Times (Nov. 19, 2017), http://www.latimes.com/business/hollywood/la-fi-ct-weinstein-company-bidder-20171119-story.html. [84]   Powerful men confronted as “Weinstein Effect” goes global, CBS News (Nov. 14, 2017), https://www.cbsnews.com/news/harvey-weinstein-effect-goes-global-powerful-men-confronted. [85]   Fiza Pirani, From Weinstein to Lauer, A Timeline of 2017’s Sexual Harassment Scandals, Atlanta J.-Const. (Dec. 11, 2017), http://www.ajc.com/news/world/from-weinstein-lauer-timeline-2017-sexual-harassment-scandals/qBKJmUSZRJqgOzeB9yN2JK/. [86]   Victor Lipman, 3 Steps Companies Can Take to Prevent Sexual Harassment, Forbes (Nov. 6, 2017), https://www.forbes.com/sites/victorlipman/2017/11/06/3-steps-companies-can-take-to-prevent-sexual-harassment/#3f956c5c38a9. [87]   Danielle Paquette, More Companies Are Buying Insurance to Cover Executives Who Sexually Harass Employees, Chi. Trib. (Nov. 3, 2017), http://www.chicagotribune.com/business/ct-biz-companies-sexual-harrassment-insurance-20171103-story.html. [88]   Katerina Ang, A Proposed New York Law Would Ban the Use of NDAs to Silence Harassment Survivors, Moneyish (Oct. 27, 2017), https://moneyish.com/ish/a-proposed-new-york-law-would-ban-the-use-of-ndas-to-silence-harassment-survivors/. [89]   Melanie Mason, California Lawmaker Wants to Ban Secret Settlements In Sexual Harassment Cases After Weinstein Scandal, L.A. Times (Oct. 19, 2017), http://www.latimes.com/politics/essential/la-pol-ca-essential-politics-updates-california-lawmaker-wants-to-ban-secret-1508428198-htmlstory.html. [90]   Lizette Chapman, California Looks to Outlaw Sexual Harassment by VCs, Bloomberg (Aug, 28, 2017), https://www.bloomberg.com/news/articles/2017-08-28/california-looks-to-outlaw-sexual-harassment-by-vcs. [91]   Steff Yotka, A Proposed New York Amendment Seeks to Protect Models from Sexual Harassment, Variety (Oct. 23, 2017), https://www.vogue.com/article/new-law-could-protect-models-against-sexual-harassment. [92]   See In re Caremark Derivative Litig., 698 A.2d 959 (Del. Ch. 1996); Daniel Miller, Ryan Faughnder, and David Ng, The Legal Fallout From the Mushrooming Weinstein Sex Scandal Could Be Big, L.A. Times (Oct. 10, 2017), http://www.latimes.com/business/hollywood/la-fi-ct-weinstein-legal-fallout-20171010-story.html. [93]   The studios sued included 20th Century Fox Film Corp., Paramount Pictures Corp., Universal City Studios, LLC, Sony Pictures Entertainment, Inc., Warner Bros. Entertainment, Inc. and Metro-Goldwyn-Mayer Studios Inc.  Plaintiffs settled the suits with all studios other than MGM and Warner Bros. [94]   Dominic Patten, Universal, Paramount, Fox & Sony Slapped With Class Action Suits Over Home Video Royalties, Deadline (Jan. 16, 2013), http://deadline.com/2013/01/universal-paramount-fox-sony-slapped-with-royalties-class-action-suits-405929/; Dominic Patten, Hal Needham Hits Warner Bros With Class Action Suit Over ‘Hooper’ Home Video Royalties, Deadline (Jan. 29, 2013), http://deadline.com/2013/01/hal-needham-hits-warner-bros-with-class-action-suit-over-hooper-home-video-royalties-416329/; MGM Faces Class-Action Lawsuit Over Home Video Revenue, Deadline (Mar. 21, 2014), http://deadline.com/2014/03/mgm-home-video-lawsuit-702923/. [95]   Bonnie Eslinger, Stallone Sues ‘Greedy’ Warner Bros. Over Movie Revenue, Law360 (Apr. 12, 2017), https://www.law360.com/articles/912991/stallone-sues-greedy-warner-bros-over-movie-revenue. [96]   Bonnie Eslinger, Warner Bros. Ordered to Give Stallone Film Profit Docs, Law360 (Sept. 27, 2017), https://www.law360.com/media/articles/968662/warner-bros-ordered-to-give-stallone-film-profit-docs. [97]   Eriq Gardner, A ‘Supernatural’ Profits Fight, and the AT&T-TW Merger Issue That Few Are Discussing, The Hollywood Rep. (Nov. 17, 2017), https://www.hollywoodreporter.com/thr-esq/a-supernatural-profits-fight-at-t-tw-merger-issue-few-are-discussing-1059396. [98]   Id. [99]   Id. [100]   Century of Progress Productions v. Vivendi S.A., No. 16-cv-7733-DMG (ASx) (C.D. Cal. Sept. 28, 2017). [101]   Id. at 1. [102]   Eriq Gardner, ‘Spinal Tap’ Lawsuit: Judge Tosses Harry Shearer, Fraud Claim From Profits Case, The Hollywood Rep. (Sept. 29, 2017), https://www.hollywoodreporter.com/thr-esq/spinal-tap-lawsuit-judge-tosses-harry-shearer-fraud-claim-profits-case-1044332. [103]   Vivendi, No. 16-cv-7733-DMG (ASx), at 8-9. [104]   Id. [105]   Complaint at 5–25, Jones v. MJJ Productions, Inc., No. BC52803 (Cal. Super. Ct. Oct. 23, 2013). [106]   Id. [107]   Bonnie Eslinger, Quincy Jones Wins $9.4M from Michael Jackson Co. at Trial, Law360 (July 26, 2017), https://www.law360.com/articles/947858/quincy-jones-wins-9-4m-from-michael-jackson-co-at-trial. [108]   Order Denying JNOV, Jones v. MJJ Productions, Inc., No. BC52803 (Cal. Super. Ct. Sept. 22, 2017). [109]   Reply Br. Regarding Equitable Defenses at 2–3, Jones v. MJJ Productions, Inc., No. BC52803 (Cal. Super. Ct. Nov. 16, 2017). [110]   17 U.S.C. § 512(i)(1)(A). [111]   See EMI Christian Music Grp., Inc. v. MP3tunes, LLC, 844 F.3d 79, 85 (2d Cir. 2016). [112]   See id. at 90. [113]   Id. [114]   See BMG Rights Mgmt. (US) LLC v. Cox Commc’ns, Inc. et al., 149 F. Supp. 3d 634, 662 (E.D. Va. 2015). [115]   Id. at 661. [116]   Capitol Records, LLC v. Vimeo, LLC, 826 F.3d 78 (2d Cir. 2016). [117]   Id. at 86–87. [118]   Id. at 87. [119]   Id. at 87–89. [120]   Id. at 89–90. [121]   Id. at 90. [122]   Id. at 90. [123]   Capitol Records, LLC v. Vimeo, LLC, 137 S. Ct. 1374 (2017). [124]   Perfect 10, Inc. v. Giganews, Inc., 847 F.3d 657, 663 (9th Cir. 2017) (quoting Ellison v. Robertson, 357 F.3d 1072, 1074, n.1 (9th Cir. 2004)). [125]   See id. [126]   See id. [127]   See id. at 668, 669-70. [128]   Id. at 667 (citing Aereo, 134 S.Ct. at 2507). [129]   See Perfect 10 v. Giganews et al., No.17-320, 2017 WL 3782333, at *1 (Dec. 4, 2017). [130]   See BWP Media USA, Inc. v. T&S Software Assocs, Inc., 852 F.3d 436, 443-44 (5th Cir. 2017). [131]   See id. at 442. [132]   Id. [133]   Id. [134]   Signature Mgmt. Team, LLC v. John Doe, No. 16-2188 (6th Cir. Nov. 28, 2017) (slip op) (emphasis added). [135]   Id. at 6. [136]   Id. at 2. [137]   Id. [138]   Id. at 5. [139]   Id. [140]   Id. [141]   Id. at 6. [142]   Id. at 7, 9. [143]   Id. at 13. [144]   See Todd Spangler, Entertainment Giants Forge New Alliance to Fight Piracy, Sue Offenders, Variety (June 13, 2017), http://variety.com/2017/digital/news/entertainment-studios-piracy-lawsuits-1202463987/. [145]   See Complaint at 1, Universal City Studios Productions LLLP et al. v. TickBox TV LLC, No. 2:17-cv-07496 (C.D. Cal. Oct. 13, 2017). [146]   See Ryan Faughnder, How an Atlanta Power Couple’s Business Has Heightened Hollywood and Silicon Valley’s Piracy Anxieties, L.A. Times (Nov. 17, 2017), http://www.latimes.com/business/hollywood/la-fi-ct-kodi-tickbox-studios-20171117-htmlstory.html. [147]   See Tickbox TV LLC Complaint, at 16, 18. [148]   See Faughnder, supra note 147. [149]   Id. [150]   Id. [151]   Order Granting Plaintiffs’ Motion for Preliminary Injunction, Disney Enterprises, Inc. et al v. VidAngel Inc., Case No. 2:16-cv-04109 – AB (PLAx) at *1-*2 (C.D. Cal. Dec. 12, 2016). [152]   Id. at *7. [153]   Bill Donahue, 9th Circ. Rejects VidAngel’s Emergency Stay Bid, Law360 (Jan. 5, 2017), https://www.law360.com/articles/877896. [154]   Bill Donahue, Hollywood Studios Beat Streaming Site At 9th Circ., Law360 (Aug. 24, 2017), https://www.law360.com/articles/957408. [155]   Opinion, Disney Enterprises, Inc. v. VidAngel, Inc., No. 16-56843 (9th Cir. Aug. 24, 2017). [156]   Id. at 19 (“If the mere purchase of an authorized copy alone precluded infringement liability under the FMA, the statute would severely erode the commercial value of the public performance right in the digital context, permitting, for example, unlicensed streams which filter out only a movie’s credits.”). [157]   Id. [158]   Id. at 20-21. [159]   Id. at 22. [160]   Id. at 23. [161]   Id. at 22. [162]   Id. at 26-31. [163]   Dave Simpson, VidAngel Files for Ch. 11 After 9th Circ. Copyright Loss, Law360 (Oct. 18, 2017), https://www.law360.com/articles/976054. [164]   Memorandum and Opinion, Graham v. Prince, No. 15-cv-10160(SHS) (S.D.N.Y. July 18, 2017) at *2. [165]   Id. [166]   Id. at *13 (referencing Cariou v. Prince, 714 F.3d 694 (2d Cir. 2013)). [167]   Id. at * 16 (“This is not a case in which the ‘open-ended and context-sensitive’ fair use inquiry can be properly applied at the motion to dismiss stage.”). [168]   Id. at *16-*23. [169]   Opinion and Order, Penguin Random House LLC v. Colting, No. 17-cv-386 (JSR) (S.D.N.Y. Sept. 8, 2017). [170]   Id. at *22. [171]   Id. at *24. [172]   Id. at *23. [173]   Id. at *24 (“Here, defendants’ story summaries do not recount plaintiffs’ Novels in the service of literary analysis, they provide literary analysis in the service of trying to make the Guides qualify for the fair use exception”). [174]   Bill Donahue, ‘Monkey Selfie’ Copyright Suit Ends In Settlement, Law360 (Sept. 11, 2017), https://www.law360.com/media/articles/962819/-monkey-selfie-copyright-suit-ends-in-settlement. [175]   Id.; Order Granting Motions to Dismiss, Naruto v. Slater, No. 15-cv-04324-WHO (N.D. Cal. Jan. 28, 2016). [176]   Order Granting Motions to Dismiss, Naruto v. Slater, No. 15-cv-04324-WHO (N.D. Cal. Jan. 28, 2016). [177]   Id. (“[The plaintiffs] argue that this result is ‘antithetical’ to the ‘tremendous public interest in animal art.’ [] Perhaps.  But that is an argument that should be made to Congress and the president, not to me.”). [178]   Donahue, supra note 175. [179]   Jimmy Hoover, Music Group’s Copyright Suit Against Ford, GM On The Rocks, Law360 (Oct. 24, 2017), https://www.law360.com/articles/977666/music-group-s-copyright-suit-against-ford-gm-on-the-rocks. [180]   Complaint, Alliance of Artists and Recording Cos. Inc. v. General Motors Co. et al., No. 1:14-cv-01271 (D.C. July 25, 2014) at *2.  [181]   Id. at *3, *5. [182]   Id. at *7. [183]   See Memorandum of Points and Authorities in Support of Defendant General Motors LLC’s Phase 1(A) Motion for Partial Summary Judgment at *9, Alliance of Artists and Recording Cos. Inc. v. General Motors Co. et al., No. 1:14-cv-01271 (D.C. Dec. 6, 2017). [184]   See Plaintiff Alliance of Artists and Recording Companies, Inc.’s Memorandum in Support of Its Motion for Partial Summary Judgment As To Phase 1(A) at *4-*7, Alliance of Artists and Recording Cos. Inc. v. General Motors Co. et al., No. 1:14-cv-01271 (D.C. Dec. 6, 2017). [185]   See Hoover, supra note 180. [186]   See Complaint, Rearden LLC, et al. v. The Walt Disney Co., et al., No. 17-cv-04006, 2017 WL 3015899 (N.D. Cal. July 17, 2017).  Rearden subsequently made similar claims against Twentieth Century Fox Film, Paramount Pictures, and Crystal Dynamics Inc. [187]   See Motion to Dismiss, Rearden LLC, et al. v. The Walt Disney Co., et al., No. 17-cv-04006 (N.D. Cal. Sept. 15, 2017). [188]   See id. at *18. [189]   Id. at *18-21. [190]   See Twentieth Century Fox Television, et al. v. Empire Distrib., Inc., 875 F.3d 1192, 1200 (9th Cir. 2017). [191]   See Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989). [192]   See Twentieth Century Fox Television, et al. v. Empire Distrib., Inc., 161 F. Supp. 3d 902 (C.D. Cal. 2016). [193]   See Mattel, Inc. v. MCA Records, Inc., 296 F.3d 894, 902 (9th Cir. 2002). [194]   Empire Distrib., Inc., 875 F.3d at 1199. [195]   See Dr. Seuss Enterprises, L.P. v. ComicMix LLC, et al., No. 16-CV-2779-JLS, 2017 WL 6059130 (S.D. Cal. Dec. 7, 2017). [196]   Id. [197]   See In re Brunetti, No. 2015-1109, 2017 WL 6391161 (Fed. Cir. Dec. 15, 2017). [198]   See id. at *2. [199]   See id. [200]   Id. at *4. [201]   Id. [202]   Id. at *6. [203]   See id. at *10. [204]   Id. [205]   Id. at *12. [206]   Id. at *17. [207]   Timothy Mclaughlin, ABC TV settles with beef product maker in ‘pink slime’ defamation case, Reuters (June 28, 2017), https://www.reuters.com/article/us-abc-pinkslime/abc-tv-settles-with-beef-product-maker-in-pink-slime-defamation-case-idUSKBN19J1W9; Christine Hauser, ABC’s ‘Pink Slime’ Report Tied to $177 Million in Settlement Costs, N.Y. Times (Aug. 10, 2017), https://www.nytimes.com/2017/08/10/business/pink-slime-disney-abc.html. [208]   Mclaughlin, supra note 208. [209]   Id. [210]   Id. [211]   See Ltr. Requesting Pre-Motion Conf. at *1, Greene v. Paramount Pictures Corp., No. 2:14-cv-01044 (E.D.N.Y. Oct. 13, 2017). [212]   See id. [213]   See id. at *3. [214]   See id. [215]   Id. at *2. [216]   See Order, Greene v. Paramount Pictures Corp., No. 2:14-cv-01044  (E.D.N.Y. Dec. 18, 2017). [217]   See Complaint, Williams v. Advanceable Techs., LLC, No. 1:17-cv-23942-KMW, 2017 WL 4876233 (S.D. Fla. Oct. 27, 2017). [218]   See id. [219]   See id. [220]   See id. [221]   Id. ¶¶ 2, 27. [222]   Id. ¶¶ 67-84. [223]   Order, Williams v. Advanceable Techs., LLC, No. 1:17-cv-23942-KMW (S.D. Fla. Nov. 29, 2017). [224]   De La Huerta v. Lions Gate Entm’t Corp., No. B271844, 2017 WL 4676234, at *1 (Cal. Ct. App. Oct. 18, 2017), review filed (Nov. 27, 2017). [225]   Id. [226]   Id. [227]   Id. at *4. [228]   Id. at *2. [229]   Id. at *2-*3. [230]   Id. at *3. [231]   Id. at *6. [232]   Id. at *7-*9. [233]   Determination of Royalty Rates and Terms for Making and Distributing Phonorecords, 82 Fed. Reg. 58, 15297 (Mar. 28, 2017) (to be codified at 37 C.F.R. pt. 385). [234]   Historical Royalty Rates, Harry Fox Agency, https://secure.harryfox.com/public/HistoricalRoyaltyRates.jsp. [235]   Ed Christman, U.S. On-Demand Streams Passed 618 Billion in 2017, Outpacing Sales Declines Again, Billboard (Jan. 5, 2018), https://www.billboard.com/articles/business/8092882/on-demand-streams-618-billion-2017-outpacing-sales-declines. [236]   Id. [237]   Eriq Gardner, A Legal Campaign Against Spotify Intensifies Ahead of the Company’s Plan to Go Public, The Hollywood Rep. (Sep. 13, 2017), https://www.hollywoodreporter.com/thr-esq/a-legal-campaign-spotify-intensifies-companys-plan-go-public-1038440. [238]   Ferrick v. Spotify USA Inc., No. 1:16-cv-08412-AJN (S.D.N.Y.), ECF 208. [239]   Jack Stanley, Spotify Has Been hit With Another Copyright Infringement Lawsuit, https://hypebeast.com/2017/7/spotify-copright-infringment-frankie-valli-lawsuit. [240]   Memorandum at 6–7, Gaudio v. Spotify USA Inc., No. 3:17-cv-01052 (M.D. Tenn. Aug. 30, 2017); Memorandum at 6–7, Bluewater Music Services Corp. v. Spotify USA Inc., No. 3:17-cv-01051 (M.D. Tenn. Aug. 30, 2017). [241]   Complaint ¶¶ 9–25, Wixen Music Publishing Inc. v. Spotify USA Inc., No. 2:17-cv-09288-GW-GJS (C.D. Cal. Dec. 29, 2017). [242]   Motion, Ferrick v. Spotify USA Inc., No. 1:16-cv-08412-AJN (S.D.N.Y. Dec. 29, 2017). [243]   Andrew Flanagan, Sweeping New Music Law Expedites A $1.6 Billion Lawsuit Against Spotify, NPR Music (Jan. 3, 2018), https://www.npr.org/sections/therecord/2018/01/03/575368674/sweeping-new-music-law-expedites-a-1-6-billion-lawsuit-against-spotify. [244]   Id. [245]   Jem Aswad, Universal’s Move to Nullify $31 Million Prince Deal Approved by Judge, Variety (July 13, 2017), http://variety.com/2017/music/news/universals-move-to-nullify-31-million-prince-deal-approved-by-judge-1202495369/. [246]   Id. [247]   Id. ¶¶ 31–34. [248]   Mot. to Dismiss at 1, Hall v. Swift, No. 17-cv-6882 (C.D. Cal. Jan. 3, 2018). [249]   Braham v. Sony/ATV Music Publ’g, No. 215-cv-8422, 2015 WL 7074571 (C.D. Cal. Nov. 10, 2015). [250]   Dave Brooks, Ticketmaster Loses Motion for Summary Judgment in Songkick Case, Billboard (Oct. 18, 2017), https://www.billboard.com/articles/business/8005831/ticketmaster-songkick-case-motion-summary-judgement. [251]   Complaint ¶¶ 1–19, Complete Entm’t Res. LLC v. Live Nation Entm’t, Inc., No. 15-cv-9814 (C.D. Cal. December 22, 2015). [252]   Id. [253]   Order at 3, Complete Entm’t Res. LLC v. Live Nation Entm’t, Inc., No. 15-cv-9814 (C.D. Cal. October 16, 2017). [254]   Id. [255]   Dave Brooks, Ticketmaster Settles Songkick Lawsuit for $110M, Billboard (Jan. 12, 2018), https://www.billboard.com/articles/news/8094201/ticketmaster-songkick-settle-lawsuit-110-million. [256]   U.S. v. Broadcast Music, Inc., No. 16-cv-3830 (2d Cir. Dec. 19, 2017). [257]   Opinion and Declaratory Judgment, U.S. v. Broadcast Music, Inc., No. 64-cv-3787 (S.D.N.Y. Sept. 16, 2016). [258]   U.S. v. Broadcast Music, Inc., No. 16-cv-3830, slip op. at 4 (2d Cir. Dec. 19, 2017). [259]   Id. at 6–7. [260]   Diane Bartz, U.S. Justice Department loses music licensing appeal, Reuters (Dec. 19, 2017), https://in.reuters.com/article/usa-music-licensing-doj/u-s-justice-department-loses-music-licensing-appeal-idINKBN1ED2S5. The following Gibson Dunn lawyers assisted in the preparation of this client update: Scott Edelman, Howard Hogan, Ben Ross, Nathaniel Bach, Corey Singer, Sean O’Neill, Beatrice Hahn, Jillian London, Mike Policastro, Jessica Culpepper, Ilissa Samplin, Sara Ciccolari-Micaldi, Andrew Blythe, Marissa Moshell, Minae Yu, Lauryn Togioka, Brittany Schmeltz, and Taylor Hathaway-Zepeda. Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding these developments.  Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or the following leaders and members of the firm’s Media, Entertainment & Technology Practice Group: Scott A. Edelman – Co-Chair, Los Angeles (+1 310-557-8061, sedelman@gibsondunn.com) Ruth E. Fisher – Co-Chair, Los Angeles (+1 310-557-8057, rfisher@gibsondunn.com) Orin Snyder– Co-Chair, New York (+1 212-351-2400, osnyder@gibsondunn.com) Howard S. Hogan – Washington, D.C. (+1 202-887-3640, hhogan@gibsondunn.com) Ari Lanin – Los Angeles (+1 310-552-8581, alanin@gibsondunn.com) Benyamin S. Ross – Los Angeles (+1 213-229-7048, bross@gibsondunn.com) Helgi C. Walker – Washington, D.C. (+1 202-887-3599, hwalker@gibsondunn.com) © 2018 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

December 1, 2017 |
Sentiment Analysis & Natural Language: Processing Techniques for Capital Markets & Disclosure

New York counsel Nicolas H.R. Dumont is the author of “Sentiment Analysis & Natural Language: Processing Techniques for Capital Markets & Disclosure,” [PDF] published by The Corporate Governance Advisor in December 2017.

October 5, 2017 |
Local Drone Law Preempted in First-of-its-Kind Ruling

​Orange County associates Jared Greenberg and Brett Long are the authors of “Local Drone Law Preempted in First-of-its-Kind Ruling,” [PDF] published by The Daily Journal on October 5, 2017.

July 19, 2017 |
Media, Entertainment and Technology Group – 2017 Mid-Year Update

At the middle of 2017, Gibson Dunn’s Media, Entertainment and Technology practice group has taken stock of another particularly active period in deal-making, developments in both live and on-demand streaming, the rise of eSports, and a plethora of key cases and rulings that together provide a crucial snapshot of trends in these ever dynamic industries.  We are pleased to bring you our latest round-up of events that shaped these industries in early 2017, which hold important lessons for our clients and will drive decision-making in the boardroom and courtroom in the months to come. __________________________ TABLE OF CONTENTS I.     2017 Mid-Year Deal Report A.     Media & Entertainment Deals, Investments & IPOs 1.     Sinclair-Tribune Merger 2.     Fox Continues to Reach for Sky 3.     Verizon Goes For Yahoo! 4.     Vice Media Secures $450 Million Investment 5.     Time Warner Signs Deal with Snap for Advertisements and Original Scripted Content 6.     SiriusXM Invests in Pandora 7.     Cable IPOs Deliver Mixed Results B.     Chinese Investments in Hollywood Experience (A Temporary?) Cooling Period & Some Growing Pains C.     The Global Streaming Race Continues 1.     Netflix’s Continued Expansion 2.     Amazon Continues Its Global Growth 3.     Hulu With Live TV Beta Launch 4.     iflix: An Emerging (Market) Competitor? D.     Field of Streams:  The Rise of OTT Sports Offerings 1.     Amazon Nabs NFL Rights 2.     Hulu’s Sports Offerings 3.     Twitter’s New Sports-Related Partnerships E.     eSports Go Big League 1.     Riot Games Adopts Franchise Model for eSports League 2.     AEG Invests in Immortals eSports Team 3.     NBA Announces NBA 2K eSports League with 17 Teams Participating F.     Strikes Averted as Guilds Reach Deals II.     2017 Mid-Year Litigation Report A.     Hollywood Against the Hackers B.     Copyright Litigation Docket 1.     Fashioning a Key Ruling in Varsity Brands 2.     VidAngel’s Fading Halo 3.     Disney’s Zootopia Sued For Substantial Similarity 4.     Broadcasters Best FilmOn on Appeal 5.     Fees Cases Post-Kirtsaeng C.     Trademark Litigation Goes on Offense 1.     SCOTUS Confronts Ban on Disparaging Trademarks in Matal v. Tam 2.     SpongeBob SquarePants’ Fictional "Krusty Krab" Restaurant Wins In Trademark Infringement Suit 3.     GOOGLE Not Subject to Genericide 4.     Belushi Is Primarily a Surname 5.     Public University Should Have Allowed Student Marijuana-Reform Organization to Use University’s Trademarks D.     First Amendment Cases Speak Loudly 1.     IMDB.com v. Becerra 2.     Virginia Citizens Defense League v. Couric 3.     Fridman v. BuzzFeed 4.     Murray Energy Corp. v. Reorg Research, Inc. E.     Music Litigation 1.     Kesha v. Dr. Luke 2.     Prince’s Estate and Subsequent Legal Battles 3.     Royalties Disputes with Digital Music Streaming Services 4.     Fair Use and Sampling Go Another Round 5.     The Estate of Jimi Hendrix F.     New Efforts to Regulate ISPs 1.     The Right To Be Forgotten __________________________ I.     2017 Mid-Year Deal Report A.     Media & Entertainment Deals, Investments & IPOs 1.     Sinclair-Tribune Merger On May 8, 2017, Sinclair Broadcast Group announced a $3.9 billion cash-and-stock agreement to acquire Tribune Media, resulting in a combined entity that will own 223 television stations serving 108 markets; the new entity’s stations would reach approximately 72% of U.S. television households.  Adding Tribune’s 42 stations to its existing roster, Sinclair would be nearly twice the size of its nearest U.S. non-network broadcast competitors, the closest of which, Nexstar, reaches 39% of homes nationwide.  Sinclair plans to pay Tribune shareholders $43.50 per share, with $35 in cash and the rest in Sinclair stock.[1] On June 15, 2017, the U.S. Court of Appeals for the D.C. Circuit lifted a temporary stay of the FCC’s decision to reinstate the "UHF Discount," which allows television station owners to count only half of the households reached by UHF (ultra high frequency) stations toward their total number of households served.  As Sinclair’s post-merger reach will extend to 72% of homes nationwide, this is particularly relevant for Sinclair and other television conglomerates looking to consolidate, as no one company’s owned television stations may reach more than 39% of U.S. TV households under current FCC ownership rules.[2]  Consolidation efforts have already begun, as Ion Media, a station group that holds the most full-power UHF stations in the U.S., recently acquired three new stations in the wake of the UHF Discount reinstatement, adding 5 million viewers to the network’s audience that currently spans 58 of the largest U.S. markets.[3]  While issues related to the UHF Discount continue to be litigated, the rule is in effect for the time being following the D.C. Circuit’s recent ruling.[4]  With the UHF Discount in place, the pending Sinclair Tribune merger is expected to pass regulatory muster.[5]  2.     Fox Continues to Reach for Sky In late 2016, 21st Century Fox announced an agreement to acquire Sky plc, the largest pay TV provider in Britain, reaching 22 million customers in five European markets.  Fox currently owns 39% of Sky shares, and proposed to purchase the remaining 61% of shares for $14.5 billion.[6]    Ofcom, the U.K.’s government media regulator, recently reviewed the deal for any potential negative effects it believes the deal might have on editorial standards in the U.K., as Fox already controls the newspaper company News Corp, the owner of two major British newspapers.[7]  Ofcom also set out to determine whether Sky would remain a "fit and proper" TV license holder after the Fox acquisition, due to recent legal and corporate governance issues surrounding Fox News.[8]  Following Ofcom’s review, British Culture Secretary Karen Bradley said she was "minded to" send the merger proposal to the U.K. Competition and Markets Authority for further scrutiny.[9]  If the deal is ultimately sent to the Competition and Markets Authority, a final decision on the transaction is expected to be delayed until mid-2018.[10]     3.     Verizon Goes For Yahoo! On June 13, 2017, Verizon Communications Inc. acquired the operating business of Yahoo! Inc. for $4.48 billion.[11]  Verizon will combine Yahoo! with its existing AOL assets to create a new subsidiary, Oath, to be headed by former AOL CEO Tim Armstrong.[12]  Marissa Meyer, former CEO of Yahoo!, has resigned.[13] The deal ends Yahoo! as an operating business, and the company’s remaining assets—including its 15% stake in Chinese e-commerce company Alibaba, Yahoo! Japan, and a noncore portfolio of patents called Excalibur—will be renamed Altaba.[14]  The transaction helps Verizon build its portfolio of online content, whose assets also include The Huffington Post, Engadget, and TechCrunch (all three of which were acquired in last year’s $4.4 billion AOL deal), Tumblr, Flickr, and a mobile video app called go90.[15]  This newest move is seen as a way to advertise across the Verizon digital network, reaching a wider audience and boosting its presence in the mobile and online video space.[16] 4.     Vice Media Secures $450 Million Investment In June 2017, the privately held Vice Media secured a $450 million investment from private equity firm TPG.[17]  Vice will use the new money to finance Vice Studios, which will produce scripted programming for its Viceland Cable Channel, as well as a planned subscription service.[18] Vice’s assets include Viceland, a print magazine, HBO’s documentary series Vice, and daily news show Vice News Tonight.[19]  Walt Disney Co., which owns an 18% stake in Vice, did not participate in the funding round, despite speculation last summer that Disney might purchase all of the company.[20] 5.     Time Warner Signs Deal with Snap for Advertisements and Original Scripted Content In June 2017, following its $3.4 billion IPO, Snap Inc. entered a deal with Time Warner Inc. in which Time Warner’s Turner cable channels and Warner Bros. film studio (and possibly HBO) will create advertisements and up to ten original, scripted shows for Snapchat.[21]  Over the past several months, Snap has signed original content deals with NBCUniversal, Turner, A+E Networks, Discovery, BBC, ABC, ESPN, Vice Media, Vertical Networks, the NFL and Metro-Goldwyn-Mayer Inc., among others.[22]  Snap hopes to air two to three new episodes of original shows per day in its bid to boost its revenue, which comes almost entirely from advertising.[23] The Time Warner deal is seen as a vote of confidence for Snap—whose revenue and growth rate slowed in May—with media companies eager to reach Snap’s young, mobile users, who are shifting their attention from traditional television to mobile apps.[24] 6.     SiriusXM Invests in Pandora In June 2017, SiriusXM agreed to invest $480 million in the music streaming service Pandora, extending its reach into ad-supported digital radio for the first time.  Following the cash-and-stock purchase, SiriusXM will hold a 19% stake in Pandora, with the condition that it cannot acquire more than 31.5% of Pandora stock without approval from the Pandora board.[25]  Under the terms of the agreement, Pandora has terminated a previous deal with private equity firm KKR & Co., which had pledged $150 million to the company in May 2017, and will pay a $22.5 million breakup fee as a result.[26]  In a separate statement on the same day, Pandora announced a $200 million sale of the digital ticketing and marketing platform Ticketfly Inc., which it acquired in 2015, to Eventbrite.[27]  Just over two weeks after the two deals were announced, Pandora announced that co-founder Tim Westergren would be stepping down as CEO of the company.[28] 7.     Cable IPOs Deliver Mixed Results Two U.S. cable companies, Altice USA and WideOpenWest ("WOW"), launched IPOs in 2017, ending a five-year drought in the market for cable IPOs.  The offerings delivered mixed results, with Altice USA exceeding and WOW falling short of expectations. On June 12, 2017, Altice USA, a U.S. subsidiary of Dutch telecommunications company Altice NV, launched a $1.9 billion IPO.[29]  The IPO raised more than any other U.S.-listed telecom since 2000 and was the second-largest U.S. offering this year, after Snap Inc.’s $3.9 billion IPO in March.[30]  Altice USA priced 63.9 million shares at $30 per share, giving the company a market capitalization of approximately $22 billion.[31]  Already the fourth-biggest U.S. cable provider, Altice USA can now use its stock as capital in future acquisitions, and some analysts have speculated that acquisition targets may include cable giants such as Charter Communications and Cox Communications.[32] Altice USA’s IPO comes on the heels of another offering by a U.S. cable company, WOW, whose March offering was the first cable IPO in the last five years.[33]  WOW raised about $310 million after pricing 18.24 million shares at $17 per share, below the 19.05 million shares the company had expected to sell at $20-$22 per share.[34] B.     Chinese Investments in Hollywood Experience (A Temporary?) Cooling Period & Some Growing Pains In the first half of 2017, the surge of Chinese investment in Hollywood slowed from a particularly hot period in 2016.  This cooling trend comes shortly after the Chinese government placed restrictions on domestic capital leaving the country in November 2016, potentially creating an obstacle to Chinese investment in these blockbuster deals.  However, deal-making has continued nonetheless and we expect the trend to continue given the importance of the foreign box office and non-domestic capital to Hollywood. One of the largest Chinese investment deals announced in 2016 was the Dalain Wanda Group ("Wanda") proposed $1 billion purchase of Dick Clark Productions, producer of the "Golden Globes Awards," "Academy of Country Music Awards" and "Dick Clark’s New Year’s Rockin’ Eve with Ryan Seacrest."[35]  The deal would have been Wanda’s first venture into television.[36]  However in early March 2017, Eldridge Industries ("Eldridge), owner of Dick Clark Productions, announced that it called off the agreement because Wanda "failed to honor its contractual obligations."[37]  As a result, Eldridge filed a motion in the Delaware Chancery Court to compel the release of $25 million in escrowed funds as payment for a termination fee and $25 million due to Eldridge for its prior agreement made in January to extend the closing date.[38]  Whether the deal fell apart because Wanda felt that the $1 billion price tag was too high, because of the Chinese government’s tightening of the rules regarding foreign investments,[39] or for other reasons, the news that this deal was scrapped caused rumblings in the industry about the fate of Chinese investments in Hollywood.[40]  Chinese media conglomerate LeEco, often called the "Netflix of China," has found itself in a spiral of legal and financial troubles following its termination of merger negotiations with American television maker Vizio, in April 2017.  On July 4, Chinese courts froze $182 million in assets controlled by LeEco’s chairman Jia Yueting as a result of the company’s aggressive overexpansion and cash-flow shortages.[41]  Mere days thereafter, Vizio filed a lawsuit in California federal court alleging that LeEco was already collapsing when merger talks began, and that LeEco planned to use the merger to create false impressions about its financial health.[42]  Vizio further alleges that LeEco secretly planned as part of the merger to gain access to Vizio’s confidential customer lists and key decision makers, and that LeEco has since engaged in corporate subterfuge in an attempt to reduce its liability for a $100 million break-up fee owed under the merger agreement.[43]  Vizio is seeking the full $100 million break-up fee and punitive damages.[44] Additionally, Voltage Pictures’ recent deal with Anhui Xinke New Materials, valued at $350 million, fall apart and has resulted in litigation.  In December 2016, the deal terminated a month after the new Chinese restrictions on overseas acquisitions were put in place and has since moved to Los Angeles Superior Court as a result of a suit brought by Voltage Pictures over the payment of a $4 million deposit.[45] Despite these recent ups and downs, and the speculation as to the effect of Chinese regulations on foreign investments, there have still been some notable deals announced between Chinese investors and media, entertainment and technology companies in the first half of the year.  Wanda, Weying Technology and Huahua Media all announced investments in Paramount Picture’s Transformers: The Last Knight, giving them merchandising, global revenue and/or marketing rights.[46]  Blumhouse Productions also announced in April that it entered into a film financing agreement with Meridian Entertainment, a Chinese company, which will finance all production outside of Blumhouse’s deal with Universal.[47]  Additionally, in May, CAA launched a long-term film fund with China’s Bona Film Group ("Bona"), with Bona’s initial investment set at a reported $150 million.[48]  The film fund is intended to finance U.S.-China co-productions, in which Bona will retain all distribution right in China and CAA will represent North America and other international territories.[49]  Another deal that left the industry speculating how the tightening of capital controls in China will impact investments in the media, entertainment and technology industry is the $1 billion slate financing deal announced in January 2017 between Paramount and Shanghai Film Co. and Huahua Media.[50]  The deal would fund Paramount’s entire theatrical output over the next three years.[51]  Despite reports that the deal was to be called off in March 2017, Viacom CEO Bob Bakish confirmed in May, during Viacom’s quarterly earnings conference, that the deal was "moving ahead" and that Shanghai Film Co. and Huahua media "have elected to upsize their commitment from 25 to 30 percent" of the total slate.[52] Finally, Hollywood continues to make inroads in China in order to benefit from the country’s booming film market.  In line with this trend, CAA launched CAA China, in partnership with CMC Capital Partners, a Chinese equity firm, to establish itself in the country’s representation landscape.[53] Additionally, UTA partnered with Tang Media Partners, a Los Angeles-based entertainment company, and Joy Pictures, a Chinese film studio, to establish a film fund to distribute approximately twelve U.S. films in China per year.[54]  C.     The Global Streaming Race Continues 1.     Netflix’s Continued Expansion a.     Entering the Chinese Market Previously blocked by regulators from entering China’s entertainment market, global streaming giant Netflix announced in April 2017 that it had reached a content agreement with Beijing-based video service iQiyi.[55]  This deal comes just over a year after Netflix went global, with only a few territories (including China) missing from its roster.[56]  iQiyi is a subsidiary of Chinese search giant Baidu and is currently morphing from an ad-supported video platform into a subscription model (akin to Netflix).[57]  Shows Black Mirror, Stranger Things, Mindhunter, BoJack Horseman, and Ultimate Beastmaster are all included as part of this deal.[58] Netflix saw an early licensing success in China with House of Cards through a deal with local service Sohu, before the show was eventually removed from local streaming services by regulators.[59]  Netflix had also previously tried to move into China as a service operator, but acknowledged last year that the regulatory hurdles were too great.[60]  b.     Growing its Local Content In April 2017, Netflix signed a deal to acquire approximately 600 hours of scripted and unscripted TV shows from South Korea’s JTBC.  Netflix trails behind numerous regional competitors armed with larger local content lineups in several parts of Asia, and this move is consistent with the belief that local content will be key if Netflix is to flourish in these areas.[61] Netflix has also announced two original Korean productions, Love Alarm and Kingdom, which are set to premier in 2018.[62] Netflix has also employed local content strategies in India, and announced the opening of a Mumbai local office in April 2017.  Netflix competes against Hotstar (a popular ad-supported app with channels, fiction and sports) and Amazon Prime Video, among others, in India.[63]  c.     Deal with Altice Netflix signed a multi-year deal with Altice, the telco group of Patrick Drahi, to start distributing Netflix content in France, Portugal, Israel, and the Dominican Republic.  This deal emphasizes the content-driven strategy Altice is now favoring, with the launch of Altice Studio and the acquisitions of sports, series, and films rights and assorted deals with right-holders.[64] d.     Additional Capital Raise In April 2017, Netflix announced its plan to raise 1 billion euros (about $1.08 billion) in new debt financing from international lenders.[65]  It upped the size of its debt offering to 1.3 billion euros ($1.4 billion) shortly thereafter.[66]  This new offering was in addition to its $3.37 billion in existing long-term obligations.[67]  Netflix successfully closed its $1.4 billion in new debt financing in May 2017, marking the third time in a little over two years that Netflix has raised more than $1 billion.[68] 2.     Amazon Continues Its Global Growth a.     Launch of Amazon Channels in the U.K. and Germany Amazon Channels, a full pay-TV service which was unveiled in the U.S. last year, recently launched in the U.K. and Germany.  Prime members in the U.K. and Germany now can watch premium TV channels without a bundle or a contract.[69]  With this launch, Amazon offered its services as an alternative to Sky, the largest pay-TV operator in both countries.  Included in the offerings in the U.K. version are Discovery, ITV Hub+, and NBCUniversal’s reality-TV streaming service Hayu.  The roster of the German service includes three NBCU nets: E! Entertainment, Studio Universal Classics, and Syfy.[70] b.     Expansion of Amazon Prime Video in India Amazon launched Amazon Prime Video in India at the end of last year at a lower subscription rate than Netflix.  Since then, Amazon has moved quickly in recent months to expand its user base in the country through partnerships.  For example, Amazon recently worked with telecom provider Vodafone to provide its customers with access to Amazon Prime Video at promotional rates.[71]  Prior to launching Amazon Prime Video, Amazon India signed deals for existing and yet-to-be-produced films with Bollywood studios.[72]  Amazon India has also arranged a streaming deal with Paramount Pictures for various titles including Teenage Mutant Ninja Turtles: Out of the Shadows and Star Trek Beyond.  The deal also covers the studio’s library franchises, like Transformers, Indiana Jones, and others.  Terms of the deal, including price, were not disclosed.[73]  This deal builds on Amazon India’s offerings of Hollywood content after a recent deal with Lionsgate for titles such as La La Land and Deepwater Horizon.[74]  Most recently, Amazon India also signed a content deal with Warner Brothers covering a range of films and TV shows including Fantastic Beasts and Where to Find Them, Suicide Squad, and TV shows Lethal Weapon, Blindspot, and Two and a Half Men.  As with the other deals, no financial details were disclosed.[75]  3.     Hulu With Live TV Beta Launch Hulu recently announced the beta launch of Hulu With Live TV, a package that includes all four major broadcast networks, the top-rated cable news channels, and a substantial sports offering.[76]  The package also includes the 3,500-plus TV and movie titles in Hulu’s basic on-demand package.[77]  The service is priced starting at $39.99 monthly and includes approximately 50 channels.[78]  Subscribers have access to ABC, CBS, Fox, NBC programming (with the availability of local TV stations varying by market), and cable networks including ESPN, CNN, MSNBC, TNT, and USA Network.  The service also carries regional sports networks from Comcast and Fox in several markets.  Showtime is available for an additional $9.[79] As of May 2017, Hulu’s live TV menu did not include HBO, AMC Networks, Viacom’s Comedy Central, or Nickelodeon, among others.  However, in early July, Hulu announced that it will allow HBO and Cinemax as add-ons to its subscription plan.[80]  Hulu has also announced that it is working to arrange deals with network station groups to augment its lineup and plans to add more local channels over time.[81] Its new skinny bundle puts Hulu directly in competition with the cable, satellite, and telco TV distributors that comprise some of the biggest customers of Hulu’s parent companies Disney, 21st Century Fox, Comcast’s NBCUniversal, and Time Warner.[82]  Notwithstanding its new skinny bundle, Hulu has confirmed that it will continue to rely on a strategy of obtaining "the iconic shows that are timeless," as shown by the recent deal for Golden Girls (a classic NBC comedy), while also continuing with its roster of original productions.[83]  4.     iflix: An Emerging (Market) Competitor? iflix, a streaming service that launched in Asia in 2015, is positioning itself as a low-cost alternative to Netflix in emerging markets.  Boasting a subscriber base of just under 5 million and armed with a recent $90-million infusion from investors including Sky and Liberty Global, iflix is focusing on local content.  It is co-producing the first high-end Arabic online series, a comedy entitled Tough Luck, set in a Cairo tenement and boasting an all-star Arab cast.  iflix also recently expanded, through a joint venture with Kuwait-based telco Zain, into the Middle East and North Africa.[84] D.     Field of Streams:  The Rise of OTT Sports Offerings The trend of cord-cutting continues to disrupt the sports media industry.  Major players, including the NFL and MLB, as well as sports networks such as ESPN, are adapting to accommodate the preferences of their viewers by embracing over-the-top ("OTT") distribution of their games and other content.  Though Netflix has indicated that it intends to remain on the sidelines and has no interest in acquiring rights to live sports programming,[85] the following recent deals highlight the increase in live-streaming arrangements between content producers and social media networks in the world of sports. 1.     Amazon Nabs NFL Rights In April 2017, Amazon finalized a deal with the National Football League to stream ten NFL "Thursday Night Football" games next season.  These games will be streamed to Amazon Prime members, including international members in more than 200 countries, via the Amazon Prime Video app.  These games will also be shown on either CBS or NBC and simulcast on the NFL Network, as part of a distribution deal with those networks last year.[86] The NFL has not disclosed the value of this one-year deal, but several reports citing unidentified sources place the deal at $50 million, an increase in value from the $10 million Twitter paid last year to stream ten NFL games,[87] which had marked the first time the league made a deal for a package of games with an online-only partner.[88] 2.     Hulu’s Sports Offerings In May, Hulu launched its new streaming live television service (discussed above), which includes a collection of sports networks.  Hulu With Live TV allows users to watch their favorite cable channels (including national sports networks ESPN, NBCSN, and FS1, as well as certain regional sports networks) online without a traditional cable subscription.  This service is similar to Sling TV, which last year became the first OTT provider of the NHL Network.[89] 3.     Twitter’s New Sports-Related Partnerships On May 1, 2017, Twitter announced more than a dozen new live streaming content deals, including several sports-related partnerships.  The WNBA will live-stream a weekly regular season game on Twitter, twenty per season, for the next three seasons.  In addition to the weekly live MLB games streaming on Twitter this season, the MLB will also stream a new three-hour program once a week featuring live MLB game highlights and analyzing stories as they trend.[90] Twitter’s Stadium, a new and original 24-hour video network, "combine[s] exclusive live college sporting events with highlights, classic games, and daily live studio programming."[91]  Twitter will also provide live pregame video and on-demand highlights of key NFL games.  In addition to the existing live-streaming deal between Twitter and PGA Tour Live, the PGA Tour live-streamed 360-degree video of the 17th hole at TPC Sawgrass during The Players Championship on Periscope and Twitter.[92] E.     eSports Go Big League eSports—the professional competitive video gaming industry—is projected by analysts to grow to a $1.5 billion market by year 2020.[93]  Recent activity in the eSports industry continues to signal the industry’s rapid growth and unrelenting push into the mainstream. 1.     Riot Games Adopts Franchise Model for eSports League Riot Games, Inc., developer and publisher of the highly popular League of Legends video game, has announced that its U.S. eSports league, the North America League of Legends Championship Series (the "NA LCS"), will adopt a franchise model, positioning the league closer to traditional sports leagues such as the NBA and NFL.  Under the new franchise model, teams will apply to become permanent partners and, once approved, will pay a fee ($10 million for current league teams and $13 million for newcomers) to solidify their spot.[94]  Similar to mainstream sports leagues, the NA LCS will also adopt revenue sharing financial incentives for good team performance, a players’ association to give players a voice in the NA LCS’s decisions, and more robust team and player development programs to ensure the growth and development of league play.[95]  All-in-all, the NA LCS changes are being celebrated for bringing eSports closer in line with traditional sports leagues and helping solidify eSports in the competitive sports arena. 2.     AEG Invests in Immortals eSports Team AEG, owner of the Los Angeles Staples Center and L.A. LIVE complexes, has further expanded into the realm of eSports by announcing a strategic investment in eSports team organization Immortals, which currently has teams competing in League of Legends, Counter-Strike: Global Offensive, Overwatch and Super Smash Bros.[96]  With the investment, AEG hopes to make L.A. LIVE the home of Los Angeles’s eSports scene and to draw tournaments to its many other live entertainment venues.[97]  AEG’s investment in Immortals is its second foray into eSports, the first being a global partnership with ESL (f/k/a Electronic Sports League), the world’s largest eSports competition organizer.[98] 3.     NBA Announces NBA 2K eSports League with 17 Teams Participating Seventeen of the NBA’s 30 franchises have signed on to operate teams in the inaugural season of the NBA 2K eSports league in 2018.[99]  Gamers will compete in a format resembling that of the NBA basketball season, with an initial draft to place gamers on teams, followed by regular season matches and bracketed tournament play for the championship.[100]  The league is the result of a co-venture with NBA 2K game developer Take-Two Interactive Software, Inc., which had announced plans to launch a professional gaming league in February.[101] F.     Strikes Averted as Guilds Reach Deals A Writer’s Guild of America ("WGA") strike was averted in early May, when the Alliance of Motion Picture and Television Producers ("AMPTP") and the WGA reached a deal on the eve of the threatened strike.[102]  Until then, the negotiation sticking points involved employer contributions to the WGA’s health plan, compensation for short-order series, wage increases and job protection on parental leave.[103]  In a letter to its members, the WGA noted that they "were able to achieve a deal that will net [its] members $130 million more, over the life of the contract, than the pattern [they] were expected to accept."[104] Additionally, a SAG-AFTRA strike was averted on July 4, 2017, when the union and the Hollywood production companies reached an agreement on the three-year master deal.[105] II.     2017 Mid-Year Litigation Report There was no shortage of watershed rulings and key litigation developments in the entertainment industry in the first half of 2017.  The Supreme Court weighed in with highly anticipated copyright and trademark rulings, first amendment cases received increased attention and concern, and music played its role on dockets nationwide.  Keeping up with the deluge of key cases is no easy task, and we have highlighted those rulings and developments that should be top of mind for our clients. A.     Hollywood Against the Hackers Beyond the courtroom, Hollywood faces renewed challenges in safeguarding its intellectual property from cybercriminals.  In the aftermath of the 2015 Sony hack, entertainment studios continue to experience serious and significant threats from hackers seeking to illegally obtain their content.  This spring, Netflix and Disney/ABC were reported victims of a hacker collective named The Dark Overlord which demanded the companies pay an unspecified ransom to prevent content being prematurely released online.[106]  When the studios balked at the ransom demand, the hackers went ahead and released the content.  Now the hacker collective claims to have additional unaired films and television series.  The Dark Overlord has stated that "Hollywood is under attack, and we’re at the forefront of this most recent offensive. We’re not in the business to scare anyone.  We’re in the business of earning vast amounts of internet money."[107]  The FBI is attempting to identify who is behind this hacking collective, but even if a culprit is located, hackers will surely remain a menace to studios going forward, and security throughout the production chain including with third-party vendors remains a primary concern for studios.[108] B.     Copyright Litigation Docket 1.     Fashioning a Key Ruling in Varsity Brands This spring, in its first case on fashion copyrights, the Supreme Court issued a sweeping opinion validating broad copyright in designs affixed to apparel products in Star Athletica v. Varsity Brands.[109]  The case involved cheerleader uniforms designed by Varsity Brands, Inc., the market leader.  Many of these uniforms are emblazoned with two-dimensional designs, such as chevrons, stripes, or zigzags, giving them that distinctive "cheerleading" look.  Varsity holds copyrights for many of these designs.  The company brought suit for copyright infringement against Star Athletica, L.L.C., alleging that it was infringing several of its copyrights by selling cheerleading uniforms that bore similar two-dimensional designs.[110] The Copyright Act extends protection not only to works of music and literature, but also to "pictorial, graphic, or sculptural" works, but only so long as those works "can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article."[111]  Star Athletica argued that the particular combinations of chevrons, zigzags and stripes that characterize Varsity’s uniforms were influenced by utilitarian considerations, and thus did not warrant copyright protection.[112]  Specifically, Star Athletica argued that the artistic aspects of the uniform designs were not "separable" from the utilitarian function of the uniform itself, and thus were not copyrightable.[113]   The district court agreed with Star Athletica, but the Sixth Circuit reversed, holding that the designs were separable.[114]  Star Athletica then sought a writ of certiorari from the Supreme Court, supported by amici who noted that courts had enumerated no fewer than nine distinct tests for conceptual separability and urged the Supreme Court to create a uniform test.[115] In a textualist opinion written by Justice Thomas, the Supreme Court affirmed the Sixth Circuit, holding that Varsity’s two-dimensional cheerleading-uniform designs are "separable features . . . of those cheerleading uniforms."[116]  The court established a two-prong test, deciding that such elements are eligible for copyright "only if the feature (1) can be perceived as a two- or three-dimensional work of art separate from the useful article and (2) would qualify as a protectable pictorial, graphic, or sculptural work—either on its own or fixed in some other tangible medium of expression—if it were imagined separately from the useful article into which it is incorporated."[117] The Court rejected Star Athletica’s argument that only "solely artistic"—as opposed to utilitarian—features of useful articles can be separable.[118]  It was therefore irrelevant whether the cheerleading uniforms remain "equally useful," or even "similarly useful," once the designs are imaginatively removed.  According to Justice Thomas’s opinion, the Court "necessarily abandon[ed] the distinction between ‘physical’ and ‘conceptual’ separability, which some courts and commentators h[ad] adopted based on the Copyright Act’s legislative history."[119]  The Court then applied this test to Varsity’s uniforms and concluded that the chevron, stripes, and stars—if separated from the uniform and applied to canvas—would qualify as works of art eligible for copyright.[120]  At the same time, the Court emphasized the limits of its ruling.  Varsity Brands and its related entities "have no right to prohibit any person from manufacturing a cheerleading uniform of identical shape, cut, and dimensions to the ones on which the decorations in this case appear.  They may prohibit only the reproduction of the surface designs in any tangible medium of expression—a uniform or otherwise."[121] In dissent, Justice Breyer focused on policy concerns—writing that by extending copyright protection to basic forms of surface designs, the majority would restrict competition for the underlying item.[122]  Indeed, many commentators and scholars, in discussing the impact of this case, have predicted that the fashion industry may use the Court’s formulation of copyright law, along with trademark law, to protect their designs from copy-cats and knockoffs.[123] 2.     VidAngel’s Fading Halo The major Hollywood studios have been waging a successful battle against VidAngel, which launched in 2014, with a business model in which the company buys DVDs sold by the studios and "sells" them to consumers, who receive the programming in a digital form that allows any objectionable content such as nudity and violence to be edited out by the consumer. This battle began in December of 2016, when the studios won a preliminary injunction, thereby shutting down VidAngel, after a California federal judge said it was likely that VidAngel was infringing their copyrights and violating the Digital Millennium Copyright Act’s ban on the circumvention of digital encryption measures.[124]  Though VidAngel requires the user to purchase a physical DVD, Judge Andre Birotte said the service still illegally bypassed locks on the disc in order to upload it and stream it to those users.  "The purchase of a DVD only conveys the authority to view the DVD, not to decrypt it," the Court wrote.[125]  Moreover, VidAngel failed to present any evidence that the Hollywood studios either "explicitly or implicitly authorized DVD buyers to circumvent encryption technology" in order to watch the DVD on another platform, such as VidAngel.[126]  Judge Birotte also rejected VidAngel’s claim that its service was shielded by the Family Home Movie Act, a 2005 statute aimed at allowing for technology to edit objectionable material from videos at home.[127]  Judge Birotte further ruled that VidAngel’s omission of objectionable material from movies did not render its use "transformative" such that it would qualify for the fair use exception under copyright law.[128]  VidAngel was then held in contempt when it did not immediately comply with the preliminary injunction order requiring it to take down the studios’ films: the order issued on December 12, 2016, but VidAngel did not comply until December 29.[129]  VidAngel’s motion to the Ninth Circuit for an emergency stay pending appeal of the preliminary injunction was denied.[130]  Although the Ninth Circuit has not yet ruled on the injunction, VidAngel in the meantime released a new filtering app on June 13, 2017, that purports to offer the same functionality, except instead of using DVDs, the app links to users’ Netflix and Amazon accounts.[131]  VidAngel filed a motion with the district court seeking clarification regarding whether the injunction order applies to this new service, but the studios are vigorously opposing VidAngel’s effort, arguing that the new service is an end run around the court’s preliminary injunction and threatens to confuse consumers regarding the legitimate streaming market.[132]  Hollywood studios remain keenly invested in guarding their intellectual property against companies like VidAngel that seek to create unauthorized copies or derivative works in order to separately monetize the studios’ films.  Thus far, the studios are prevailing in this fight. 3.     Disney’s Zootopia Sued For Substantial Similarity A recent lawsuit filed against Disney alleges that Disney copied the work of Gary L. Goldman in its Oscar-winning film, Zootopia.[133]  Some of Goldman’s other work includes Total Recall and Minority Report.  The lawsuit, brought by Esplanade Productions, alleges that Goldman twice pitched Disney his similar project—titled "Looney"—in 2000 and 2009.[134]  During those pitches, Goldman provided a title, synopsis, character descriptions and even illustrations.  Disney, however, declined to pursue Goldman’s proposal.  Shortly afterward, the lawsuit alleges, Disney began production on its own Zootopia project, which went on to gross more than $1 billion at the box office.[135]  On July 11, 2017, the Court granted Disney’s motion to dismiss with leave to amend, finding, based on the inclusion in the complaint of both the asserted and the allegedly infringing materials that "[t]he differences between the character designs outnumber the similarities."[136] 4.     Broadcasters Best FilmOn on Appeal In a significant victory for cable broadcasters, the Ninth Circuit Court of Appeals reversed a victory in favor of streaming company FilmOn, handing significant relief to broadcasters like CBS, Fox, NBC and ABC, who objected to a California federal judge’s decision in July 2015 that streamers can be deemed to be a "cable system," eligible to obtain a compulsory license to broadcasters’ content under Section 111 of the Copyright Act.[137] The Ninth Circuit held that a service that captures copyright-protected works broadcast over the air, and that then retransmits them to paying subscribers over the internet without the consent of copyright holders, is not a "cable system" eligible for a compulsory license.[138]  The panel found that even if the statute may be ambiguous, it was appropriate to defer to the guidance of the Copyright Office, which has consistently found that internet-based services do not qualify as "cable systems" under the law.[139] After the ruling, FilmOn and the cable broadcasters reached a settlement.[140]  The details are confidential, but FilmOn has withdrawn pending appeals in the DC and Seventh Circuits.[141]  5.     Fees Cases Post-Kirtsaeng In 2016, the Supreme Court issued a decision Kirtsaeng v. John Wiley & Sons, Inc., holding that in deciding whether to award attorney’s fees under the Copyright Act, a district court should give substantial weight to the "objective reasonableness" of the losing party’s position, while still taking into account all other circumstances relevant to granting fees.[142]  Since then, lower courts have endeavored to apply this new standard, including in the "Stairway to Heaven" appeal and the "Who’s On First" litigation. a.     Led Zeppelin’s "Stairway to Heaven" Last summer, a jury found that guitarist Jimmy Page did not copy "Stairway to Heaven’s" iconic opening from a 1968 instrumental piece by the band Spirit, which for a time had toured with Led Zeppelin.  However, Spirit songwriter Randy Wolfe’s trustee and lawyer, Michael Skidmore, refused to accept the loss, and filed a voluminous appeal in the Ninth Circuit.  Led Zeppelin’s attorney cross-appealed, asking the Ninth Circuit to reverse the District Judge’s order on fees, and to assess the defendants’ attorneys’ fees against the Wolfe estate.[143]  In August 2016, District Judge Gary Klausner ruled that the Wolfe estate’s claims were neither frivolous nor "objectively unreasonable" enough to force paying defendants’ legal bill of nearly $800,000, despite allegations of litigation misconduct by the Wolfe estate’s attorney.[144]  Judge Klausner’s ruling came just months after the Supreme Court’s decision in Kirtsaeng. On appeal, Zeppelin and Warner/Chappell argue that Judge Klausner erred in treating litigation misconduct with equal weight as the Fogerty factors, a set of standards that were established for evaluating fee awards in copyright cases in a 1994 U.S. Supreme Court case involving singer John Fogerty.[145]  A ruling from the Ninth Circuit is pending, and expected later this year. b.     "Who’s On First" In early June, a federal magistrate judge recommended that the heirs of the famed comedy duo, Abbott and Costello, pay more than $50,000 in attorneys’ fees for filing an unsuccessful copyright lawsuit against the producers of a Broadway play that featured the duo’s famous "Who’s On First" comedy routine.[146]  United States Magistrate Judge James C. Francis said the estate’s claim that it continued to own the rights to that iconic bit was precisely the kind of "objectively unreasonable" position that the Kirtsaeng opinion had indicated can result in an award of fees.[147]  But the heirs pushed back, saying the suit had, after all, survived a motion to dismiss, and did not end until the Second Circuit shot down their claim to the rights in October 2016, in a decision that created "new law relative to this technical copyright issue."[148]  The heirs argued that a later decision cannot retroactively transform the heirs’ claim from valid to objectively unreasonable at the time of filing.[149]  No decision has been reached on this issue, but it remains clear that even under the post-Kirtsaeng standards, courts continue to be reluctant to award fees in copyright cases in the absence of clear showing that a party advanced a position it knew to be inconsistent with the law. C.     Trademark Litigation Goes on Offense 1.     SCOTUS Confronts Ban on Disparaging Trademarks in Matal v. Tam On June 19, 2017, the Supreme Court handed down its opinion in Matal v. Tam (fka Lee v. Tam), ruling that the federal government’s ban on "disparaging" trademark registrations, which was enacted into law in 1946, violates the First Amendment.[150]  Under what became known as the "disparagement clause," the Lanham Act prohibited the federal registration of trademarks on the "principal register" that may "disparage . . . persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute."[151]  To determine if a trademark application was disparaging, the United States Patent and Trademark Office ("PTO") examiner would employ a two-part test.  First, the examiner would determine "the likely meaning of the matter in question," and then, "[i]f that meaning is found to refer to identifiable persons, institutions, beliefs or national symbols," the examiner considers if the meaning could be disparaging "to a substantial composite of the referenced group."[152] In the case at issue, Simon Tam, the lead singer of the band The Slants, applied to register the band’s name on the principal register in 2010.[153]  The band, whose members are of Asian descent, sought to "reclaim" the derogatory racial slur.  However, the PTO examiner denied the registration, citing "numerous dictionaries" that define the term as derogatory, online bloggers and commentators who wrote about the name being offensive, and a performance that was canceled due to the band’s name.[154] Tam challenged the denial, but initially lost before the PTO’s Trademark Trial and Appeal Board (the "Board").[155]  On appeal, the U.S. Court of Appeals for the Federal Circuit found that the Lanham Act’s disparagement clause was facially unconstitutional under the Free Speech Clause of the First Amendment.[156]  Justice Alito announced the judgment of the Court, which was unanimous with respect to the conclusion that, despite the role of government in the registration process, trademarks constitute private rather than government speech.  The Court reasoned that the government merely registers the contents of others’ trademarks; it "does not dream up these marks," "it does not edit marks submitted for registration," and the PTO has made clear in the past that registration does not constitute government approval of a particular mark.  The Court also found that prior Supreme Court precedents fail to support trademark registration as a form of government speech.  According to the opinion, trademarks are different from speech used to convey a government message—as was the case with selected monuments placed on governmental property in Pleasant Grove City v. Summum—and there is no evidence the public associates trademarks with the government itself—as was the case with specialty license plates in Walker v. Texas Division, Sons of Confederate Veterans.  Further backing away from Walker, which the Court noted "likely marks the outer bounds of the government-speech doctrine," the Court emphasized that government registrations in other, related contexts like copyright registration do not constitute government speech. Justice Alito went on to reject the remainder of the government’s arguments, writing only for himself, Chief Justice Roberts, Justice Thomas, and Justice Breyer.  First, Justice Alito explained that trademark registration is not a form of government subsidy, which would permit the government to subsidize speech expressing a particular viewpoint while refusing to subsidize activities it does not wish to promote.[157]  He also refused to create a new "government-program" doctrine for trademarks that would allow for some content- and speaker-based restrictions.[158]  Finally, Justice Alito explained that it is unnecessary to decide whether the relaxed-scrutiny afforded commercial speech under the First Amendment applies here, because the disparagement clause is too broad to withstand even that lesser standard of review.[159] Justice Kennedy, in a separate opinion joined by Justices Ginsburg, Sotomayor and Kagan, emphasized in greater detail why the First Amendment protects "THE SLANTS" trademark from governmental disapproval of a viewpoint the government finds unacceptable.  He reasoned that the case involved viewpoint discrimination that warranted heightened scrutiny, without undertaking a commercial speech analysis as in Justice Alito’s opinion.[160] Justice Thomas filed a short concurrence in part and in the judgment, reiterating his view that whenever the government seeks to restrict truthful speech in order to suppress the ideas conveyed, strict scrutiny applies.[161] Tam’s central holding—that the Lanham Act’s disparagement clause is unconstitutional—is likely to have only a limited impact, as most trademarks are not accused of disparagement.  The ruling has already had implications in the sports world, however, as the government has conceded in a filing to the Fourth Circuit that because the Tam case "controls the disposition of" the government’s effort to cancel the registration of the team name and other trademarks owned by the Washington Redskins professional football team, the team will likely prevail.[162] 2.     SpongeBob SquarePants’ Fictional "Krusty Krab" Restaurant Wins In Trademark Infringement Suit On March 17, 2017, the District Court of the Southern District of Texas granted Viacom International Inc.’s motion for summary judgment on its common law trademark infringement and unfair competition claims against IJR Capital Investments, LLC.[163]  IJR had filed a federal trademark application for THE KRUSTY KRAB mark under restaurant services.  Viacom, which owns the popular Nickelodeon cartoon SpongeBob SquarePants, issued a cease and desist letter, demanding that IJR withdraw the application because the proposed mark would cause a likelihood of consumer confusion with the fictional Krusty Krab restaurant that repeatedly appears in the SpongeBob cartoon series.  IJR rejected the request, and Viacom sued, alleging, among other things, common law trademark infringement, dilution, and unfair competition.[164] To succeed on its common law trademark infringement claim, Viacom needed to establish that it possessed a valid mark in The Krusty Krab and that IJR’s use created a likelihood of confusion as to the source of the mark.[165]  To prove a valid mark, Viacom had to show that it uses the mark in commerce and that the mark is either "inherently distinctive" or has "acquired distinctiveness through secondary meaning."[166] The court first found that Viacom possessed a valid mark, even though it never registered The Krusty Krab mark and The Krusty Krab is a fictional restaurant.  Trademark ownership "is established by use in the market, not by registration," the court stated.  The Krusty Krab has appeared in 166 episodes of SpongeBob since 1999, was depicted in both SpongeBob feature films (which grossed over $470 million), and has appeared on various licensed consumer products.[167]  The Court analogized The Krusty Krab to "Kryptonite" and the "Daily Planet," two fictional components of the Superman universe that have been ruled to possess common law trademark protections because they have "regularly appeared on licensed consumer merchandise over the years."[168] Second, Viacom demonstrated that the mark had "acquired distinctiveness through secondary meaning."[169]  The Court found that Viacom has "shown by a preponderance of the evidence that it has met several of the" factors courts use to determine distinctiveness through secondary meaning.  Krusty Krab-licensed merchandise has appeared in "numerous print and Internet advertisements," declarations and exhibits summarizing SpongeBob’s eleven seasons proved the length and manner in which The Krusty Krab had been used, and the amount and manner of advertising the mark was shown by the $197 million in advertising spent on the two SpongeBob movies.[170] Finally, Viacom established a likelihood of confusion, primarily based on the strength and continued use of its own mark and "the identical spelling and pronunciation of the two marks, including the unconventional way of spelling the words with a ‘K’ instead of a ‘C.’"[171]  The Court also found that the "sales and forms of advertising are likely to overlap" and that evidence existed that the creator of IJR’s mark "was aware of Viacom’s mark."[172]  As such, Viacom’s motion for summary judgment was granted, both as to Viacom’s claim for trademark infringement and for its claim of unfair competition.[173]  The Court entered its final judgment on April 11, 2017,[174] and IJR appealed on May 9, 2017.[175] 3.     GOOGLE Not Subject to Genericide On May 16, 2017, the Ninth Circuit Court of Appeals affirmed a district court grant of summary judgment for Google against claims that its registered GOOGLE mark had become generic and should be canceled.[176] Plaintiffs had registered hundreds of domain names that included the word "google."  After Google filed a complaint with the National Arbitration Forum, the two plaintiffs initiated a federal lawsuit in Arizona, petitioning to cancel the GOOGLE mark pursuant to 15 U.S.C. § 1064(3), "which allows [for] cancellation of a registered trademark if it is primarily understood as a ‘generic name for the goods or services . . . for which it is registered.’"[177]  Generic terms are not protectable as trademarks, and this process, which has affected aspirin, cellophane, and escalator, has become known as "genericide." Plaintiffs argued that "a majority of the relevant public uses the word ‘google’ as a verb" and that "verb use constitutes generic use as a matter of law."  Google, on the other hand, "argued that [Plaintiffs] failed to present sufficient evidence to support a jury finding that the relevant public primarily understands the word ‘google’ as a generic name for internet search engines."  On appeal, the Ninth Circuit agreed with Google’s position, and affirmed the district court’s decision.[178] The Ninth Circuit concluded that widespread use of "Google" as a verb has not caused "Google" to become a generic term like "aspirin" or "thermos."[179]  The court explained that a claim of genericide must relate to a particular type of product or service, not simply to the word itself.[180]  Accordingly, the proper question was not whether "Google" had become a generic term for the "act" of search, but instead whether it had become a generic name consumers use for internet search engines.[181] 4.     Belushi Is Primarily a Surname Applicant Beds & Bars Limited applied to register the mark BELUSHI’S for travel and hotel services, but the Trademark Examining Attorney refused the application, citing 15 U.S.C. § 1052(e)(4), which "precludes registration of a mark on the Principal Register that is ‘primarily merely a surname’ without a showing of acquired distinctiveness."[182]  Applicant appealed, and the Trademark Trial and Appeal Board affirmed the Examining Attorney’s refusal, concluding "that BELUSHI’S is a surname that "has no other ‘ordinary language meaning.’"[183] Proposed marks are considered "primarily merely a surname if, when viewed in relation to the goods or services for which registration is sought, its primary significant to the purchasing public is that of a surname."[184]  To assist in this analysis, examiners consider if "the applicant adopted a principal’s name," whether the proposed mark has a "nonsurname, ‘ordinary language’ meaning," and how common the surname is.[185] On appeal, Bed & Bars argued two points:  first, that "Belushi" is an extremely rare surname and second, "if BELUSHI’S brings to mind the famous Belushi brothers, then it cannot be primarily merely a surname."[186]  But Applicant did not present "any evidence showing that BELUSHI has a meaning other than as a surname."[187]  Consequently, although the Board agreed that use of the name BELUSHI as a surname is "rare"—with only five people in the United States using it as a surname—BELUSHI is "so well-known as a result of media publicity" over the years because of the actors Jim and John Belushi "that it would be immediately recognized as a surname."[188]  And therefore, even though it is "a rare surname" its "primary significance to purchasers is that of a surname."[189] 5.     Public University Should Have Allowed Student Marijuana-Reform Organization to Use University’s Trademarks On June 13, 2017, the Eight Circuit Court of Appeals affirmed a district court’s ruling that Iowa State University ("ISU") "violated plaintiffs’ First Amendment rights because [ISU] engaged in viewpoint discrimination" when ISU repeatedly denied the student chapter of the National Organization for the Reform of Marijuana Laws’ ("NORML ISU") requests to use ISU’s trademarks in connection with designs that included cannabis leaves.[190]  The Court also affirmed the district court’s ruling that the defendants were not entitled to qualified immunity.[191] ISU recognizes NORML ISU as one of the university’s approximate 800 official student organizations.[192]  NORML ISU advocates for reforming laws that prohibit marijuana use, and as an official student organization, it can submit to ISU’s Trademark Office proposed merchandise that incorporates ISU’s trademarks with the group’s name and message.[193]  If the proposed merchandise complies with ISU’s Trademark Guidelines, the application is approved.[194] In October 2012, NORML ISU submitted a t-shirt design with a cannabis leaf to ISU’s Trademark Office, and the Trademark Office initially approved the submission.[195]  Shortly thereafter, however, the Des Moines Register published a front-page article about efforts to legalize marijuana and quoted NORML ISU’s president.[196]  This article caught the attention of the Iowa House Republican caucus and the Governor’s Office of Drug Control Policy, and both groups pushed back against the school’s policy.[197]  Ultimately, ISU placed NORML ISU’s reorder of the t-shirt design on hold, required the group to seek special approval before submitting applications to the ISU Trademark Office, revised its Trademark Guidelines to prohibit "designs that suggest promotion of . . . illegal or unhealthy products . . . [or] drugs and drug paraphernalia," and rejected all of NORML ISU’s subsequent design applications that included cannabis leaves.[198] In affirming that ISU violated plaintiffs’ First Amendment rights, the Court ruled that "ISU created a limited public forum when it made its trademarks available for student organizations to use if they abided by certain conditions."[199]  Viewpoint discrimination—regulating speech due to the speaker’s message—is permissible in limited public forums only when "the government demonstrates that its regulation is narrowly drawn and is necessary to effectuate a compelling state interest."[200]  Here, however, the Court concluded that ISU’s "discriminatory motive [was] evidenced by the unique scrutiny [it] imposed on NORML ISU."[201]  ISU placed the t-shirt reorder on hold, required the group to obtain pre-approval before submitting future designs to the Trademark Office, NORML ISU was the only student organization "to have had its trademark application denied for fear that the university would be endorsing a political cause," and "[t]he record [was] replete with statements from defendants regarding their political motives."[202] An ISU spokesman has stated that ISU is reviewing whether it will appeal the decision.[203] D.     First Amendment Cases Speak Loudly First Amendment cases and concerns featured heavily in the national news cycle in the first half of 2017, which saw a journalist for The Guardian body-slammed by a congressional candidate on the eve of Montana’s special election to fill a vacated seat.  And courts around the country are working through difficult questions surrounding the rights and responsibilities of journalists and the often controversial struggle to balance rights of privacy with access to newsworthy information.  In California, a federal judge weighed whether a new law can prevent IMDB from publishing actors’ ages.  In New York, courts considered whether a small-scale, highly targeted subscription-based news source should be compelled to reveal its sources and whether BuzzFeed should face legal ramifications for publishing the infamous Trump dossier.  1.     IMDB.com v. Becerra In an attempt to reduce age discrimination against professionals in the entertainment industry, California recently passed legislation requiring that commercial online entertainment employment services providers remove information about an individual’s age or birth date upon their request.  The new law, known as AB 1687, requires service providers to remove the offending information within 5 days of such request and to ensure that any companion sites under their control remove the same.[204] Although the language of the law applies generally to all commercial online entertainment employment service providers, it appears that the Amazon-owned IMDB and IMDB Pro are the only sites affected and were intended to be the targets.[205]  While other such databases exist, they already remove age-related information from their websites upon an actor’s request.[206]  IMDB, in contrast, has resisted calls to redact such information and, according to the company’s policy, "do[es] not remove valid dates of birth."[207]  SAG-AFTRA reportedly receives hundreds of member claims each year about IMDB’s practice of publishing actors’ ages and the impact such public information may have on casting decisions.[208]  In November 2016, IMDB filed suit to enjoin enforcement of the law on the grounds that it amounts to an unconstitutional restriction on speech.  In February, a federal district court issued a preliminary injunction enjoining the state from enforcing AB 1687 while the lawsuit is pending.[209]  In the order issuing the injunction, Judge Chhabria wrote that "it’s difficult to imagine how AB 1687 could not violate the First Amendment."[210]  The court held that the law restricted non-commercial speech on the basis of content.[211]  Under First Amendment jurisprudence, the government is therefore required to demonstrate that the restriction is actually necessary to serve a compelling government interest. While preventing age discrimination is a compelling government interest, Judge Chhabria held that the law was not necessary to serve that goal and expressed doubt that the law could "meaningfully combat discrimination at all."[212]  He also noted that the government could achieve the same ends through "more direct, more effective, and less speech-restrictive ways," including enforcing existing anti-discrimination laws more strongly.[213] Following the issuance of the preliminary injunction, the court ruled that no discovery would be permitted in the case until the government filed a motion "describing with specificity the discovery it wished to conduct and the reasons why it would be appropriate to do so."[214]  The government filed a motion for discovery seeking permission to serve various document request, interrogatories and depositions of IMDB representatives.  The government asked specifically for information regarding any policies at IMDB regarding the posting of age information on the site and any efforts by IMDB to lobby against AB 1687.[215]  In June 2017, the court issued a strongly worded denial of the discovery motion, calling the government’s request "irrelevant and burdensome," and given the First Amendment concerns in the case, "disturbing."[216]  Judge Chhabria accused the government of imposing a strict restriction on speech and then "hop[ing] a justification materialized in discovery."[217] 2.     Virginia Citizens Defense League v. Couric In 2016, Katie Couric appeared in and executive produced a documentary film, Under the Gun, which deals with the social issues surrounding gun control.  The film highlights the absences of significant changes to the nation’s gun laws following the 2012 massacre at Sandy Hook elementary school in Newtown, Connecticut.  Footage in the documentary includes an interview between Couric and nine members of the Virginia Citizens Defense League ("VCDL"), which describes itself as a "non-partisan, grassroots organization dedicated to advancing the rights of responsible gun owners under the Second Amendment and Virginia Constitution."[218]  During an interview scene, Couric asked "If there are no background checks for gun purchasers, how do you prevent felons or terrorists from purchasing guns?"[219]  The film then depicts the interview panel sitting in an awkward silence; no one appears to respond to Couric’s question.  Following the film’s release, two members of VCDL who participated in the interview sued Couric, along with the director and distributor of the film, for defamation. The plaintiffs, a gun store owner and an attorney who practices litigation related to firearms and personal defense, alleged that Couric and the co-defendants manipulated footage of the interview and that the resulting segment defamed them, both directly and by implication.[220]  Contrary to what was portrayed in the final film, plaintiffs insisted that multiple members of the interview panel, including both named plaintiffs, responded to Couric’s query.  Plaintiffs alleged that Couric’s failure to include their responses to her question was defamatory because the silence suggested that they: "(1) had no basis for their opposition to background checks, (2) are uninformed notwithstanding their expertise in the areas of gun regulations and rights, (3) were stumped by Couric’s question and (4) are ignorant or unfit in their trades."[221] Ruling on defendants’ motion to dismiss, the court dismissed plaintiff’s defamation claims, noting that defamation requires an actionable statement that is both false and defamatory.[222]  The judge found that while plaintiffs did respond to Couric’s question, they did not answer it; rather, the Court explained, "[t]hey talked about background checks and gun laws generally, but did not answer the question of how to prevent felons or terrorists from purchasing guns without background checks."[223]  Thus, the Court found that the presentation of the interview in the film was not false but instead a "dramatize[d]" rendering of the reality that the plaintiffs did not have a responsive answer to Couric’s direct question.[224]  Further, the Court held that the statement at issue was not defamatory as a matter of law. Taken in context, the scene suggests that the plaintiffs oppose background checks and at worse, that they could not or would not answer Couric’s question regarding possible methods of restricting gun sales to felons or terrorists.[225]  The Court held that the inability or refusal to answer to a question about "difficult and complex issues" neither carried the necessary sting to be defamatory nor implied that either plaintiff was unfit for their respective profession.[226] 3.     Fridman v. BuzzFeed In January 2017, BuzzFeed made the controversial decision to publish an unverified dossier detailing, among other things, allegations of long-standing attempts by the Russian government and financial sector to influence then President-elect Trump.  Owners of Alfa Bank, a Russian Bank named in the dossier, filed a defamation action against the website in May, in New York state court, seeking unspecified damages.  The complaint alleges that BuzzFeed decided to publish the unverified allegations contained in the dossier, including that "Alfa and its officials and employees ‘co-operated’ with a Kremlin campaign to interfere in the U.S. Presidential election, "with "knowledge of their falsity or with reckless disregard of whether they were true or false."[227]  BuzzFeed has defended its decision to publish the dossier, citing the ongoing congressional and FBI investigations into allegations of Russian attempts to influence the election and the fact that two successive presidents received official briefings on the dossier.[228] This is the second lawsuit filed against BuzzFeed over the publication of the dossier.  Earlier this year, Russian technology entrepreneur Aleksej Gubarev filed a similar defamation action against the website in Florida.[229]  The dossier included claims that he and his companies conducted cyber operations against the Democratic Party.[230]  Shortly after the suit was filed, BuzzFeed redacted portions of the dossier naming Gubarev and issued an apology.[231] 4.     Murray Energy Corp. v. Reorg Research, Inc. In February 2017, a New York trial court issued a ruling requiring Reorg Research, Inc., a company that provides distressed debt market intelligence to paying subscribers, to disclose the identities of several anonymous sources.[232]  The individuals in question allegedly provided to the subscription news service confidential information about coal company Murray Energy’s ongoing negotiations with its creditors.  Reorg initially refused to reveal the names of its sources, citing the New York Shield Law, which protects professional journalists from being held in contempt of court for refusing to reveal the identities of their confidential sources.[233]  The trial court, however, held that the Shield Law’s protections did not extend to the employees and sources of a commercial subscription alert service with a relatively small subscriber base.[234]  The court noted that the purpose of the Shield Law is to promote "news intended for dissemination to the public," while the value in Reorg’s alerts is that subscribers receive access to otherwise non-public information before it is widely known by the general public.[235]  The trial court also noted that Reorg’s subscription terms bar subscribers from sharing the information with non-subscribers.[236]  Therefore, the trial court held that Reorg did not fit into any of the enumerated categories of news organizations protected by the Shield Law.[237]  Reorg appealed the trial court decision and was granted a stay of the order pending appeal.  In July 2017, the Appellate Division of the Supreme Court of New York issued an order reversing the trial court decision and dismissed the case, holding that Reorg is "a professional medium or agency which has as one of its main functions the dissemination of news to the public" and is therefore protected from revealing its sources by the Shield Law.[238]  Reorg and supporting amici successfully argued that its subscription model is "essential to the economic viability of specialty or niche publications that target relatively narrow audiences."[239]  In addition, the court held that the public receives secondary benefits from the service’s news alerts, despite the restrictions on subscribers ability to share the information, because its subscribers are "the people who are most interested in this information and most able to use and benefit from it."[240]  While the trial court viewed Reorg’s high subscription fees and small user base with suspicion, the appeals court noted that given the substantial investment necessary to report on a niche subject with a small number of interested readers, the alternative to the subscription model "is not broader coverage but no coverage at all."[241]  In its conclusion, court affirmatively extended the protection of the Shield Law to Reorg and other niche subscription news services while cautioning that conditioning the Shield Law’s protection on a "fact-intensive inquiry" regarding the number of subscribers, fees, and any restrictions on disclosing the information is "unworkable" and may lead "to a potential ‘chilling’ effect."[242] E.     Music Litigation 1.     Kesha v. Dr. Luke The long-running legal battle between singer Kesha and producer Lukasz "Dr. Luke" Gottwald, now spans multiple lawsuits and counterclaims.  In October 2014, Kesha filed a civil suit against Dr. Luke in California for infliction of emotional distress, gender-based hate crimes, employment discrimination and other causes of action.[243]  In response, Dr. Luke sued Kesha and her mother, Pebe Sebert, in New York, for defamation and breach of contract.[244]  Specifically, Dr. Luke alleged that Kesha failed to work on a third album as required under her contract. The New York lawsuit resulted in the staying of the California lawsuit, which Kesha later dropped, in August 2016.  Kesha filed a countersuit in the New York action seeking to be released from her contract on the basis that Dr. Luke had allegedly "sexually, physically, and verbally and emotionally" abused her since the beginning of their professional relationship.[245]  Last year, the New York court denied Kesha’s motion for preliminary injunction that would have allowed her to record an album outside of her contract.[246]  Months later, the court dismissed all of her counterclaims.  In January 2017, Kesha’s attorneys sought to amend her original counterclaim, alleging that Dr. Luke was refusing to send accounting statements and delaying her new album’s release.[247]  The following month, Dr. Luke argued that Kesha was attempting to litigate these disputes as part of a smear campaign to blacklist him from the music industry, and that she owed him $1.3 million in royalties. Dr. Luke also asked the court to allow him to amend his complaint to include allegations concerning additional defamatory statements made by Kesha and her representatives in the media, falsely claiming that Dr. Luke had raped another recording artist, and encouraging Internet petitions to pressure Sony Music Entertainment to release Dr. Luke from his contract.[248]  In March 2017, the New York court rejected Kesha’s attempt to amend her counterclaims, citing its prior finding that Kesha did not perform her obligations under her recording contract.[249]  The court also denied her request for declaratory relief, holding that it was "speculative, not justiciable" whether Sony Music Entertainment’s contract with Dr. Luke was ending and "whether [the deal] would be able to assist" Kesha in fulfilling her contractual duties.[250]  Finally, the court rejected Kesha’s effort to assert California’s seven-year rule on personal service contracts because the parties chose New York law to govern their dealings and there was no overriding public policy interest from another jurisdiction that was materially greater than New York’s interest in enforcing the parties’ choice of New York law.[251] Kesha has since filed a notice of appeal seeking to reverse the New York Supreme Court’s dismissal of her request to amend her counterclaims.[252]  It is now pending before the New York Appellate Division.  (Disclosure: Gibson Dunn represents Sony Music Entertainment in this matter.) 2.     Prince’s Estate and Subsequent Legal Battles  Following the pop star Prince’s unexpected passing in April 2016, his estate and legacy have been the subject of a fair amount of litigation.  While Prince was well known for strictly controlling his intellectual property rights during his lifetime, he died without a will and thereby left no specific instructions about how his much-discussed "vault" of music should be handled.  Since the overwhelming majority of his estate’s value is from the copyrights in his songs, we anticipate that additional lawsuits may crop up concerning Prince’s works in the future. a.     Universal Music Group Obtains Rescission of Deal That Included Conflicted Rights In February 2017, Prince’s Estate and Universal Music Group announced that they had inked a deal that would give UMG the rights to distribute much of Prince’s catalog as well as unreleased masters from the artist’s storied vault.[253]  But immediately after the deal was announced, Warner Bros. Records informed UMG that it held rights that conflicted with those that the Estate had purportedly sold to UMG, despite the Estate’s representatives’ assurances that UMG would receive those rights.[254]  As a result of those misrepresentations, UMG sought rescission of the licensing agreement,[255] and on July 13, 2017, the Minnesota probate court overseeing the administration of Prince’s Estate approved the rescission agreement over the strident objections of several parties, including three of Prince’s heirs.[256]  (Disclosure: Gibson Dunn represents UMG in this matter.) b.     Prince’s Estate Blocks Engineer’s Attempt to Release New Prince EP In April 2017, just a few weeks before the first anniversary of Prince’s death, his estate obtained an injunction against audio engineer and Prince’s former collaborator George Ian Boxill, blocking the unauthorized release of a new six-song EP entitled Deliverance, credited to the singer.[257]   The estate claimed that Boxill unlawfully held onto recordings made between 2006 and 2008 and that he does not have the authorization to release them.  Specifically, the estate points to a confidentiality agreement that Boxill signed with Prince which states that the pair’s recordings "would remain Prince’s sole and exclusive property" and that Boxill "would not use any recordings or property in any way whatsoever."[258]  c.     Andy Warhol Foundation v. Lynn Goldsmith The estate of pop artist Andy Warhol preemptively brought suit in New York federal court seeking declaratory judgment against photographer Lynn Goldsmith over certain artworks featuring Prince’s image "to protect the works and legacy of Andy Warhol."[259]  The complaint came after Goldsmith asserted that Warhol violated the copyright of her photographs of Prince, taken in 1981 for a Vanity Fair article, when they were used to make Warhol’s screen prints.[260]  The Warhol Foundation alleged that the works in Warhol’s "Prince" series do not infringe upon Goldsmith’s copyright in the photograph and are in fact "transformative or are otherwise protected fair use."[261]  The complaint goes into great detail to distinguish Goldsmith’s photo and Warhol’s prints, pointing to changes in color, depth, cropping, and more.  The Warhol Foundation further argues that Goldsmith’s claims are barred by the three-year statute of limitations of the Copyright Act.  Goldsmith responded in a Facebook post to the lawsuit by arguing that she only learned of the Warhol series’ existence following Prince’s death last year.[262]  In June 2017, Goldsmith filed her answer and counterclaims asserting infringement related to a May 2016 special Prince tribute magazine, alleging the lack of transformative nature through the following comparison between the image used for the magazine cover and the original image:[263]   3.     Royalties Disputes with Digital Music Streaming Services New technology streaming services like Spotify, Pandora, and SiriusXM have recently faced multiple royalty disputes from songwriters and artists for allegedly failing to obtain proper licenses and/or pay complete royalty payments.  For instance, in May 2017, Spotify agreed to a $43 million settlement in a class action lawsuit brought by singer-songwriter Melissa Ferrick, who alleged that the streaming service Spotify infringed upon thousands of songwriters’ copyrights rather than follow the proper procedures to obtain mechanical royalties.[264]  Specifically, Ferrick alleged that, as required for mechanical royalties under section 115 of the Copyright Act, Spotify did not file the formal "notice of intent" to obtain many licenses.  In a separate suit, last year, Spotify agreed to settle a suit from the National Music Publishers’ Association for $30 million over unmatched and unpaid song royalties.[265]  Mechanical royalties are currently of considerable interest to the industry because later this year, the Copyright Royalty Board—the panel of judges who describe the royalty rates paid to songwriters and music publishers for the sale of each musical composition to any streaming services—will decide the new mechanical royalty rates for 2018 to 2022.  The current mechanical rates are 9.1 cents for a sale, which is split by the music publisher and songwriter, and rates for streaming are fractions of a cent per play.  A hearing on the matter was held in March 2017, and the Copyright Royalty Board will issue its decision in December 2017.[266]  4.     Fair Use and Sampling Go Another Round Questions over the use and copying of older songs remained a hot-button issue in the aftermath of the 2015 "Blurred Lines" trial, where a jury awarded Marvin Gaye’s family nearly $7.4 million after determining that singers Robin Thicke and Pharrell Williams had copied Gaye’s music in creating their hit song.  This year, the plaintiffs in a different case were less successful in establishing copyright infringement when a New York district court held that the artist Drake’s sample of a spoken word Jimmy Smith track constituted non-infringing fair use.[267]  In 2014, the estate of jazz musician Jimmy Smith brought a copyright infringement suit against Drake over the spoken word sample that opens Drake’s track "Pound Cake/Paris Morton Music 2" on his album Nothing Was the Same.[268]  The lawsuit alleged that Jimmy Smith’s 1982 song "Jimmy Smith Rap" was so prominently sampled on Drake’s track that it amounted to infringement.  In the original track, Smith says, "Jazz is the only real music that’s gonna last.  All that other bull— is here today and gone tomorrow.  But jazz was, is, and always will be."  In Drake’s version, the words are cut down to "[o]nly real music’s gonna last.  All that other bull— is here today and gone tomorrow." The court held that Drake’s sample did not constitute copyright infringement.  When comparing the original against Drake’s version, the court found that Smith’s original was "an unequivocal statement on the primacy of jazz over all other forms of popular music" while Drake’s version transforms it into a "statement that ‘real music’ with no qualifiers, is ‘the only thing that’s gonna last.’"[269]  Because the purpose of the "Pound Cake" track was "sharply different" from Smith’s original message, it added something new and was thereby "transformative."[270]  On July 13, Smith’s motion for reconsideration was denied.[271]  Notably, while the "Blurred Lines" case revolved around the musical composition underlying the song, the Drake case focused on the prose of only a spoken word sample and the meaning of that prose in both songs, providing a contrast between music that was allegedly copied, on the one hand, and a brief sample of actual lyrics, on the other hand.  (Disclosure: Gibson Dunn represents Apple Inc. in this matter.) 5.     The Estate of Jimi Hendrix  For years, entertainment litigators have seen estates of famous celebrities move aggressively to safeguard the legacy of the deceased.  Experience Hendrix, LLC, the estate for legendary guitarist Jimi Hendrix, has been particularly vocal in raising legal challenges to protect his reputation and brand, as evidenced by two recent cases. In Experience Hendrix, LLC v. Tiger Paw Distributors, LLC, the Hendrix estate alleged that the liquor company Tiger Paw committed trademark infringement and disparagement, unfair competition, and other unlawful acts by using Hendrix’s trademarks on an unauthorized promotion of Purple Haze Liqueur.[272]  As part of a settlement, the U.S. District Court for the Southern District of Georgia entered a permanent injunction against the defendants in January 2017, prohibiting them from using the names "Jimi Hendrix" and "Jimi," the initials "JH," and any of the Hendrix estate’s trademarks that incorporate an image or likeness of Hendrix.[273]  The judgment, however, specified that Tiger Paw could nevertheless continue to sell spirits under titles that explicitly referenced several of Hendrix’s songs, and may in fact reference Hendrix directly, as long as those references have a smaller type face and do not infer any endorsement by or affiliation with Hendrix’s estate. Separately, the California Court of Appeal also recently resolved a long-standing contract dispute over whether a film documenting Hendrix’s February 1969 performances at the Royal Albert Hall in London would ever be released.  More than four decades after the performances, the Hendrix estate and film documentarian Gerald Goldstein formed a joint venture to distribute a film of the concert.  But the following year, the estate rescinded the deal, claiming that Goldstein breached it by unreasonably refusing to consent to Sony Pictures Entertainment’s distribution offer.  As a result, the Hendrix estate sued Goldstein seeking $5 million in restitution.  Goldstein responded by arguing that he envisioned a wide release of at least 1,500 movie theaters for the film and did not want to take the Sony deal, which only offered a limited release of about a half-dozen screens and allegedly would result in minimal, if any, profits. The Los Angeles Superior Court ruled in Goldstein’s favor in October 2014, finding that "[w]hile it appears unlikely that he would have been able to attract sufficient financing to achieve the wide release he had envisioned, Goldstein was not given the opportunity to attempt to obtain third party financing."[274]  The lower court also ordered the Hendrix estate to pay more than $300,000 in attorneys’ fees.  On appeal, in May 2017, the court of appeal rejected the estate’s arguments and held that Goldstein was within his contractual rights when he rejected Sony Pictures’ plans to distribute.[275]  The court affirmed the trial court’s finding that Goldstein’s longstanding vision for a wide release of the film may not have been a sound business decision, but was within his rights under the contractual terms.[276]  F.     New Efforts to Regulate ISPs So far, 2017 has seen a number of interesting developments in areas where social media and the internet intersect with speech and privacy rights.  One such development occurred in New York, where lawmakers are considering enacting a version of the European "Right to Be Forgotten" law, which raises a host of First Amendment considerations not implicated in Europe. 1.     The Right To Be Forgotten In May 2014, the European Court of Justice ruled that internet search engines must honor an individual’s right to be forgotten and delete links that do not serve a compelling public interest and which harm privacy rights.[277]  Since then, European Union policymakers have approved a general data protection regulation ("GDPR"), which goes into effect in May 2018.  The GDPR will require internet providers to balance takedown requests against other competing interests and rights.[278] One issue currently surrounding the European version of the law is its jurisdictional reach.  In France, the Commission Nationale de l’Informatique et des Libertés ("CNIL") has ordered Google to globally erase content subject to removal regardless of what country the request came from.[279]  Google maintains that it need only remove content from the European versions of its search engine, but government officials disagree, and similar fights would likely result from the New York law, which is styled to apply "regardless of whether such content also was or is published elsewhere."[280] On February 8, 2017, New York State Assemblyman David I. Weprin introduced The Right to Be Forgotten Act.[281]  Bill A05323, as currently written, would amend the state’s civil rights laws so that "[u]pon the request from an individual, all search engines, indexers, publishers and any other persons or entities that make available, on or through the internet . . . , information about the requester, shall remove information, articles, identifying information and other content about such individual . . . that is ‘inaccurate’, ‘irrelevant’, ‘inadequate’ or ‘excessive’ within thirty days of such request."[282]  The bill proceeds to collectively define "inaccurate," "irrelevant," "inadequate," or "excessive" as "content, which after a significant lapse in time from its first publication, is no longer material to current public debate or discourse, especially when considered in light of the financial, reputational and/or demonstrable other harm that the . . . content is causing to the requester’s . . . interest."[283]  However, the bill excludes "content related to convicted felonies, legal matters relating to violence, or a matter that is of significant current public interest."[284] In addition, the New York law does not appear to sufficiently account for First Amendment free-speech considerations or the need to preserve information that remains in the public’s interest, calling into question the bill’s constitutionality even before its enactment.[285]  In the United States, non-defamatory social media posts, news articles, and search engine histories are forms of protected speech under the First Amendment, and courts have repeatedly held that the freedom of speech extends to hateful and disagreeable speech.[286]  Therefore, were the law to be enacted, without clearer limitations, New York’s Right to Be Forgotten Act is likely to face constitutional challenges. Even putting aside such constitutional issues, experience with similar laws in Europe has shown that these laws have created uncertainty for internet companies.  And the proposed New York law is likely to raise similar issues.  In particular, critics have raised questions as to the  jurisdictional breadth of the proposed law and the burdens that it would place on the internet companies that would be forced to attempt to interpret and comply with it.  As written, the bill could result in fines of $250 per day against violators after a thirty-day grace period.[287]   [1] Cynthia Littleton, Sinclair Broadcast Group Sets $3.9 Billion Deal to Acquire Tribune Media, Variety, May 8, 2017, http://variety.com/2017/tv/news/sinclair-tribune-merger-station-group-1202416416/. [2] Jenna Ebersole, DC Circuit Lifts Halt on FCC TV Ownership Shift, Law360, June 15, 2017, https://www.law360.com/articles/935104/dc-circuit-lifts-halt-on-fcc-tv-ownership-shift. [3] Etan Vlessing, Ion Media Buys Three TV Stations, Bringing Total to 63, The Hollywood Rep., June 20, 2017, http://www.hollywoodreporter.com/news/ion-media-buys-three-tv-stations-bringing-total-63-1015058. [4] Ebersole, supra note 2. [5] Cynthia Littleton, Appeals Court Removes FCC Roadblock to Sinclair-Tribune Merger, Variety, June 15, 2017, http://variety.com/2017/tv/news/fcc-sinclair-tribune-uhf-discount-appeals-court-1202467351/. [6] George Szalai, Fox’s Sky Deal: Regulators Submit Reports, U.K. Government to Decide by June 29, The Hollywood Rep., June 20, 2017, http://www.hollywoodreporter.com/news/foxs-sky-deal-regulators-submit-reports-uk-government-1014630. [7] Ivana Kottasova & Alanna Petroff, Murdoch’s Fox-Sky Deal in Hands of U.K. Government, CNN Money, June 20, 2017, http://money.cnn.com/2017/06/20/media/sky-fox-deal-rupert-murdoch/index.html. [8] Szalai, supra note 6. [9] Jason Douglas & Stu Woo, Fox’s Bid for Sky Set for More U.K. Scrutiny, Wall St. J., June 29, 2017, https://www.wsj.com/articles/foxs-bid-for-sky-set-for-more-u-k-scrutiny-1498735307. [10] Id. [11] Arjun Kharpal, Verizon Completes Its $4.48 Billion Acquisition of Yahoo; Marissa Meyer Leaves with $23 Million, CNBC, June 13, 2017, http://www.cnbc.com/2017/06/13/verizon-completes-yahoo-acquisition-marissa-mayer-resigns.html. [12] Id. [13] Id. [14] Id. [15] Ryan Knutson, et al., Verizon Doubles Down on Media with Yahoo Deal, Wall St. J., June 13, 2017, https://www.wsj.com/articles/verizon-doubles-down-on-media-with-yahoo-deal-1469465120. [16] Kharpal, supra note 11. [17] Lukas I. Alpert & Shalini Ramachandran, Vice Media Secures $450 Million Investment from Private-Equity Firm TPG, Wall St. J., June 19, 2017, https://www.wsj.com/articles/vice-media-secures-450-million-investment-from-private-equity-firm-tpg-1497882405. [18] Id. [19] David Lieberman, Vice Media Grips $450M Investment That CEO Says Raises Valuation to $5.7B, Deadline Hollywood, June 19, 2017, http://deadline.com/2017/06/vice-media-grips-450m-investment-ceo-says-raises-valuation-1202115714/. [20] Id. [21] Shalini Ramachandran & Georgia Wells, Time Warner Signs $100 Million Deal With Snap for Shows and Ads, Wall St. J., June 19, 2017, https://www.wsj.com/articles/time-warner-signs-100-million-deal-with-snap-for-shows-and-ads-1497885737. [22] Shalini Ramachandran, Media Companies Line Up to Make Shows for Snap TV, Wall St. J., May 4, 2017, https://www.wsj.com/articles/media-companies-line-up-to-make-shows-for-snap-tv-1493890205. [23] Id. [24] Ramachandran & Wells, supra note 21. [25] Variety Staff, SiriusXM Sets $480 Million Investment in Pandora, Variety, June 9, 2017, http://variety.com/2017/music/news/siriusxm-480-million-investment-pandora-1202459872/. [26] Benjamin Horney, 4 Firms Assist On SiriusXM’s $480M Investment In Pandora, Law360, June 9, 2017, https://www.law360.com/articles/933029/4-firms-assist-on-siriusxm-s-480m-investment-in-pandora. [27] Id.; see also Chelsea Naso, Pandora Inks $450M Deal For Event Ticketing Service, Law360, Oct. 7, 2015, https://www.law360.com/articles/711861/pandora-inks-450m-deal-for-event-ticketing-service. [28]    Brian Heater, Pandora CEO Tim Westergren is Officially Out Amid Company Shakeup, TechCruch, June 27, 2017, https://techcrunch.com/2017/06/27/pandora-ceo-tim-westergren-is-officially-amid-company-shakeup/. [29] Nick Kostov & Corrie Driebusch, Cable Operator Delivers Biggest U.S. Telecom IPO in 17 Years, Wall St. J., June 21, 2017, https://www.wsj.com/articles/altice-usa-a-mashup-of-telecoms-set-to-be-one-of-the-biggest-ipos-of-the-year-1498053660. [30] Id. [31] Alex Barinka & Gerry Smith, Altice USA CEO Goei Thinks Ahead to M&A on First Day of Trading, Bloomberg Tech., June 21, 2017, https://www.bloomberg.com/news/articles/2017-06-21/altice-usa-raises-1-9-billion-in-year-s-second-biggest-u-s-ipo. [32] Lauren Hirsch & Liana B. Baker, Cable Operator Altice USA Raises $1.9 bln in IPO, Reuters, June 21, 2017, available at http://www.cnbc.com/2017/06/21/reuters-america-update-1-cable-operator-altice-usa-raises-19-bln-in-ipo.html. [33] Id. [34] Sruthi Shankar & Laharee Chatterjee, WideOpenWest Shares Fail to Wow in Debut, Reuters, May 25, 2017, http://www.reuters.com/article/us-wideopenwest-ipo-idUSKBN18L1YT. [35] Ryan Faughnder & David Pierson, The $1-billion deal to sell Dick Clark Productions to China’s Wand Group is dead, L.A. Times, March 10, 2017, http://www.latimes.com/business/hollywood/la-fi-ct-wanda-dick-clark-deal-20170309-story.html. [36] Id. [37] Sherisse Pham, Dick Clark Productions owner pulls the plug on $1 billion sale to China’s Wanda Group, CNN Money, March 13, 2017, http://money.cnn.com/2017/03/13/news/companies/dalian-wanda-dick-clark-deal-dead/index.html. [38] David Lieberman, Dick Clark Productions Owner Scraps $1B Sale to Wanda Group, Deadline, March 10, 2017, http://deadline.com/2017/03/dick-clark-productions-owner-scraps-sale-wanda-group-1202040693/. [39] Id. [40] Brent Lang & Gene Maddaus, After Dick Clark Productions Deal Fails to Close, What’s Next for Dalain Wanda, Variety, March 14, 2017, http://variety.com/2017/film/news/wanda-dick-clark-productions-deal-failure-hollywood-1202007964/. [41] Patrick Brzeski, Crisis Grows at China’s LeEco After Courts Freeze Chairman’s Millions, The Hollywood Rep., July 4, 2017, http://www.hollywoodreporter.com/news/crisis-grows-at-chinas-leeco-courts-freeze-chairmans-millions-1018664. [42] Eriq Gardner, Vizio Files Fraud Lawsuit Against China’s LeEco After $2 Billion Merger Fails, The Hollywood Rep., July 11, 2017, http://www.hollywoodreporter.com/thr-esq/vizio-files-fraud-lawsuit-chinas-leeco-2-billion-merger-fails-1020120. [43] Id. [44] Id. [45] Gene Maddaus, Chinese Metals Firm in Busted Voltage Deal Says It Can’t Be Sued in U.S. Court, Variety, June 2, 2017, http://variety.com/2017/biz/news/anhui-xinke-new-materials-voltage-china-lawsuit-1202452301/. [46] Patrick Brzeki, Wanda Boards Paramount’s ‘Transformer 5’ as Marketing Partner in China, The Hollywood Rep., June 19, 2017, http://www.hollywoodreporter.com/news/wanda-boards-paramounts-transformers-5-as-marketing-partner-china-1014635. [47] Mila Galuppo, Blumhouse Inks Multiyear Co-Financing Deal with China’s Meridian, The Hollywood Rep., Apr. 25, 2017, http://www.hollywoodreporter.com/news/blumhouse-inks-multiyear-financing-deal-chinas-meridian-997293. [48] Rebecca Sun, CAA and China’s Bona Film Group Establish $150 Million Film Fund, The Hollywood Rep., May 25, 2017, http://www.hollywoodreporter.com/news/caa-chinas-bona-film-group-establish-150-million-film-fund-1007809. [49] Id. [50] Patrick Frater, Paramount’s Billion-Dollar Deal With Chinese Partners Hits Major Snag, Variety, March 8, 2017, http://variety.com/2017/film/asia/paramount-slate-deal-chinese-partners-hits-road-bump-1202003483/. [51] Id. [52] George Szalai, Paramount’s China Partners Now Financing 30 Percent of Slate, The Hollywood Rep. May 4, 2017, http://www.hollywoodreporter.com/news/viacom-paramounts-china-deal-is-operation-partners-financing-30-percent-slate-1000160. [53] Rebecca Sun & Patrick Brzeski, CAA’s New China Frontier; Strong Investor Now, Possible IPO Later?, The Hollywood Rep., Apr. 26, 2017, http://www.hollywoodreporter.com/news/caas-new-china-frontier-strong-investor-ipo-997497. [54] Patrick Brzeski, Cannes: UTA, Tan Media Partners Tem on China Distribution Fund,  The Hollywood Rep., May 21, 2017, http://www.hollywoodreporter.com/news/cannes-uta-tang-media-partners-team-china-distribution-fund-1005959. [55] Patrick Brzeski, Netflix Signs Licensing Deal with China’s iQiyi, The Hollywood Rep., Apr. 24, 2017, http://www.hollywoodreporter.com/news/netflix-signs-licensing-deal-chinas-iqiyi-997071. [56] Patrick Frater, Netflix to Debut in China Via Original Content Licensing Deal with iQIYI, The Hollywood Rep., Apr. 24, 2017, http://variety.com/2017/digital/asia/netflix-strikes-streaming-deal-with-china-iqiyi-1202394504/. [57] Brzeski, supra note 54. [58] Id. [59] Id. [60] Frater, supra note 56. [61] Patrick Frater, Global Streaming Giant Netflix Plays Catch-Up in Asia, The Hollywood Rep., Apr. 27, 2017, http://variety.com/2017/digital/asia/netflix-plays-catch-up-in-asia-1202401071/. [62] Id. [63] Id.; Abhishek Madhavan, How Netflix Lost Big to Amazon in India, Wired, Jan. 12, 2017, https://www.wired.com/2017/01/how-netflix-lost-big-to-amazon-in-india/. [64] Elsa Keslassy, Patrick Drahi’s Telco Group Altice Inks Multi-Year Deal with Netflix, Variety, June 12, 2017, http://variety.com/2017/digital/global/patrick-drahis-telco-group-altice-inks-multi-year-deal-with-netflix-1202462301/; see also Section I.A.7, supra. [65] Todd Spangler, Netflix to Raise $1.1 Billion in New Debt From Non-U.S. Lenders, Variety, Apr. 24, 2017, http://variety.com/2017/digital/news/netflix-1-billion-debt-non-us-content-expansion-1202393530/. [66] Todd Spangler, Netflix Ups Size of Latest Debt Offering to $1.4 Billion to Fund Content Deals, Variety, Apr. 26, 2017, http://variety.com/2017/digital/news/netflix-debt-offering-1-4-billion-1202399657/. [67] Todd Spangler, Netflix Streams More Debt as Investors Wait to See Payoff, Variety, May 4, 2017, http://variety.com/2017/biz/news/netflix-more-debt-1202408166/. [68] Id. [69] Georg Szalai, Amazon Channels Launches in U.K. With Discovery, NBCU, ITV Content, The Hollywood Rep., May 23, 2017, http://www.hollywoodreporter.com/news/amazon-channels-launches-uk-discovery-nbcu-itv-content-1006625. [70] Stewart Clarke, Amazon Launches Channels in U.K. and Germany with Discovery, ITV, NBCU, RTL, Variety May 23, 2017, http://variety.com/2017/tv/global/amazon-channels-in-uk-and-germany-discovery-itv-nbcu-rtl-tele-munchen-mgm-bfi-hopster-1202441171/. [71] Trefis Team, Here’s How Amazon Is Expanding Prime Video In India, Forbes, March 20, 2017, https://www.forbes.com/sites/greatspeculations/2017/03/20/heres-how-amazon-is-expanding-prime-video-in-india/#74c6c8fe2ece. [72] Naman Ramachandran, Amazon Prepares to Launch Prime Video in India, Variety, December 13, 2016, http://variety.com/2016/digital/asia/amazon-prepares-launch-prime-video-india-1201940612/. [73] Nyay Bhushan, Paramount, Amazon India Strike Licensing Deal, The Hollywood Rep., Apr. 10, 2017, http://www.hollywoodreporter.com/news/paramount-amazon-india-strike-licensing-deal-992360. [74] Id. [75] Nyay Bhushan, Amazon India, Warner Bros. Ink Licensing Deal, The Hollywood Rep., June 5, 2017, http://www.hollywoodreporter.com/news/amazon-india-warner-ink-licensing-deal-1010113. [76] Todd Spangler, Hulu Live TV Service Launches With 50 Channels for $40 Monthly, Variety, May 3, 2017, http://variety.com/2017/digital/news/hulu-live-tv-service-launch-channels-1202407778/; Daniel Holloway, Hulu Sets Live TV Carriage Pact for NBCUniversal Channels, Variety, May 1, 2017, http://variety.com/2017/tv/news/hulu-nbcuniversal-carriage-pact-1202404615/. [77] Spangler, supra note 76. [78] Id. [79] Id.   [80] Andrew Wallenstein Hulu Offers HBO, Cinemax as Subscription Add-Ons, Variety, July 6, 2017,  http://variety.com/2017/tv/news/hulu-offers-hbo-cinemax-as-subscription-add-ons-1202488341/ [81] Id.   [82] Id. [83] Michael O’Connell, Hulu Chief Says Library Acquisitions, Like ‘Golden Girls,’ Still a Key to Streamer’s Strategy, The Hollywood Rep., Jan. 17, 2017, http://www.hollywoodreporter.com/live-feed/hulu-chief-says-library-acquisitions-like-golden-girls-still-key-965005. [84] Nick Vivarelli, iflix Looks to Take On Netflix in Emerging Markets, Variety, May 30, 2017, http://variety.com/2017/digital/news/iflix-middle-east-chief-nader-sobhan-netflix-emerging-markets-1202447431/. [85] Todd Spangler, Netflix CEO Reed Hastings on Amazon: ‘They’re Awfully Scary’, Variety, May 31, 2017, http://variety.com/2017/digital/news/netflix-reed-hastings-amazon-awfully-scary-1202448694. [86] Zachary Zagger, Amazon Grabs NFL Thursday Streaming Rights In $50M Deal, Law360, Apr. 5, 2017, https://www.law360.com/media/articles/910148/amazon-grabs-nfl-thursday-streaming-rights-in-50m-deal. [87] Id. [88] Cynthia Littleton, Amazon Nabs Streaming Rights to NFL’s ‘Thursday Night Football’ Games, Variety, Apr. 4, 2017, http://variety.com/2017/biz/news/amazon-streaming-nfl-thursday-night-football-deal-1202023105/. [89] Zachary Zagger, Hulu, Twitter Add Live Sports Options In Cord-Cutting Trend, Law360, May 3, 2017, https://www.law360.com/media/articles/920063/hulu-twitter-add-live-sports-options-in-cord-cutting-trend. [90] Todd Spangler, Twitter Pushes Live-Video Deals With MLB, NFL, Viacom, BuzzFeed, Live Nation, WNBA and More, Variety, May 1, 2017, http://variety.com/2017/digital/news/twitter-pushes-live-video-deals-with-mlb-buzzfeed-live-nation-wnba-and-others-1202405236/. [91] Id. [92] Id. [93] Peter Warman, eSports Revenues Will Reach $696 Million This Year and Grow to $1.5 Billion by 2020 As Brand Investment Doubles, NewZoo, Feb 14, 2017, https://newzoo.com/insights/articles/esports-revenues-will-reach-696-million-in-2017/. [94] Evolution of the NA LCS, Esports, June 1, 2017, http://www.lolesports.com/en_US/articles/evolution-of-the-na-lcs. [95] Id. [96] AEG Announces Investment in Leading eSports Franchise Immortals, Business Wire, June 20, 2017, http://www.businesswire.com/news/home/20170620005597/en/AEG-Announces-Investment-Leading-Esports-Franchise-Immortals. [97] Id. [98] Id. [99] Jacob Wolf, NBA Announces 17 Teams Will Participate in NBA 2K League, ESPN, May 4, 2017, http://www.espn.com/esports/story/_/id/19305330/nba-announces-17-teams-participate-nba-2k-esports-league. [100] Id. [101] Id. [102] Dave McNary, Writers Guild Strike Averted Without Fanfare, Variety, May 2, 2017, http://variety.com/2017/film/news/writers-guild-strike-averted-1202406222/. [103] Id. [104] Id. [105] David Robb & Erik Pedersen, DEAL! SAG-AFTRA & Producers Reach Tentative Agreement on New Film & TV Contracts; Read The Terms, Deadline, July 4, 2017, http://deadline.com/2017/07/screen-actors-guild-strike-averted-tentative-deal-film-tv-contract-sag-amptp-1202123068/; Jonathan Handel, SAG-AFTRA Reaches Deal with NPR, Strike Averted, The Hollywood Rep., July 16, 2017, http://www.hollywoodreporter.com/news/sag-aftra-reaches-deal-npr-strike-averted-1021565. [106] Hacker Releases New Episodes of "Orange Is The New Black," The Hollywood Rep., Apr. 28, 2017, http://www.hollywoodreporter.com/news/hacker-threatens-release-new-episodes-orange-is-new-black-998670;  Abid Rahman, Hacker Leaks Episodes of Steve Harvey’s ABC Game Show, ‘Funderdome,‘ The Hollywood Rep., June 7, 2017, http://www.hollywoodreporter.com/news/hacker-leaks-episodes-steve-harveys-abc-game-show-funderdome-1010101. [107] Tatiana Siegel, Netflix, ABC Hacker Promises More Leaks: ‘Hollywood Is Under Attack,‘ The Hollywood Rep., June 6, 2017, http://www.hollywoodreporter.com/news/netflix-abc-hacker-promises-more-leaks-hollywood-is-under-attack-1010789. [108]   Janko Roettgers, ‘Orange Is the New Black’ Leak Shows: Hollywood Cybersecurity Lives and Dies With Third-Party Vendors, Variety, Apr. 29, 2017, http://variety.com/2017/digital/news/oitnb-leak-hack-hollywood-security-1202403886/. [109]   Star Athletica, L.L.C. v. Varsity Brands, Inc., 580 U.S. ___, *1 (2017) ("Op."). [110]   Id. at *2. [111]  17 U.S.C. § 101. [112]   Id. [113]   Id. (citing 17 U.S.C. § 101).  [114]   Id. [115]   Id. at *4. [116]   Id. [117]   Id. at *1-*2. [118]   Id. at *12-*15. [119]   Id. at *15. [120]   Id. at *17. [121] Id. at *12. [122]   Id. at *9 (Stevens, J., dissenting). [123]  Steff Yotka, What the Supreme Court’s First Ruling on Fashion Copyrights Means for the Runway, Vogue, March 23, 2017, http://www.vogue.com/article/supreme-court-star-athletica-varsity-brands-ruling-fashion-industry ("Designers have relied mostly on trademarks to protect themselves, but now they can argue that more conceptual, less obvious aspects of their designs should be protected by copyright too…You can expect to see designers relying on copyright law more often to challenge what they perceive to be knock-offs."). [124]   Order Granting Plaintiffs’ Motion for Preliminary Injunction, Disney Enterprises, Inc. et al v. VidAngel Inc., Case No. 2:16-cv-04109 – AB (PLAx) at *1-*2 (C.D. Cal. Dec. 12, 2016). [125]   Id. at *7. [126]   Id. [127]   Id. at *7-*8. [128]   Id. at *13-*14 ("VidAngel’s service does not add anything to plaintiff’s works. It simply omits portions that viewers find objectionable."). [129] Ashley Cullins, VidAngel Found in Contempt for Delay in Removing Disputed Films, The Hollywood Rep., Jan. 6, 2017, http://www.hollywoodreporter.com/thr-esq/vidangel-found-contempt-delay-removing-disputed-films-961609. [130]   Bill Donahue, 9th Circ. Rejects VidAngel’s Emergency Stay Bid, Law360, Jan. 5, 2017, https://www.law360.com/articles/877896. [131]   Eriq Gardner, Hollywood Studios are Suspicious of VidAngel’s New Filtering App, The Hollywood Rep., June 21, 2017, http://www.hollywoodreporter.com/thr-esq/hollywood-studios-are-suspicious-vidangels-new-filtering-app-1015521.   [132] Ashley Cullins, Hollywood Studios Rip VidAngel’s New Service in Filtering Fight, The Hollywood Rep., July 3, 2017, http://www.hollywoodreporter.com/thr-esq/hollywood-studios-rip-vidangels-new-service-filtering-fight-1018550. [133]   Eriq Gardner, Disney Hit With Lawsuit Claiming ‘Zootopia’ Ripped Off ‘Total Recall’ Writer, The Hollywood Rep., Mar. 21, 2017, http://www.hollywoodreporter.com/thr-esq/disney-hit-lawsuit-claiming-zootopia-ripped-total-recall-writer-987660. [134]   Complaint, Esplanade Prods., Inc. v. The Walt Disney Company et al.,  Case No. 2:17-cv-02185 at *1-2, *11-13. (C.D. Cal. Mar. 21, 2017). [135]   Id. at *13. [136] Eriq Gardner, Disney Wins Dismissal of ‘Zootopia’ Copyright Lawsuit (For Now), The Hollywood Rep., July 11, 2017, http://www.hollywoodreporter.com/thr-esq/disney-wins-dismissal-zootopia-copyright-lawsuit-1020026. [137] Eriq Gardner, Appeals Court Rules TV Streamers Don’t Get Compulsory License to Broadcast Networks, The Hollywood Rep., Mar. 21, 2017, http://www.hollywoodreporter.com/thr-esq/appeals-court-rules-tv-streamers-dont-get-compulsory-license-broadcast-networks-987614.   [138] Opinion, Fox Television Stations Inc. et al. v. Aereokiller LLC et al., Case No. 15-56420 at *25 (9th Cir. Mar. 21, 2017). [139] Id. ("The Copyright Office says they are not eligible. Because the Office’s views are persuasive, and because they are reasonable, we defer to them."). [140] Eriq Gardner, Broadcasters Settle Copyright Dispute With FilmOn, The Hollywood Rep., May 15, 2017, http://www.hollywoodreporter.com/thr-esq/broadcasters-settle-copyright-dispute-filmon-1003980.  [141] Id. [142] Kirtsaeng v. John Wiley & Sons, Inc., 136 S.Ct. 1979 (2016).  [143] Ashley Cullins, Led Zeppelin Asks Appeals Court to Award Fees for "Stairway" Trial Win, The Hollywood Rep., June 7, 2017, http://www.hollywoodreporter.com/thr-esq/led-zeppelin-asks-appeals-court-award-fees-stairway-trial-win-1011116. [144] Order re: Defendants’ Motion for Attorney’s Fees and Costs, Michael Skidmore v. Led Zeppelin et al,  Case No. CV 15-03462 RGK (AGRx) at *2-*5 (C.D. Cal. Aug. 8, 2016). [145] Combined Answering and Opening Brief, Michael Skidmore v. Led Zeppelin et al., Case Nos. 16-56057 & 16-56287 (9th Cir. June 2, 2017), at *82-*89 ("The District Court — without considering whether its ruling furthered the purposes of the Copyright Act — identified the following Fogerty factors: ‘(1) "the degree of success obtained on the claim"; (2) "frivolousness"; (3) "motivation"; (4) "objective reasonableness of factual and legal arguments"; and (5) "need for compensation and deterrence."’). [146] TCA Television Corp. et al v. McCollum et al, Report and Recommendation, Case No. 15 Civ. 4325 (GBD) (JCF) at *24 (S.D.N.Y. June 5, 2017). [147] Id.  [148] Objections to Report and Recommendation, TCA Television Corp. et al v. McCollum et al,  Case No. 15 Civ. 4325 (GBD) (JCF) at *5-*6 (S.D.N.Y. Jun. 19, 2017). [149] Id. at *6. [150] 582 U.S. ___, Slip Op. No. 15-1293, at *1, *3, *6 (Jun. 19, 2017). [151] Id. at *5-*6 (citing 15 U.S.C. § 1052(a)). [152] Id. at *6 (quoting Trademark Manual of Examining Procedure § 1203.03(b)(i) (Apr. 2017), p. 1200-150, available at http://tmep.uspto.gov). [153] Id. at *7; In re Tam, 808 F.3d 1321, 1331 n.2 (CA Fed. 2015) (en banc). [154] Tam, Slip Op. No. 15-1293, at *7. [155] Id. [156] In re Tam, 808 F.3d at 1321-32, 1334-39. [157] Tam, Slip Op. No. 15-1293, at *18-*19. [158] Id. at *20-*23. [159] Id. at *24. [160] Id. at *1-*8 (Kennedy, J., concurring). [161] See id. at *1 (Thomas, J., concurring). [162] Blackhorse v. Pro-Football, Inc., Cancellation No. 92046185 at 81 (T.T.A.B. 2014); Josh Gerstein, Feds Give Up Fight Against Redskins Trademarks, Politico, June 28, 2017, http://www.politico.com/blogs/under-the-radar/2017/06/28/washington-redskins-trademarks-240066. [163] Viacom Int’l Inc. v. IJR Capital Invs., LLC, — F.Supp.3d —, 2017 WL 1037294 (S.D. Tx. 2017). [164] Id. at *1-*2. [165] Id. at *2. [166] Id. at *3-*4. [167] Id. at *3. [168] Id. (internal quotations omitted). [169] Id. at *4. [170] Id. [171] Id. at *5. [172] Id. at *5-*6. [173] Id. at *8.  However, Viacom’s motion for summary judgement on its dilution claim was denied because "IJR has not used the mark in commerce, and the alleged threats of future dilution are speculative."  Id. [174] Final Judgment, Viacom Int’l Inc. v. IJR Capital Invs., LLC, No. 4:16-CV-00257 (S.D. Tx. Apr. 11, 2017), ECF at No. 49. [175] Notice of Appeal, Viacom Int’l Inc. v. IJR Capital Invs., LLC, No. 4:16-CV-00257 (S.D. Tx. May 9, 2017), ECF at No. 53. [176] Elliott v. Google, Inc., — F.3d —-, 2017 WL 2655528 (9th Cir. 2017) (original opinion amended on June 14, 2017). [177] Id. at *1 (quoting 15 U.S.C. § 1064(3)). [178] Id. at *2. [179] Id. at *3. [180] Id. at *4-*5. [181] Id. at *5, *9. [182] In re Beds & Bars Ltd., No. 85597669, at *1-*3 (T.T.A.B., May 5, 2017). [183] Id. at *13. [184] Id. at *4. [185] Id. at *4. [186] Id. at *9. [187] Id. at *8. [188] Id. at *11. [189] Id. [190] Gerlich v. Leath, — F.3d —, 2017 WL 2543363, at *1, *7 (8th Cir. 2017).  ISU also failed to "argue that [its] administration of the trademark licensing program was narrowly tailored to satisfy a compelling government interest."  Id. at *7. [191] Id. at *9. [192] Id. at *1. [193] Id. [194] Id. [195] Id. [196] Id. [197] Id. at *2, *6. [198] Id. at *3-*5. [199] Id. at *4. [200] Id. [201] Id. [202] Id. at *5-*6.  "NORML ISU’s use of the cannabis leaf does not violate ISU’s trademark policies because the organization advocates for reform to marijuana laws, not the illegal use of marijuana."  Id. at *9. [203] See Bill Donahue, 8th Cir. Again Says Pot TM Ban Violated First Amendment, Law360, June 13, 2017, https://www.law360.com/articles/934127/8th-circ-again-says-pot-tm-ban-violated-first-amendment. [204] Cal. Civ. Code §1798.83.5 (2016). [205] Jonathan Handel. "New California IMDB Age Law Probably Unconstitutional, Experts Say," The Hollywood Rep.,  Sept. 27, 2016, http://www.hollywoodreporter.com/thr-esq/new-california-imdb-age-law-932808. [206] Id. [207] "Submission Guides: Biographical Information," IMDB, (last visited June 25, 2017) available at http://www.imdb.com/help/search?domain=helpdesk_faq&index=2&file=bio_all_guides&ref_=hlp_sr_2#birthdeath [208] Handel, supra note 205. [209] IMDB.COM, Inc. v. Becerra. No. 16-cv-06535-VC, 2017 WL 772346 at *2 (N.D.Cal. Feb. 22, 2017). [210] Id. at *1. [211] Id. [212] Id. [213] Id. [214] IMDB.COM, Inc. v. Becerra, No. 16-cv-06535-VC, 2017 WL 2859063, at 1 (N.D.Cal. June 27, 2017). [215] Id. at *3. [216] Id. [217] Id. [218] Vir. Citizens Def. League v. Couric. No. 3:16-cv-00757-JAG 2017 WL 2364198 at *1 (May 31, 2017). [219] Id. at *2. [220] Id. at *3. [221] Id. at *4. [222] Id. [223] Id. at *3. [224] Id. [225] Id. at *5. [226] Id. [227] Complaint, Fridman. v. Buzzfeed., Inc., No. 154895/2017 (N.Y. Sup. Ct. N.Y. Cty. 2017). [228] Paul Colgan. "BuzzFeed CEO Jonah Peretti says Lawsuit Over Trump Dossier is an ‘Outrageous Attempt’ to Silence Media" Business Insider, May 30, 2017, http://www.businessinsider.com/buzzfeed-ceo-says-trump-dossier-lawsuit-is-an-attempt-to-silence-media-2017-5. [229] Peter Kafka, After Being Sued, BuzzFeed has Apologies to a Russian Executive Named in the Unverified Trump Dossier, Recode, Feb. 3, 2017, https://www.recode.net/2017/2/3/14505574/buzzfeed-russian-trump-dossier-defamation-suit-apology. [230] Complaint for Damages, Gubarev v. Buzzfeed, Inc., No. 0:17-cv-60426-UU (S.D.Fla. Feb. 3, 2017). [231] Kafka, supra note 229. [232] Murray Energy Corp. v. Reorg Research, Inc., 47 N.Y.S.3d 871 (N.Y. Cty. 2017). [233] N.Y. Civ. Rights L. §79-h (1970). [234] 47 N.Y.S.3d at 881-82. [235] Id. at 879. [236] Id. [237] Id. at 879-82. [238] Murray Energy Corp. v. Reorg Research, Inc., 2017 WL 2977781 at *1 (July, 13 2017). [239] Id. [240] Id. [241] Id. [242] Id. at *2. [243] Sebert v. Gottwald, No. BC560468 (L.A. Super. Ct. Oct. 10, 2014). [244] Gottwald v. Sebert, No. 653118/2014, Dkt. 1 (N.Y. Sup. Ct. Oct. 14, 2014). [245] Gottwald v. Sebert, No. 653118/2014, Dkt. 252 at 13 (N.Y. Sup. Ct. July 7, 2015). [246] Gottwald v. Sebert, No. 653118/2014, Dkt. 496 (N.Y. Sup. Ct. Feb. 9, 2016). [247] Gottwald v. Sebert, No. 653118/2014, Dkt. 626-630 (N.Y. Sup. Ct. Jan. 30, 2017). [248] Gottwald v. Sebert, No. 653118/2014, Dkt. 621-625 (N.Y. Sup. Ct. Jan. 30, 2017). [249] Gottwald v. Sebert, No. 653118/2014, Dkt. 808 at 10 (N.Y. Sup. Ct. Mar. 21, 2017). [250] Id. at 9. [251] Id. at 9-11. [252] Gottwald v. Sebert, No. 653118/2014, Dkt. 828-832 (N.Y. Sup. Ct. Apr. 21, 2017). [253] Ben Sisario, Prince’s Post-1995 Albums and Music From His Vault Will Be Released by Universal, The New York Times, Feb. 9, 2017, https://www.nytimes.com/2017/02/09/arts/music/prince-estate-universal-music-group-vault.html. [254] Jem Aswad, Universal May Try to Nullify Recorded-Music Deal With Prince Estate, Variety, Apr. 14, 2017, http://variety.com/2017/music/news/prince-recorded-music-universal-music-group-warner-bros-records-1202031182/. [255] Jem Aswad, It’s Official: Prince’s Estate Manager and Universal Music Group Move to Nullify Recorded-Music Deal, Variety, May 19, 2017, http://variety.com/2017/music/news/prince-recorded-music-universal-music-group-warner-bros-records-1202031182/. [256] Jem Aswad, Universal’s Move to Nullify $31 Million Prince Deal Approved by Judge, Variety, July 13, 2017, http://variety.com/2017/music/news/universals-move-to-nullify-31-million-prince-deal-approved-by-judge-1202495369/. [257] Paisley Park Enterprises, Inc. v. Boxill, No. 0:17-cv-01212, Dkt. 18-2 (D. Minn. Apr. 19, 2017). [258] Id. at 1. [259] Andy Warhol Foundation for the Visual Arts, Inc. v. Goldsmith, No. 1:17-cv-02532, Dkt. 6 at 1 (S.D.N.Y. Apr. 7, 2017). [260] Id. at 2. [261] Id. [262] Lynn Goldsmith, Facebook (Apr. 9, 2017), https://www.facebook.com/lynn.goldsmith/posts/10155098104516758. [263] Andy Warhol Foundation for the Visual Arts, Inc. v. Goldsmith, No. 1:17-cv-02532, Dkt. 20 (S.D.N.Y. July 10, 2017). [264] Ferrick v. Spotify USA Inc., No. 1:16-cv-08412-AJN, at Dkt. 165 (S.D.N.Y. May 26, 2017). [265] Ed Christman, Spotify and Publishing Group Reach $30 Million Settlement Agreement Over Unpaid Royalties, Billboard, Mar. 17, 2016, http://www.billboard.com/articles/business/7263747/spotify-nmpa-publishing-30-million-settlement-unpaid-royalties. [266] Emmanuel Legrand, US Copyright Royalty Board holds hearings on mechanical rates, Music Week, Mar. 8, 2017, http://www.musicweek.com/publishing/read/us-copyright-royalty-board-holds-hearings-on-mechanical-rates/067751. [267] Estate of James Oscar Smith v. Cash Money Records, Inc., No. 1:14-cv-02703-WHP, Dkt. 135 at 21 (S.D.N.Y. May 30, 2017). [268] Estate of James Oscar Smith v. Cash Money Records, Inc., No. 1:14-cv-02703-WHP, Dkt. 2 (S.D.N.Y. Apr. 16, 2014). [269] Estate of James Oscar Smith v. Cash Money Records, Inc., No. 1:14-cv-02703-WHP, Dkt. 135 at 16 (S.D.N.Y. May 30, 2017). [270] Id. at 17. [271] Estate of James Oscar Smith v. Cash Money Records, Inc., No. 1:14-cv-02703-WHP, Dkt. 157 (S.D.N.Y. July 13, 2017). [272] Experience Hendrix, LLC v. Tiger Paw Distributors, LLC, No. 4:16-cv-00107-JRH-GRS, Dkt. 1 (S.D. Ga. Feb. 29, 2016). [273] Experience Hendrix, LLC v. Tiger Paw Distributors, LLC, No. 4:16-cv-00107-JRH-GRS, Dkt. 206 at 2-6 (S.D. Ga. Jan. 27, 2017); see also Kevin Penton, Jimi Hendrix Estate, Booze Co. Settle TM Row, Law360, Jan. 30, 2017, https://www.law360.com/articles/885939.  [274] Experience Hendrix, LLC v. The Last Experience, Inc., No. BC460695 (L.A. Super. Ct. Aug. 5, 2015). [275] Experience Hendrix, LLC v. The Last Experience, Inc., No. B268414 at 2 (Cal. Ct. App. May 8, 2017). [276] Id. at 10. [277] Allison Grande, NY’s ‘Right To Be Forgotten’ Bill Needs Narrower Focus, Law360, Mar. 28, 2017, https://www.law360.com/articles/906491/ny-s-right-to-be-forgotten-bill-needs-narrower-focus. [278] Id. [279] See Shanti Salas, Conducting Due Diligence In A ‘Right To Be Forgotten’ Age, Law360, May 30, 2017, https://www.law360.com/articles/928932/conducting-due-diligence-in-a-right-to-be-forgotten-age. [280] Grande, supra note 277; see also Bill A05323, available at http://nyassembly.gov/leg/?default_fld=&leg_video=&bn=A05323&term=&Summary=Y&Text=Y. [281] Bill A05323. [282] Id. [283] Id. [284] Id. [285] See Grande, supra note 277. [286] See, e.g., Matal v. Tam, 582 U.S. ___, Slip Op. No. 15-1293, at 25 (Jun. 19, 2017) (the First Amendment "protect[s] the freedom to express ‘the thought[s] that we hate.’" (quoting United States v. Schwimmer, 279 U. S. 644, 655 (1929) (Holmes, J., dissenting))). [287] See id. The following Gibson Dunn lawyers assisted in the preparation of this client update: Ruth Fisher, Scott Edelman, Howard Hogan, Nathaniel Bach, Corey Singer, Sean O’Neill, Anthony Vita, Jerry Tower, Sara Ciccolari-Micaldi, Lauryn Togioka, DeDe Mann, and Joseph Ireland. Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding these developments.  Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or the following leaders and members of the firm’s Media, Entertainment & Technology Practice Group: Scott A. Edelman – Co-Chair, Los Angeles (+1 310-557-8061, sedelman@gibsondunn.com)Ruth E. Fisher – Co-Chair, Los Angeles (+1 310-557-8057, rfisher@gibsondunn.com)Orin Snyder– Co-Chair, New York (+1 212-351-2400, osnyder@gibsondunn.com)Howard S. Hogan – Washington, D.C. (+1 202-887-3640, hhogan@gibsondunn.com) Ari Lanin – Los Angeles (+1 310-552-8581, alanin@gibsondunn.com)Benyamin S. Ross – Los Angeles (+1 213-229-7048, bross@gibsondunn.com)Helgi C. Walker – Washington, D.C. (+1 202-887-3599, hwalker@gibsondunn.com) © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

June 21, 2017 |
Channeling the Channel-Partner Risk: Addressing Anti-Corruption Risk with Channel Partners in the Technology Sector

​Orange County partner Nicola Hanna, Los Angeles partner Michael Farhang, Washington, D.C. associate Pedro Soto and Orange Country associate Caitlin Peters are the authors of "Channeling the Channel-Partner Risk: Addressing Anti-Corruption Risk with Channel Partners in the Technology Sector," [PDF] published in FCPA Report on June 21, 2017.

June 21, 2017 |
Supreme Court Strikes Down Ban on Registration of Disparaging Trademarks on First Amendment Grounds

On June 19, 2017, the Supreme Court unanimously held in Matal v. Tam that a decades-old statute prohibiting the registration of disparaging trademarks violates the First Amendment to the U.S. Constitution.  The Court concluded that, because trademark registration is a mere administrative recognition of private speech rather than government speech, the registration process must be viewpoint-neutral.  Gibson Dunn filed a brief in the case on behalf of the United States Chamber of Commerce as amicus curiae, urging the conclusion that the Court reached. *          *          * The Tam case arose from a decision of the United States Patent and Trademark Office ("PTO") to refuse registration of a trademark for "THE SLANTS," the name of an Asian-American rock band.  The PTO relied on a provision of the Lanham Act prohibiting the registration of trademarks that "may disparage . . . persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute."  15 U.S.C. § 1052(a).  Applying the PTO’s framework for disparagement, the examining attorney concluded that "THE SLANTS" was likely to disparage a significant number of Asian Americans. On appeal, the U.S. Court of Appeals for the Federal Circuit found that the Lanham Act’s disparagement clause was facially unconstitutional under the Free Speech Clause of the First Amendment.  The Supreme Court agreed, though several Justices expressed a difference of opinion as to the reasoning.  Justice Alito announced the judgment of the Court, which was unanimous with respect to the conclusion that, despite the role of government in the registration process, trademarks constitute private rather than government speech.  The Court reasoned that the government merely registers the contents of others’ trademarks; it "does not dream up these marks," "it does not edit marks submitted for registration," and the PTO has made clear in the past that registration does not constitute government approval of a particular mark.  It also found that prior Supreme Court precedents fail to support trademark registration as a form of government speech.  Trademarks are vastly different from, for example, speech used to convey a government message—as was the case with selected monuments placed on governmental property in Pleasant Grove City v. Summum—and there is no evidence the public associates trademarks with the government itself—as was the case with specialty license plates in Walker v. Texas Division, Sons of Confederate Veterans.  Further backing away from Walker, which the Court noted "likely marks the outer bounds of the government-speech doctrine," the Court emphasized that government registrations in other, related contexts like copyright registration do not constitute government speech.[1] Justice Alito went on to reject the remainder of the government’s arguments, writing only for himself, Chief Justice Roberts, Justice Thomas, and Justice Breyer.  First, Justice Alito explained that trademark registration is not a form of government subsidy, which would permit the government to subsidize speech expressing a particular viewpoint while refusing to subsidize activities it does not wish to promote.  He also refused to create a new "government-program" doctrine for trademarks that would allow for some content- and speaker-based restrictions.  Finally, Justice Alito explained that it is unnecessary to decide whether the relaxed-scrutiny afforded commercial speech under the First Amendment applies here, because the disparagement clause is too broad to withstand even that lesser standard of review. Justice Kennedy, in a separate opinion joined by Justices Ginsburg, Sotomayor and Kagan, emphasized in greater detail why the First Amendment protects "THE SLANTS" trademark from governmental disapproval of a viewpoint the government finds unacceptable.  He reasoned that the case involved viewpoint discrimination that warranted heightened scrutiny, without undertaking a commercial speech analysis as in Justice Alito’s opinion. Justice Thomas filed a short concurrence in part and in the judgment, reiterating his view that whenever the government seeks to restrict truthful speech in order to suppress the ideas conveyed, strict scrutiny applies.  Justice Gorsuch took no part in the consideration or the decision. *          *          * Tam‘s central holding—that the Lanham Act’s disparagement clause is unconstitutional—is likely to have only a limited impact, as most trademarks are not accused of disparagement.  One company likely to benefit from the decision, however, is the Washington Redskins professional football team, which had seen several of its trademark registrations invalidated by the PTO under the same Lanham Act provision.  The Supreme Court’s decision resolves a split on the constitutionality of the statute between the approach of the Federal Circuit in the Tam case and that of the U.S. District Court for the Eastern District of Virginia in the Washington Redskins case, Blackhorse v. Pro-Football, Inc. More broadly, the Supreme Court’s unanimous government-speech ruling suggests that it is poised to cabin what is considered to be government speech in the context of government registration and regulation.   The Court explicitly warned that courts "must exercise great caution before extending" government-speech rules to messages that originate from private parties.  And the Justices’ emphasis on viewpoint-neutrality as it relates to the government suggests that the Court is unlikely to extend the government speech doctrine any time in the near future.     [1]   In a portion of the opinion in which only Justice Thomas abstained, Justice Alito also wrote for the majority in concluding that the term, "persons," in the Lanham Act’s disparagement clause was meant to prohibit registration of marks that disparage members of a racial or ethnic group.   Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments.  Please contact the Gibson Dunn lawyer with whom you usually work, or the authors: Howard S. Hogan – Washington, D.C. (+1 202-887-3640, hhogan@gibsondunn.com) Michael R. Huston – Washington, D.C. (+1 202-887-3793, mhuston@gibsondunn.com) Christine Demana – Dallas (+1 214-698-3246, cdemana@gibsondunn.com) Rachel Y. Wade – Dallas (+1 214-698-3273, rwade@gibsondunn.com) Please also feel free to contact the following practice group leaders:  Intellectual Property Group:Josh Krevitt – New York (+1 212-351-4000, jkrevitt@gibsondunn.com)Wayne Barsky - Los Angeles (+1 310-552-8500, wbarsky@gibsondunn.com)Mark Reiter – Dallas (+1 214-698-3100, mreiter@gibsondunn.com) Appellate and Constitutional Law Group:Mark A. Perry – Washington, D.C. (+1 202-887-3667, mperry@gibsondunn.com)James C. Ho – Dallas (+1 214-698-3264, jho@gibsondunn.com) Caitlin J. Halligan – New York (+1 212-351-4000, challigan@gibsondunn.com) Fashion, Retail and Consumer Products Group: David M. Wilf  – New York (+1 212-351-4027, dwilf@gibsondunn.com) Howard S. Hogan – Washington, D.C. (+1 202-887-3640, hhogan@gibsondunn.com) Media, Entertainment & Technology Group: Ruth E. Fisher – Los Angeles (+1 310-557-8057, rfisher@gibsondunn.com) Scott A. Edelman – Los Angeles (+1 310-557-8061, sedelman@gibsondunn.com)Orin Snyder– New York (+1 212-351-2400, osnyder@gibsondunn.com) Sports Law Group: Andrew S. Tulumello – Washington, D.C. (+1 202-955-8657, atulumello@gibsondunn.com) Maurice M. Suh – Los Angeles (+1 213-229-7260, msuh@gibsondunn.com) Richard J. Birns – New York (+1 212-351-4032, rbirns@gibsondunn.com)     © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

May 4, 2017 |
Who controls Low-Altitude Airspace?

​Orange County associate Jared Greenberg is the author of "Who controls Low-Altitude Airspace?" [PDF] published by The Daily Journal on May 4, 2017.

March 31, 2017 |
Supreme Court Establishes National Test to Determine When an Artistic Element of a Useful Item Is Protectable Under the Copyright Act

On March 22, 2017, the Supreme Court issued its decision in Star Athletica v. Varsity Brands, holding that design features incorporated into clothing and other useful articles are copyright eligible under Section 101 of the Copyright Act, 17 U.S.C. § 101.  Star Athletica, L.L.C. v. Varsity Brands, Inc., 580 U.S. ___, *1 (2017) ("Op.").  Below, we provide a brief review the Star Athletica case and possible effects of the Supreme Court’s decision.  Gibson Dunn’s intellectual property, transactional, and appellate attorneys are available to discuss in more detail at your convenience.     I.    Background Varsity Brands, Inc. and related entities ("Varsity") design, make, and sell cheerleading uniforms.  Many of these uniforms are emblazoned with two-dimensional designs, such as chevrons, stripes, or zigzags, which give the uniforms their distinctive cheerleading look.  Varsity holds copyrights for many of these two-dimensional designs.  The company brought a lawsuit for copyright infringement against Star Athletica, L.L.C.–another seller of cheerleading uniforms–alleging that Star Athletica was infringing several of its copyrights by selling cheerleading uniforms with similar two-dimensional designs. Star Athletica defended the suit on the ground that the uniform designs were not "separable" from the uniform itself, and were thus not copyrightable.  The Copyright Act does not protect "useful article[s]," like garments, which have "an intrinsic utilitarian function that is not merely to portray the appearance of the article or to convey information." 17 U.S.C. § 101.  But the Act does protect design features of useful articles that are "separable" from the useful article.  A design feature is separable "if, and only to the extent that, such design incorporates pictorial, graphic, or sculptural features that can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article."  Id. Star Athletica argued that Varsity’s uniform designs were not "separable" from the uniforms themselves–and were therefore not copyrightable–because the designs served the utilitarian function of identifying the garments as cheerleading uniforms.  The district court agreed with Star Athletica, but the Sixth Circuit reversed, holding that the designs were separable. Star Athletica then sought a writ of certiorari from the Supreme Court, supported by amici who noted that courts had enumerated no fewer than nine distinct tests for conceptual separability and urged the Supreme Court to create a uniform test. II.    The Majority Opinion Affirming The Sixth Circuit In a thoroughly textualist opinion written by Justice Thomas, the Supreme Court affirmed the Sixth Circuit.  The Court declined to engage in a "free-ranging search for the best copyright policy,"  Op. 6, and held that Varsity’s two-dimensional cheerleading-uniform designs are "separable features . . . of those cheerleading uniforms."  Id. at 4. Hewing closely to the text of Section 101 of the Copyright Act, the Court held that two requirements must be satisfied for a design to be separable from a useful article: First, under the "separate-identification" requirement, a useful article must be capable of being "perceived as a two- or three-dimensional work of art separate from the useful article."  Op. 1, 17.  Second, under the "independent-existence" requirement, "the separately identified feature . . . must be able to exist as its own pictorial, graphic, or sculptural work . . . once it is imagined apart from the useful article."  Id. at 7.  Thus, the separately identified feature "cannot itself be a useful article or ‘an article that is normally a part of a useful article’ (which is itself considered a useful article)."  Id. at 7 (quoting 17 U.S.C. § 101).  "Nor could someone claim a copyright in a useful article merely by creating a replica of that article in some other medium . . . . Although the replica could itself be copyrightable, it would not give rise to any rights in the useful article that inspired it."  Id. at 7-8. Summarizing the test, the Court characterized the "ultimate separability question" as "whether the feature for which copyright protection is claimed would have been eligible for copyright protection . . . had it originally been fixed in some tangible medium other than a useful article before being applied to a useful article."  Op. 8.  That separability inquiry, the Court concluded, comports with the Act’s structure and the Court’s precedent by ensuring that "copyright protection extends to pictorial, graphic, and sculptural works regardless of whether they were created as freestanding art or as features of useful articles."  Id. The Court rejected Star Athletica’s argument that only "solely artistic"–as opposed to utilitarian–features of useful articles can be separable.  It was thus irrelevant whether the cheerleading uniforms remain "equally useful," or even "’similarly useful,’" once the designs are imaginatively removed.  Op. 13 (citation omitted).  That is so, the Court concluded, because the "focus of the separability inquiry is on the extracted feature and not on any aspects of the useful article that remain after the imaginary extraction."  Id.  In addition, limiting copyright protection to "solely artistic" features of useful articles would make an otherwise copyright-eligible design "lose that protection simply because it was first created as a feature of the design of a useful article"–a result inconsistent with the Copyright Act and the Court’s precedent.  Id. at 14.  In rejecting this argument, the Court "necessarily abandon[ed] the distinction between ‘physical’ and ‘conceptual’ separability, which some courts and commentators h[ad] adopted based on the Copyright Act’s legislative history."  Op. 15.  The Court determined that "separability is a conceptual undertaking," and does not depend on whether the design can be "’physically separated from the article.’"  Id. (citation omitted). Applying its separability test to Varsity’s uniform designs was "straightforward."  Op. 10.  The chevrons, stripes, and shapes, if "separated from the uniform and applied to . . . a painter’s canvas," would "qualify as ‘two-dimensional . . . works of . . . art,’" eligible for copyright.  Id. (quoting 17 U.S.C. § 101).  The fact that this hypothetical painter’s canvas would "retain the outline of a cheerleading uniform" is "not a bar to copyright," the Court said.  Id. at 11.  The imaginary painter’s canvas still "would not replicate the uniform itself" as a useful article, just as "a design etched or painted on the surface of a guitar," when placed on an album cover, "does not ‘replicate’ the guitar as a useful article," even though the design "would still resemble the shape of a guitar."  Id. at 10-11.  Varsity’s uniform designs were thus separable from the uniforms themselves and copyrightable. At the same time, the Court emphasized the limits of its ruling.  Varsity Brands and its related entities "have no right to prohibit any person from manufacturing a cheerleading uniform of identical shape, cut, and dimensions to the ones on which the decorations in this case appear.  They may prohibit only the reproduction of the surface designs in any tangible medium of expression–a uniform or otherwise."  Op. 12.  And the Court expressed "no opinion on whether these works are sufficiently original to qualify for copyright protection, or on whether any other prerequisite of a valid copyright has been satisfied."  Id. at 11 n.1 (citation omitted).[1] III.    The Dissenting Opinion Justice Breyer wrote a dissenting opinion, which Justice Kennedy joined.  The dissent, emphasizing the legislative history of the Copyright Act of 1976, primarily took issue with the majority’s conclusion that a design on a useful article can be copyrightable when the design, imagined apart from the useful article, simply "picture[s] the useful article."  Dissent 6.  Under that approach, the dissent worried, "virtually any industrial design" could be "imaginatively reproduced on a painter’s canvas" and thus be eligible for copyright.  Id. at 6-7.  The dissent believed that such expansive copyright protection ignored Congress’s repeated decisions "not to grant full copyright protection to the fashion industry" and "risk[ed] increased prices and unforeseeable disruption in the clothing industry, which in the United States alone encompasses nearly $370 billion in annual spending and 1.8 million jobs."  Id. at 9.  The dissent’s view appeared to be focused on a concern that by extending copyright protection to basic forms of surface designs, the majority would restrict competition for the underlying item.  Justice Breyer wrote that a copyright claim consisting of "a plain rectangular space depicting chevrons and stripes, like swaths from a bolt of fabric" would be ineligible for copyright because it would be "plainly unoriginal."  Dissent 11.  But under the majority’s approach, the dissent argued, Varsity could "prevent its competitors from making useful three-dimensional cheerleader uniforms by submitting plainly unoriginal chevrons and stripes as cut and arranged on a useful article"–here, a cheerleading dress.  Id.  That result, the dissent continued, will improperly allow Varsity to "obtain copyright protection that would give them the power to prevent others from making those useful uniforms . . . ."  Id.  In reaching that result, the dissent believed the majority "lost sight of its own important limiting principle"–namely, that one may not "’claim a copyright in a useful article merely by creating a replica of that article in some other medium.’"  Id. (quoting Op. 7). IV.    Possible Effects of The Supreme Court’s Decision in Star Athletica The Star Athletica decision has important implications for the fashion and industrial design industries. In brief, the Star Athletica decision confirms that two-dimensional designs incorporated into useful articles, such as clothing, can be copyright eligible.  The Court characterized the first step of the separability analysis–the "separate-identification" step–as "not onerous." Op. 7.  And while it labeled the "independent-existence requirement" as "ordinarily more difficult to satisfy," id., the Court had no trouble determining that the uniform designs at issue in the case could stand alone as "pictorial" or "graphic" works when imagined apart from the uniforms themselves.  Id. at 10-11.  That low bar for the copyright eligibility of clothing designs may lead fashion designers to attempt to "kill[] knock-offs with copyright," as Justice Sotomayor put it at oral argument. The decision may, however, lead to additional litigation over three-dimensional artistic features that are incorporated into useful articles.  In dissent, Justice Breyer observed that courts have "denied copyright protection to objects that begin as three-dimensional designs, such as measuring spoons shaped like heart-tipped arrows, candleholders shaped like sailboats, and wire spokes on a wheel cover."  Dissent 4-5 (citations omitted).  But the majority expressly refused to adopt a bright-line rule that would render unprotectable two- and three-dimensional designs that are incorporated into useful items.  Thus, to the extent that the design of a "heart-tipped arrows" (id.) could be "imaginatively remov[ed]" and "appl[ied] in another medium" without replicating the spoons "as a useful article" (Op. 10-11), the design of the heart-tipped arrow would be protectable if it were sufficiently original to qualify for protection as a pictorial, graphic, or sculptural work standing on its own.  On one hand, this could create new issues of fact for particular artistic elements of useful items.  On the other hand, it is generally in keeping with prior decisions that have found that elements like a decorative animal-theme hood on a children’s costume may be protectable to the extent it is separable from the more utilitarian function of covering the wearer’s body.  See, e.g., Chosun Int’l, Inc. v. Chrisha Creations, Ltd., 413 F.3d 324, 329 (2d Cir. 2005). The determining factor in these cases may be the factual question of how the court defines a given useful item’s "use."  In this case, the majority appeared to view the use of the uniform in a narrow sense to clothe the wearer and not to represent a school or a make a particular impression, rendering it easier to separate the decorative elements of the cheerleader’s uniform.  In a future case, however, it may be more difficult to determine if the protected work is integral to or separate from the relevant item’s intended use.    [1]   Justice Ginsburg concurred only in the judgment.  Concurrence 1-3.  In her view, the case could have been resolved on narrower grounds urged by the United States as amicus curiae.  The majority declined to consider the United States’ argument because it was "not raised below" and was "not advanced in this Court by any party."  Op. 6. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this update.  Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Intellectual Property, Appellate and Constitutional Law, Fashion, Retail and Consumer Products or Media, Entertainment & Technology practice groups, or the following practice leaders: Intellectual Property Group: Josh Krevitt – New York (+1 212-351-4000, jkrevitt@gibsondunn.com) Wayne Barsky - Los Angeles (+1 310-552-8500, wbarsky@gibsondunn.com) Mark Reiter – Dallas (+1 214-698-3100, mreiter@gibsondunn.com) Appellate and Constitutional Law Group: Mark A. Perry – Washington, D.C. (+1 202-887-3667, mperry@gibsondunn.com) James C. Ho – Dallas (+1 214-698-3264, jho@gibsondunn.com) Caitlin J. Halligan – New York (+1 212-351-4000, challigan@gibsondunn.com) Fashion, Retail and Consumer Products Group: Lois F. Herzeca – New York (+1 212-351-2688, lherzeca@gibsondunn.com) David M. Wilf  – New York (+1 212-351-4027, dwilf@gibsondunn.com) Howard S. Hogan – Washington, D.C. (+1 202-887-3640, hhogan@gibsondunn.com) Media, Entertainment & Technology Group: Ruth E. Fisher – Los Angeles (+1 310-557-8057, rfisher@gibsondunn.com) Scott A. Edelman – Los Angeles (+1 310-557-8061, sedelman@gibsondunn.com) Orin Snyder– New York (+1 212-351-2400, osnyder@gibsondunn.com) © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

February 16, 2017 |
Media, Entertainment and Technology Group – 2016 Year-End Update

As we look back on an active 2016, and ahead to the rest of 2017, ushered in by a new administration, Gibson Dunn’s Media, Entertainment and Technology practice group has taken stock of a particularly active period in deal-making, including Hollywood going (even more) global and the world coming to Hollywood.  First Amendment cases in privacy, defamation, and the right of publicity have reshaped the landscape and jolted the industry.  Elsewhere in litigation, there was much to consider in copyright, video gaming, and music, and it was a particularly fertile year for developments in art law.  As always, we are pleased to be able to keep you up to date on these cutting-edge issues.  __________________________ TABLE OF CONTENTS I.        Transaction & Regulatory Overview A.     An Active Year in Studio Deal-Making 1.   NBCUniversal Acquires DreamWorks Animation 2.   Lionsgate Acquires Starz 3.   Fox Turns to Sky B.     Consolidation in Cable 1.   Altice’s Acquisition of Cablevision C.     China Comes to Hollywood D.     Streaming Goes Global, Skinny, and Social (and Faces Some Resistance) 1.   The Global Streaming Race 2.   Hulu’s Skinny Bundle 3.   New Directions at Twitter 4.   The Rise of the "Netflix Tax" II.        Litigation Overview A.     First Amendment Takes Center Stage: Defamation, Privacy, and Publicity Rights 1.   Hulk Hogan v. Gawker 2.   Eramo v. Rolling Stone 3.   Sarver v. Chartier 4.   The Straight Outta Compton Case B.     Copyright Litigation 1.   The DMCA and Pre-1972 Sound Recordings 2.   Licensing and Sampling: UMG Recordings v. Global Eagle Entertainment 3.   VMG Salsoul LLC v. Ciccone 4.   Discipline and Attorneys’ Fees: Kirtsaeng v. John Wiley & Sons 5.   Copyrightable Subject Matter 6.   Other Copyright Developments C.     Agency Wars D.     Video Games:  Original Madden Creator Loses Big on Royalties E.      Music:  Mo’ Streamers, Mo’ Problems? F.      A Banner Year in Art Litigation 1.   The Battle Over VARA’s Scope Continues 2.   Authentication Triumph for Peter Doig 3.   California Resale Royalty Act Preempted by Copyright Law 4.   Fair Use and Richard Prince Go Another Round __________________________ I.     Transaction & Regulatory Overview A.     An Active Year in Studio Deal-Making In addition to the widely reported announcement of the proposed $85 billion merger of AT&T and Time Warner that will combine video content with video distribution, there have been a number of other notable deals in Hollywood over the past year.   1.     NBCUniversal Acquires DreamWorks Animation In August of 2016, NBCUniversal, part of the Comcast Corporation, acquired DreamWorks Animation ("DWA") for $3.8 billion.[1]  Former CEO of DWA Jeffrey Katzenberg will no longer serve as CEO following the acquisition, but will remain in a leadership position, serving as chairman of DreamWorks New Media, which oversees DWA’s two digital ventures: Awesomeness TV and NOVA.[2]  DWA will become part of the Universal Filmed Entertainment Group, alongside Universal Pictures, Fandango and NBCUniversal Brand Development.  Regarding the acquisition, Steve Burke, CEO of NBCUniversal, stated, "DreamWorks will help us grow our film, television, theme parks and consumer products businesses for years to come."[3]  While DWA is best known for its family films such as Shrek and Kung Fu Panda, many took note of Burke’s mention of theme parks and consumer products, believing that value in this deal could come from opportunities relating to amusement park integrations and merchandising, in the same vein as Disney’s acquisition of Lucasfilm and its early cross-platform successes with the Star Wars franchise. The $3.8 billion valuation of DWA was a welcome announcement for other entertainment production companies.  After the deal was announced, shares of Lionsgate rose more than 7 percent and Viacom saw its stock jump almost 9 percent.[4] 2.     Lionsgate Acquires Starz Two other recent mergers have signaled studios’ eagerness to diversify their media business and gain more direct distribution to consumers.  In December 2016, Lionsgate closed its acquisition of Starz for $4.4 billion in cash and stock.  The merger, first announced in June 2016, received the overwhelming approval of the two companies’ shareholders, receiving 98% and 95% approval at the companies’ respective shareholder meetings.[5]  Speculation of a merger began in February 2015, when the companies exchanged minority stakes and Starz investor John Malone joined the board of Lionsgate.[6]  As a result of the merger, Lionsgate has grown into a more diverse media company, now spanning film and TV production as well as cable-based subscription and online-streaming services. 3.     Fox Turns to Sky On December 15, 2016, 21st Century Fox announced that it had reached an agreement to acquire Sky plc, Europe’s largest pay-TV and online streaming service provider.  Fox offered Sky shareholders £10.75 ($13.61) per share in cash for the remaining 61% of shares not already owned by Fox, resulting in a £18 billion ($22 billion) valuation of Sky.[7]  The stock acquisition is being structured as a "scheme of arrangement," which would allow the takeover to move forward with only 75 percent approval of independent shareholders, rather than the standard 90 percent shareholder approval needed for a traditional takeover.[8]  The transaction would result in Rupert Murdoch, the owner of Fox, expanding his U.K. and European media business by growing Fox’s direct-to-consumer capabilities in the region.  B.     Consolidation in Cable 1.     Altice’s Acquisition of Cablevision Altice became the fourth-largest broadband provider in the U.S. in 2016 after its $17.7 billion (including debt) acquisition of the New York-based cable operator Cablevision Systems Corp. in June of 2016.[9] As a condition to approving the acquisition, the New York Public Service Commission required Altice to commit to passing on to customers 25% of its estimated $450 million in savings in operational costs from the merger.[10]  New York state regulators estimate that conditions of the deal will bring $243 million in benefits to New York consumers.  In addition, the FCC required Altice to retain Cablevision’s consumer-facing staff for the next five years.  Altice’s acquisition of Cablevision follows Altice’s 2015 acquisition of St. Louis-based cable company Suddenlink (which was the seventh largest U.S. cable company before being acquired).[11]  Chairman and chief executive of Altice USA, Dexter Goei, indicated that the company plans to continue its acquisitions in the U.S. cable market, but not before integrating its recently acquired assets and units across the country.[12] Altice’s recent acquisitions continue the market trend of cable company consolidation, with large cable companies acquiring smaller operators to take advantage of economies of scale.  As CEO of AT&T Entertainment Group John Stankey announced following AT&T’s acquisition of DirecTV, "We didn’t buy DirecTV because we love satellite exclusively as a distribution medium, we bought it because it gave us scale in entertainment."[13]  We may see even more consolidation in 2017 as the major cable providers continue to view acquisitions as a way to create cost savings and reach new audiences.  C.     China Comes to Hollywood  In December 2016, the Chinese State Administration of Press, Publication, Radio, Film and Television announced that there were 40,917 movie screens in mainland China.  Assuming the accuracy of these numbers, China has surpassed the United States in the number of movie screens in a single nation (the US had 40,759 screens in 2016).  With an average rate of twenty-six new screens opening per day in China in 2016, along with a rapid increase in box office revenues, China is on pace to become the biggest film market in the world in 2017.  Additionally, Chinese investors’ interest in the U.S. entertainment and media market has continued throughout 2016 and shows no sign of slowing down in 2017.  Between 2014 and the first half of 2016, Chinese investors made thirteen equity investments amounting to $5 billion, including the Wanda Group’s acquisition of Legendary Entertainment.  With this uptick in acquisitions by Chinese companies, it is speculated that China’s share of the U.S. entertainment and media market is currently around five percent and growing. As China continues to establish itself as a major player in world-wide entertainment, in October 2016, Wang Jianlin, Chairman of the Wanda Group, announced a forty percent rebate for foreign and domestic films and television shows that film at the Wanda Group’s studio in Qingdao, China.  The rebate amounts to a subsidy valued at $750 million over a five-year period.  However, the company has recently caught the attention of sixteen members of Congress who wrote a letter urging greater scrutiny of Chinese investments in the U.S. entertainment and media sectors.  The letter cited the Wanda Group’s acquisitions of Legendary Entertainment and AMC, and voiced concerns of possible Chinese efforts to exert political influence on American media. Despite these concerns, in December 2016, the Justice Department approved AMC’s purchase of Carmike Cinemas for $1.2 billion.  As noted, AMC is owned by the Wanda Group and the merger will make the company the owner of the largest U.S. movie theater chain.  This acquisition will help further the Wanda Group’s goal of owning twenty percent of the global movie theater seats by 2020.  In order to receive approval, AMC had to agree to sell off some theaters and holdings in fifteen geographic areas that overlap with Carmike Cinemas.  Additionally, AMC must reduce its interest in National CineMedia since Carmike is a major backer of its competitor Screenvision Exhibition. Meanwhile, proponents of China’s investments in Hollywood welcome the influx of investments and the potential to reach the growing Chinese market that is controlled by that country’s revenue sharing program, which only permits thirty-four foreign films to reach its market a year.  The increase in Chinese-American co-productions, which can be exempted from the quota, is likely to continue in light of the importance of the Chinese market.   D.     Streaming Goes Global, Skinny, and Social (and Faces Some Resistance) Chinese companies and investors are not the only ones racing to establish themselves in the global entertainment and media market.  The competition between Netflix and Amazon has heated up in a competitive effort to reach foreign markets and expand their presence, while Hulu continues to carve out its own unique niche in the U.S. market. 1.     The Global Streaming Race   In January 2016, Netflix launched in over 130 countries, reaching more than 190 nations and territories, and was essentially the only major video streaming service operating worldwide, while Amazon Prime Video reached the U.K., Germany, Austria and Japan.  However, in December 2016, Amazon Prime Video launched in over 200 countries and territories at a lower monthly price than Netflix, bringing significant competition to the online streaming market.  For both companies, content selection, outside of their original content, will depend on securing global rights to licensed content.  In 2017, both companies are likely to focus on their new global audience by releasing content that reflects their widespread reach and providing more content in foreign languages. 2.     Hulu’s Skinny Bundle This year, Hulu released more details on its forthcoming internet TV streaming service, commonly referred to as the "Hulu Skinny Bundle," set for release in 2017.[14]  In a press release describing the forthcoming Hulu Skinny Bundle, Hulu executives stated that the streaming service will give its subscribers access to "more than 35 top networks" including various Fox and Disney channels (two of the companies jointly operating Hulu.)[15] More good news for potential Hulu Skinny Bundle subscribers came in August of 2016, when Time Warner announced that it would acquire 10% of Hulu for an estimated $583 million.[16]  As part of this deal, Hulu’s Skinny Bundle will carry all of Time Warner’s Turner cable networks (including TNT, with its live sports offerings such as NBA playoff games and March Madness).  Time Warner’s investment could also mean Hulu could potentially incorporate HBO into its streaming services.  3.     New Directions at Twitter  This past year, in an effort to broaden its user base, Twitter landed an exclusive deal with the National Football League to deliver a live OTT digital stream of the NFL’s Thursday Night games during the 2016 season.  For $10 million, the social media platform received the right to stream ten games, valuing each game at $1 million.  Twitter won the bid for the NFL package against Verizon, Yahoo!, and Amazon.  This deal reflects the NFL’s awareness in the growing number of cord-cutters and the trend toward streaming content over the internet, especially among its target demographic of 18-34 year olds.  Deals with social media networks give content producers who traditionally distribute through broadcast or cable another avenue to reach a younger demographic.  If this deal proves successful, we will likely see an increase in live-streaming deals between content producers and social media networks, particularly in sports, which continues to attract viewers for live broadcasts.  Notably, Twitter has already signed a series of live-streaming deals with Wimbledon, CBS News, the National Basketball Association, Major League Baseball, the National Hockey League and the Pac-12 Network. Additionally, in September 2016, news broke that Twitter might be up for sale, with speculation about potential buyers such as Google, Salesforce.com and The Walt Disney Company.  However, by October it appeared that all potential bidders had backed off, in part over concerns regarding Twitter’s approach toward ending user harassment and its ability to generate revenue.  Whether there is a new buyer for Twitter has yet to be seen. 4.     The Rise of the "Netflix Tax" State and local tax authorities appear eager to fill tax revenue gaps that have resulted from consumers trading in traditional sources of entertainment for online-only sources, such as Netflix, Hulu, Spotify and Xbox Live.  As a result, we have seen the rise of so-called "Netflix taxes," which are specifically designed to tax these digital entertainment services.  The most noteworthy examples so far have been implemented in Chicago, Pennsylvania, and Pasadena (California), each of which takes a unique approach on how the tax is implemented and to what services it applies.  For example, the Pennsylvania Netflix Tax, which passed in 2016, extends the state’s 6 percent sales tax to digital downloads, subscription services, music, e-books, apps and games, as well as any updates, maintenance or support of these items.  In contrast, Pasadena city officials announced their own plan to implement a new 9.4 percent tax focused only on paid video streaming services.  Pasadena officials confirmed that the new tax is intended to compensate for lost tax revenue resulting from falling cable TV subscriptions. On June 9, 2015, the city of Chicago’s Finance Department extended its 9 percent "Amusement tax" on entertainment to include all "electronically delivered amusements" and "nonpossessory computer leases."[17]  The Chicago tax is more expansive than its Pennsylvania and Pasadena counterparts, as it targets all paid-for digital media as well as any services utilizing cloud computing or storage.  However, the tax is being challenged by a group of Chicago residents in the Circuit Court of Cook County, Illinois, which alleges two bases for overturning the tax.[18]  First, the plaintiffs claim that the Chicago Finance Department’s decision to apply its Amusement tax to streaming services amounts to a new tax that must have been passed by a vote of city officials.[19]  Second, the plaintiffs claim the tax imposes a discriminatory tax on electronic commerce in violation of the Federal Internet Tax Freedom Act by granting tax exemptions to purveyors of live media and entertainment, such as live music and theater, and even Netflix’s own DVD delivery service.[20]  The case is still pending in the Circuit Court of Cook County, Illinois.[21] II.       Litigation Overview A.        First Amendment Takes Center Stage: Defamation, Privacy, and Publicity Rights First Amendment cases took center stage in 2016:  President Trump campaigned on, among other things, the promise to loosen libel laws, and threatened to sue several media organizations, including The New York Times, in response to the paper’s reporting on his tax returns and sexual assaults.  2016 also featured the first-ever trial pitting a celebrity against a media organization for the posting of a sex tape.  A Virginia jury determined that a news source (Rolling Stone) can be held liable for the republication of defamatory statements, but not necessarily for the original publication of those statements.  And the Ninth Circuit held that an anti-SLAPP motion may defeat a right of publicity claim, while another right of publicity case had the odd procedural posture of having its plaintiff pass away while litigation was pending. 1.       Hulk Hogan v. Gawker One of the most talked about lawsuits in the press this year was the culmination of Hulk Hogan’s four-year battle against Gawker, which ultimately led to the online media company’s demise.  In October 2012, Gawker published a less-than-two-minute excerpt of a 30-minute video showing the famous wrestler Hulk Hogan (né Terry Bollea) having sex with Heather Cole, the then-wife of his best friend, Tampa-area radio personality Bubba the Love Sponge (real name Todd Alan Clem).  Gawker posted the sex tape alongside an essay by then-editor-in-chief A.J. Daulerio musing about celebrity sex.  Eleven days later after Gawker posted the video, Hogan filed two lawsuits for invasion of privacy, illegal wiretapping, violation of right of publicity, and intentional infliction of emotional distress–one in federal suit in the Middle District of Florida against Gawker Media, its founder and CEO Nick Denton, and Daulerio;[22] and one in Florida state court against the Clems, who had recorded the video without his knowledge.[23]  After the federal court declined to grant a temporary injunction on grounds that it would constitute a prior restraint on free speech,[24] Hogan dismissed the federal action[25] and amended his state court complaint in December 2012 to add the Gawker defendants.[26]  Florida State Court Judge Pamela Campbell granted Hogan a temporary injunction in 2013,[27] but  Gawker refused to remove the post from its website, arguing that the order "is risible and contemptuous of centuries of First Amendment jurisprudence."[28]  The injunction was stayed on appeal,[29] and then denied in 2015 by the appeals court.[30]  The District Court of Appeal of Florida found that it was an unconstitutional prior restraint under the First Amendment.[31]  At trial, the case became an implicit battle between the First Amendment, which guarantees freedom of the press and freedom of speech, against a citizen’s Fourteenth Amendment right to privacy under equal protection of life, liberty, and property.  While Gawker argued that it was within its First Amendment right to determine what was newsworthy, Hogan claimed that the video violated his privacy rights as Terry Bollea, a private citizen untethered from his celebrity wrestling persona as Hulk Hogan.  In March 2016, after a two-week trial, the Florida state jury determined that privacy rights outweighed the right to make speech.  It found Gawker Media liable and awarded Hogan $115 million in compensatory damages and $25 million in punitive damages.[32] Unbeknownst to Gawker until after the trial had concluded, Silicon Valley billionaire Peter Thiel, who had been outed as gay by a Gawker blog in 2007, secretly provided financial backing for Hogan’s lawsuit and others suing the company.  Gawker considered pursuing legal action against Thiel, but three months after the verdict the company filed for Chapter 11 bankruptcy protection and its assets (not including the main Gawker blog) later sold to Univision.  Days later, the Gawker blog announced that it would entirely shutter its operations.  First Amendment advocates saw Thiel’s actions as setting a dangerous precedent that could encourage other deep-pocketed individuals or entities to fund lawsuits again media organizations that are critical of them or against which they seek revenge, in effort to put them out of business. In November 2016, the parties reached a settlement.  Hogan will receive $31 million plus a share of the distributions from a contingent proceeds creditor account in exchange for Gawker forgoing its appeal.  Hogan’s lawsuit will unquestionably encourage other celebrities to pursue legal recourse against clickbait news outlets in similar situations.  For instance, in June 2016, Michael Jackson’s nephews filed a $100 million defamation suit against Radar Online over multiple decades-old stories alleging that they were sexually abused by their uncle and accepted gifts to cover it up.[33]  The complaint alleges that "Radar has tried to profit by launching a vicious and unrelenting attack on [Jackson] based on claims that, years ago, he was guilty of sexual abuse, even though, at that time, he was found ‘not guilty of that very charge.’"[34]  Radar Online filed an answer in September 2016 and litigation remains ongoing. 2.       Eramo v. Rolling Stone Media companies are also concerned with the potentially chilling impact of a jury verdict finding that the magazine Rolling Stone was liable for defamatory statements stemming not from the original publication of those statements, but in the republication of them in an editor’s note. The magazine published a controversial article, "A Rape on Campus" in its November 19, 2014 issue describing a brutal gang rape of a freshman identified as "Jackie" at a University of Virginia campus fraternity.  Immediately following publication, The Washington Post identified major gaps in the magazine’s reporting, which led to Rolling Stone issuing a formal apology for failing to thoroughly fact-check the article.  Following an independent report by the Columbia School of Journalism that faulted the publisher for gross reporting errors, Rolling Strone retracted the story and removed it from the website in April 2015. A month later, Nicole Eramo, the university’s former associate dean, sued the publication, the parent company Wenner Media and the writer Sabrina Rudin Erdely for casting her as the "chief villain" who "silenced" Jackie or "discouraged" her from reporting the alleged gang rape to the police.[35]  The suit survived the summary judgment stage in September 2016 and proceeded to trial.[36] In November 2016, after a two-week trial, a federal jury decided in less than two hours that the defendants were liable on multiple counts of defamation and awarded $3 million in damages.[37]  The jury, however, did not find actual malice when Rolling Stone published the story.  It was only afterwards–when Rolling Stone republished the assertions in an editor’s note the following week and made several other public statements–that the jury held the publication acted with actual malice. In the immediate aftermath of the verdict, media companies are worried that apologizing or simply refusing to immediately retract a story may expose them to significant legal liability.[38]  As a result, eight media groups including The Washington Post, Associated Press, Gannet Co. and others asked the judge in an amicus brief to overrule the jury as a matter of law.[39]  They argue that "[t]he Court’s decision to have the jury determine whether the defamatory information was ‘republished’ when an editor’s note was attached would be harmful for news organizations and those who rely upon them for accurate news reports.  Upholding the current verdict would discourage the news media from correcting errors in their stories, particularly because not mentioning a particular fact from a story in the note constitutes ‘republishing’ it.  The only recourse available would be to require new sites to completely remove stories when any question of credibility is raised.  Neither choice . . . would serve the interests of the public."[40] In February 2017, the court heard oral argument regarding Rolling Stone‘s motion for judgment notwithstanding the verdict, motion to reconsider sanctions, and the bill of costs.  The case remains pending at the post-trial briefing stage. 3.       Sarver v. Chartier  This year, the Ninth Circuit considered whether an anti-SLAPP motion can be used to successfully defend against a right of publicity lawsuit.  In March 2010, Army Sergeant Jeffrey Sarver sued the creators of the Oscar-winning film, The Hurt Locker, claiming that the film’s protagonist was based on his experiences as a U.S. Army explosive ordnance disposal technician in Iraq; that he did not consent to such use; and that some scenes in the film falsely portrayed him in a way that harmed his reputation.  He brought multiple state law claims, including misappropriation of his likeness and right of publicity.  The defendants successfully transferred the case from New Jersey to California, and then moved to strike Sarver’s complaint under California’s anti-SLAPP statute–a powerful law that forces a plaintiff in a case seeking to punish another for invoking their speech rights (e.g., for defamation) to come forth with evidence to substantiate the claim at the very outset of the litigation.  The district court dismissed Sarver’s lawsuit in its entirety in October 2011, finding that the anti-SLAPP statute applied because the defendants were engaged in the exercise of free speech (the film) in connection with a public issue, and that the film’s use of Sarver’s identity was transformative.[41]  In February 2016, the Ninth Circuit affirmed the lower court’s dismissal.[42]  It first held that California law was properly applied, instead of New Jersey law, because California had the most significant relationship to the litigation.[43]  On the merits, the Ninth Circuit applied the anti-SLAPP statute’s two-prong analysis.  First, the film and its central character spoke directly to issues of a public nature, specifically the Iraq War and the use of improvised explosive devices.[44]  Second, the film was speech fully protected by the First Amendment because the creators had sufficiently "transformed" the material into art.[45]  Because Sarver could not show a compelling state interest in preventing the defendants’ speech, applying California’s right of publicity law against that speech would violate the First Amendment.  The Ninth Circuit concluded that Sarver had not built up any economic value in a marketable performance of identity to warrant protection under right of publicity.  As a result, the district court did not err in granting defendant’s anti-SLAPP motion.[46]  The Ninth Circuit’s ruling will not only make it easier for entertainment companies to create stories ripped from the headlines so long as they sufficiently "transform" the material into art, but also empower them to use anti-SLAPP statutes to defend against future lawsuits.  4.       The Straight Outta Compton Case Last year, former N.W.A. manager Jerry Heller filed a defamation suit against the producers of the hit film Straight Outta Compton, along with Legendary Pictures, Compton Records, director F. Gary Gray, and others, claiming that the film falsely portrayed him as responsible for instigating the breakup of N.W.A.[47]  In June 2016, the Court granted defendants’ motion to strike as to all the allegedly defamatory scenes listed in the amended complaint, except for two scenes stating or implying that Heller discouraged the rapper Ice Cube from retaining an attorney during contract negotiations.[48]  The litigation took an unexpected twist in early September 2016 when Heller passed away from a heart attack.  He was set to be deposed in August, but his attorneys canceled the day prior citing an unspecified conflict of interest.  As of January 2017, Heller’s nephew was named executor of his uncle’s will and in that capacity filed a motion to continue the lawsuit on the estate’s behalf.[49]  Should the court permit this case to proceed with Heller’s estate as the plaintiff, it will set up an unusual situation where a defamation case is litigated past the death of the plaintiff. B.        Copyright Litigation 1.       The DMCA and Pre-1972 Sound Recordings In a decision with far-reaching impact for online hosts, the Second Circuit in Capital Records v. Vimeo ruled that the Digital Millennium Copyright Act’s (DMCA) safe harbor provisions protect online hosts, such as Vimeo, from copyright liability for musical recordings that predate 1972, despite the fact that these recordings are not covered by federal copyright law.[50] The decision also clarified the meaning of "red flag knowledge" and willful blindness in the context of the DMCA.[51]  In doing so, the Second Circuit reversed the lower court’s decision categorically excluding any copyright claims based on pre-1972 songs from the DMCA safe harbor, thus becoming the first federal appeals court to rule on this issue. The DMCA contains safe harbor provisions, which shield qualifying Internet Service Providers (ISPs) from liability for copyright infringement when their users upload infringing material on the ISP’s site and the ISP is unaware of the infringement.[52]  So long as the ISP responds to the copyright holder’s takedown request by promptly investigating and removing the offending content, the ISP is shielded from liability pursuant to the safe harbor provisions.  These provisions were enacted to shield the still-nascent Internet industry from the potentially crushing burden of copyright liability for sites that host third-party content by shifting the burden of actively monitoring these sites for copyright violations to the copyright-holder herself. However, it had long been unclear whether this federal safe harbor scheme covered pre-1972 recordings.  This uncertainty stemmed from the fact that Congress created federal copyright protection for recorded sounds in 1972, but did not make this protection retroactive, leaving pre-1972 recorded songs covered by a patchwork system of state-level quasi-copyright laws.[53]  In the past few years, record labels have been somewhat successful in advancing the argument that the DMCA’s safe harbor provisions do not, in fact, shield sites from liability for hosting pre-1972 songs.  In a case filed by UMG Recordings against the now-defunct online streaming service Grooveshark, a New York appellate court ruled that the provision did not protect Grooveshark against pre-1972 claims.[54]  The Copyright Office has also endorsed that view.[55]  This position, however, ran directly contrary to an earlier decision by a New York federal judge that found the safe harbor protected online music storage service MP3tunes from state-law copyright claims.[56] With this backdrop of relative uncertainty, in the Capitol Records case, plaintiffs filed suit against Vimeo, alleging that Vimeo was liable for copyright infringement because it hosted 199 user-generated "lip dub" videos, featuring songs from the Beatles, Jay-Z, Radiohead, Lady Gaga and others.  The plaintiffs further argued that Vimeo had forfeited its protection under the DMCA’s safe harbor provisions because it had "red flag" knowledge of the infringement, or was willfully blind to it, because some Vimeo employees had viewed, commented, and "liked" the infringing videos. With respect to the videos that used pre-1972 songs, District Judge Abrams granted summary judgment to the plaintiffs, holding that "[I]t is for Congress, not the courts, to extend the Copyright Act to pre-1972 sound recordings."[57]  She also held that Vimeo did not void its safe harbor immunity by "willfully blinding" itself to infringement by its users.[58]  Following this decision, Vimeo moved for certification of an interlocutory appeal to the Second Circuit on the pre-1972 sound recordings issue, which was granted.[59]  In its appeal, Vimeo and other web hosts argued that they cannot police their sites for copyright infringement of only pre-1972 recordings without affirmatively monitoring everything that crosses their networks, which would negate the very purpose of the DMCA’s safe harbors. The Second Circuit’s ruling, written by Judge Pierre Leval, was a clear victory for online service hosts such as Vimeo and YouTube.  The Court ruled that the DMCA’s safe harbors protect online hosts like Vimeo from liability even for pre-1972 recordings that are not covered by federal law, because a ruling to the contrary would "defeat the very purpose Congress sought to achieve in passing the statute."[60]  The Court’s opinion largely endorsed Vimeo’s concerns, saying that Capitol’s position would force ISPs to either "incur heavy costs of monitoring every posting to be sure it did not contain infringing pre-1972 recordings" or face "potentially crushing liabilities under state copyright laws."[61] In addition to the issue of pre-1972 recordings, the Second Circuit’s decision clarified the meaning of the "red flag awareness" and "willful blindness" doctrines related to the DMCA’s safe harbors.  The Court resolved both of these issues strongly in favor of Vimeo and other ISPs. First, the Court overturned the district court’s ruling that Vimeo might have had "red flag awareness" of the infringement because its employees viewed, commented, and "liked" them.  "A showing by plaintiffs of no more than that some employee of Vimeo had some contact with a user-posted video . . . is not sufficient."[62]  Citing its prior decision in Viacom International, Inc. v. YouTube, Inc.,[63] the court held that in order to make out "red flag" knowledge, Capitol Records needed to present evidence showing that "Vimeo personnel either knew the video was infringing or knew facts making that conclusion obvious to an ordinary person."[64]  Second, the Court rejected Capitol’s claim that Vimeo "willfully blinded" itself to infringement by its users by encouraging them to post infringing videos and then looking the other way.  "[A] handful of sporadic instances . . . in which Vimeo employees inappropriately encouraged users to post videos that infringed music cannot support a finding of the sort of generalized encouragement of infringement supposed by their legal theory . . . [and does not] suffice to justify stripping Vimeo completely of the protection of [the DMCA’s safe harbor]."[65] Following the panel’s decision, Capitol Records and the Recording Industry Association of America both filed briefs urging the Second Circuit to reconsider, or rehear en banc the panel’s ruling.  They argued that the decision had ignored decades of precedent separating federal copyright law from state-level protections, and that it represented "a slippery slope" about what other aspects of federal copyright law might now be applied to pre-1972 recordings.  However, the Second Circuit denied their petition for rehearing en banc.[66]  On December 16, 2016, Capitol Records filed a petition for certiorari with the Supreme Court.[67] 2.       Licensing and Sampling: UMG Recordings v. Global Eagle Entertainment In a closely watched case involving licenses to stream music as in-flight entertainment, Universal Music Group and Global Eagle Entertainment settled in August 2016, with Global Eagle’s payout to Universal valued at almost $30 million.[68]  Universal had sued Global Eagle back in 2014, alleging that Global Eagle and its subsidiaries provided airline passengers with unauthorized access to works by Taylor Swift, Katy Perry, Elton John, Paul Simon, Eminem, and others.  The district court rejected Global Eagle’s argument that the parties had reached an oral licensing agreement, stating that "[t]here is ample evidence that IFP knew it had no licenses from plaintiffs" and yet was "repeatedly making the business decision to continue its unauthorized use" of the songs.[69]  The district court granted Universal’s motion for summary judgment, finding that Global Eagle willfully infringed more than 4,500 works owned by Universal and other related publishers.  Statutory damages for willful infringement under the Copyright Act can reach up to $150,000 per track.  A trial to determine damages was scheduled, but Global Eagle, facing a potential payout of $675 million, signaled its intent to settle.[70]  Commentators have noted that this litigation, and others like it, is a reflection of the music industry’s decision to crack down on the "murky environment" surrounding in-flight streaming services.  However, facing such substantial penalties, some in-flight entertainment companies have elected to err on the side of safety, and have suspended music streaming services until formal licensing requirements have been satisfied.[71] 3.       VMG Salsoul LLC v. Ciccone This past year, the Ninth Circuit shot down a copyright lawsuit against Madonna over a split-second music sample she used in her 1990 smash hit "Vogue," and in doing so, set up a circuit split on the important issue of whether a very small amount of music sampling constitutes copyright infringement.[72]  The decision was the first by a federal appeals court to directly reject the Sixth Circuit’s controversial 2005 ruling in in Bridgeport Music, Inc. v. Dimension Films, which held that the de minimis defense to copyright infringement does not apply to sound recording copyrights.[73]  That decision has been controversial in the musical community, since it effectively turned any amount of sampling into copyright infringement, opening up sampling musicians to liability and rendering the Sixth District a plaintiff-friendly jurisdiction in song-theft cases.[74] The Ninth Circuit’s decision affirmed the district judge’s 2013 ruling that Madonna’s use of a 0.23-second "horn hit" from the Salsoul Orchestra’s song "Love Break" was de minimis, and thus did not constitute copyright infringement.  The court noted the "consistent application of the de minimis exception across centuries of jurisprudence," including other artistic works (visual art, photography), and saw "no principled reason" to carve out an exception for sound recordings.[75]  Therefore, until and unless the Supreme Court grants certiorari on the issue, this decision affords musical artists a bit more room to experiment with sampling, so long as they are confident that any claims will be litigated in the Ninth Circuit, and remain conscious of the fact that other circuits, such as the Sixth Circuit, may look less favorably upon the de minimis defense. 4.       Discipline and Attorneys’ Fees: Kirtsaeng v. John Wiley & Sons The Supreme Court handed down a significant ruling in June 2016, clarifying when judges should award attorneys’ fees to successful copyright litigants under the Copyright Act’s discretionary fee-shifting provision, 17 U.S.C. § 505.  The Court held that the "objective reasonableness" of a losing party’s position should be given "substantial weight" – but not necessarily control –the outcome of a fee petition.[76] In a 1994 decision, Fogerty v. Fantasy Inc., the Supreme Court said that fees should be equally available to victorious plaintiffs and defendants, but did not establish a "precise rule or formula" for when they should be awarded.[77]  Rather, the Court handed down four "non-exclusive" factors for lower courts to consider – the frivolousness of the case, the losing party’s motivation, objective unreasonableness, and considerations of compensation and deterrence.  Given the relative lack of guidance, lower courts began to diverge in how they weighed these factors.  Some weighed them evenly, others tried to serve "the purposes of the Copyright Act," and others, like the Second Circuit, placed a strong emphasis on the "objective unreasonableness" factor. In this case, Supap Kirtsaeng attempted to recover more than $2 million in attorneys’ fees after prevailing in a copyright infringement case brought against him by textbook giant John Wiley & Sons.  Kirtsaeng had been buying cheap foreign editions of Wiley’s textbooks, and then reselling them in the United States.  However, in 2012, the Supreme Court ruled that the first-sale doctrine applies to works sold overseas, meaning that Kirtsaeng’s scheme was lawful and did not violate Wiley’s copyright.[78]  When Kirtsaeng sought attorneys’ fees, both the district court and Second Circuit refused on the ground that Wiley’s position in a difficult, unresolved issue of first impression – that the first sale doctrine did not apply to works sold abroad – had been objectively reasonable.[79] In its decision, a unanimous Supreme Court largely endorsed the approach of the Second Circuit, writing that "a district court should give substantial weight to the objective unreasonableness of the losing party’s position, while still taking into account all other circumstances relevant to granting fees."[80]  However, the Court nonetheless vacated the Second Circuit’s decision, saying that it had perhaps placed too much emphasis on the reasonableness question.[81]  Thus, moving forward, the Court’s opinion emphasizes that reasonableness is an important factor; however, it should not be a controlling one.  For example, the Court specifically mentioned two situations that could weigh in favor of granting attorneys’ fees in cases other than ones involving unreasonable legal positions: one involved litigation misconduct, and the other "overaggressive assertions of copyright" in which a copyright holder filed hundreds of suits on an overbroad legal theory, many of which were reasonable, but which still led to fee awards for the other side.  In future cases, therefore, courts should weigh the reasonableness of the parties’ positions, but also take into account factors such as misconduct or improper litigation strategies.   The Court described fee awards as "a double-edged sword" that both "increase the reward for a victory–but also enhance the penalty for a defeat."[82]  Therefore, the Court concluded that favoring awards in close cases, as Kirtsaeng had urged, would likely discourage parties from litigating those cases to completion by raising the stakes in suits where the outcome was already uncertain.  Rather, the Court reasoned that giving substantial weight to the "objective reasonableness" of the losing party’s position "both encourages parties with strong legal positions to stand on their rights and deters those with weak ones from proceeding."[83]  Lastly, the Court noted that the "objective reasonableness" standard is an "administrable" one that the district courts can easily assess, having litigated the merits of the case.[84] 5.       Copyrightable Subject Matter There were a few interesting developments in the area of copyrightable subject matter during the latter half of 2016.  In Solid Oak Sketches, LLC v Visual Concepts, Inc. (the "NBA 2K tattoo" case), a federal judge threw out claims for statutory damages by tattoo artist shop Solid Oak Sketches in its lawsuit against the maker of the popular NBA 2K video game series.[85]  Solid Oak had alleged that its designs–inked into the skins of NBA stars Kobe Bryant, LeBron James, DeAndre Jordan, and others–were used in the video game without permission and violated their copyrights.  The judge ruled that statutory damages were not available because the designs were registered with the U.S. Copyright Office in 2015, after the alleged infringement occurred.[86]  However, the judge ruled that Solid Oak may pursue actual damages related to lost income for the tattoos’ appearances in the NBA 2K series.   A federal judge in Atlanta allowed a suit by 54 Sudanese refugees who say that their interviews with a screenwriter about their persecution in Darfur and ultimate journey to America are subject to copyright protection, and that they are entitled to joint authorship of the taped interviews.[87]  The refugees’ interviews formed the basis of The Good Lie, a 2014 film starring Reese Witherspoon.  The judge ruled that the interviews were a "creative process designed to create material for a screenplay and film," and that this "likely includes enough creativity to render the Interviews an original work of authorship" under the Copyright Act.[88]  The case has proceeded to the discovery phase, and may impact the way that interviews and narratives are collected from real-life participants, and how those interviews are used in or form the basis of films or television programs.[89] Late in 2015, Paramount Pictures and CBS Studios filed a lawsuit against the makers of a crowd-funded Star Trek inspired fan film ("Axanar"), accusing them of copyright infringement over various concepts in the Star Trek universe, including the Klingon language.[90]  Despite director J.J. Abrams’ assurances at a Star Trek fan event that the case would soon be over, the movie studios were not prepared to give up.[91]  Studios have long tolerated, and sometimes even supported, fan-made films so long as they did not attempt to capitalize financially on copyrighted material.  While most fan-made films are modest, humble affairs, "Axanar" raised over $1.2 million through a crowd-funding campaign.  However, the producer of "Axanar" insists that this project was never about making money or competing with the official Star Trek movies.  After all, no one could "mistake it [Axanar] for an officially released ‘Star Trek’ movie that costs $150 million."[92]  Regardless, the movie studios refused to drop the suit, and both sides filed dueling summary judgment motions in federal court in Los Angeles in November 2016.  In early January 2017, a federal judge granted partial summary judgment for the plaintiffs, rejecting Axanar’s claims that the project fell "squarely within the protection of fair use" and that it would not have "any negative impact on plaintiffs’ market."  Rather, the judge held that "[t]he Axanar works are rightfully considered derivative works of the Star Trek copyrighted works," that Axanar "evidently intend[ed] for their work to effectively function as a market substitution to the Star Trek copyrighted works," and that "there is little doubt that unrestricted and widespread conduct of the sort engaged in by defendants would result in a substantially adverse impact of market substitution for the Star Trek copyrighted works."[93]  This decision set the stage for trial, scheduled for late January 2017.  Two weeks later, however, the parties reached a settlement in which Axanar acknowledged that its film had "crossed boundaries acceptable to CBS and Paramount" and "agreed to make substantial changes" to the film and follow new Star Trek fan fiction guidelines released as part of the settlement for future films.[94] 6.       Other Copyright Developments  a.        GS Media v. Sanoma Media In a case with implications for companies that operate abroad, in September 2016, the European Court of Justice issued a decision in GS Media v. Sanoma Media, holding that for-profit websites that hyperlink to unauthorized works are liable for copyright infringement.[95]  This decision was greatly praised by copyright holders, and heavily criticized by Internet companies.  In 2011, the popular Danish news website Geenstijl published multiple stories containing hyperlinks to various third-party sites where users could view and download nude photos of Dutch Playboy model Britt Decker.  Sanoma Media, which publishes the Dutch version of Playboy, complained to the third party websites, most of which took down the offending photos.  However, GS Media continued to thumb its nose at Sanoma by posting more hyperlinks to other third party site that had the photos.[96] Sanoma Media initiated legal proceedings against GS Media in the Netherlands, where the Dutch Supreme Court referred the case to the European Court of Justice. EU law states that "Member States shall provide authors with the exclusive right to authorize or prohibit any communication to the public of their works . . . ."  At issue in the case was whether posting a hyperlink to infringing conduct qualified as a "communication with the public."  The court determined that in the case of a for-profit website like GeenStijl, it did.[97]  Practically speaking, this ruling means that commercial websites in the EU will have to conduct some due diligence to check whether the publication of content on another’s website is made with or without the copyright owner’s consent.  Not-for-profit websites, however, are under no such burden and can wait until they receive a takedown request. b.        Fox v. FilmOn & Fox v. Aerokiller The Ninth and DC Circuits are poised to issue decisions in 2017 in dueling cases on whether streaming services are eligible for a compulsory license to stream copyrighted television content, potentially setting the stage for a trip to the Supreme Court.  Section 111 of the Copyright Act gives cable companies automatic access to broadcasters’ content, and the question in these cases is whether this compulsory license provision is limited to traditional cable companies, or applies to online streaming services as well.  In the past, web-based television services have generally been considered ineligible for the license, but in July 2015, a federal judge in Los Angeles ruled that FilmOn, a web-based streaming service, was eligible.[98]  The plaintiff in the case, Fox Television Studios, appealed to the Ninth Circuit.  Then, a few months later, a federal judge in Washington D.C. said the opposite – that Section 111 was intended only for traditional cable companies, and web-based streaming services did not qualify.[99]  Both cases have been appealed to their respective circuits, and a decision in both cases seems likely to come down in 2017.  The dueling cases have big implications for the growing Internet streaming industry and for the statutory license at issue. C.        Agency Wars Competition between the major talent agencies including WME, CAA, UTA, and ICM Partners is, as it has always been, fierce in Hollywood.  However, in March 2015, one of the largest mass migrations from one agency to another occurred when ten CAA comedy department agents departed to UTA, taking many of their clients along with them. Two days after the agents left, CAA filed suit against UTA and the former agents who were not under contract, alleging multiple causes of action including intentional interference with contractual relations, international interference with prospective economic advantage, and breach of fiduciary duty, among others.[100]  Some agents were under employment contracts when they quit and those agreements demanded that any disputes be handled in arbitration, whereas others were not under contract, but could be sued for helping others break their contract.  After CAA amended their complaint twice, UTA fired back in its response, claiming that the former CAA agents were within their rights to make a move because the employment agreements only bound them to employment with CAA for a seven year period, and the agents at issue had exceeded that threshold.[101]  CAA sought to stay the proceedings pending a separate arbitration for the former agents under employment contracts, which the Court granted in September 2016 and remains pending.  D.        Video Games:  Original Madden Creator Loses Big on Royalties The Ninth Circuit recently affirmed a district court ruling wiping out a large copyright infringement jury verdict against the developer of the "Madden NFL" franchise.  In 2011, a software developer brought an action against Electronic Arts ("EA") seeking contact damages for unpaid royalties.  Robin Antonick was originally hired by EA in 1984 to develop what later became the first game in the popular Madden series.[102]  At the time, his employment contract gave him the right to royalties on "Derivative Works," defined as "any computer software program or electronic game which . . . constitutes a derivative work of the Work within the meaning of the United States Copyright law."[103]  Antonick sought royalties for subsequent versions of the Madden game he did not work on, but which he alleged utilized his intellectual property.[104]  In 2013, Antonick secured a jury verdict in his favor.[105]  The successful verdict stood to be valued in the "tens of millions of dollars" in light of the $4 billion in sales Madden Football has generated.[106]  But in 2014, the district court overturned the verdict in favor of the video game developer.  The Court granted EA’s motion for judgment as a matter of law.[107]  In accordance with Ninth Circuit law, the court found that Antonick’s Madden game must be compared against the allegedly copied Madden games as a whole to determine whether "they are sufficiently similar to support a finding of illicit copying."[108]  The Court found that they were not.[109]  At trial and on motion, Antonick argued that his original work and EA’s allegedly derivative works were similar "to their counterparts," using an element-by-element comparison.[110]  The court noted that because the jury had no evidence of Antonick’s or EA’s allegedly derivative works "as a whole," it could not make a subjective comparison that the works were "virtually identical."[111]  The Court also found that "because copyright law protects only similarity in protectable expression," similarities in the look of the game–that is, "unprotectable ideas"–will not be protected by copyright law.[112]  In November 2016, the Ninth Circuit agreed that the video game developer was not entitled to royalties for games created for different Madden platforms under his contract with the game manufacturer.[113] E.        Music:  Mo’ Streamers, Mo’ Problems? 2016 was the year in which streaming became the primary mode of music consumption, with more than 251 billion on-demand streams, which accounted for 38% of the entire music-listening market, passing total digital sales for the first time.[114]  With its success, streaming has become a target of lawsuits.  Recently, several musicians have attempted to wield class actions as a sword in the ongoing battle between musicians and online streaming music services.  At the end of 2015, an independent rock musician filed a $150 million putative class action against Spotify, accusing the music streaming service of conducting an egregious and ongoing campaign of copyright infringement.[115]  The musician, David Lowery, alleges that Spotify is knowingly and willfully infringing on his rights to his music, and is wrongfully withholding royalty payments.[116]  According to the complaint, Spotify has publicly admitted to its failure to obtain licenses for some of the music it distributes or pay royalties to the copyright owners.[117] A wave of class action suits against online streaming services followed.  In January 2016, Melissa Ferrick filed a similar suit against Spotify alleging copyright infringement.[118]  Then, in February 2016, the band The American Dollar filed a similar suit against Jay Z and his Tidal streaming service.  The suit alleged that Tidal failed to properly pay mechanical royalties, which go to songwriters when their compositions are recorded or reproduced.[119]  While streaming services can pay mechanical royalties either through direct deals with copyright holders or through a compulsory license from the Copyright Office, here, Tidal allegedly did neither.  And later, one of the bands Lowery performs with–Camper Van Beethoven–launched a class action against Rhapsody International Inc., seeking $150 million for alleged copyright infringement. In the Spotify action, Lowery sought to obtain and review all of Spotify’s communications with class members in its National Music Publishers Association (NMPA) settlement, one condition of which was that its members would waive their ability to participate in any legal action against Spotify, including Lowery’s class action.[120]  Lowery was concerned Spotify might not be informing publishers and songwriters they are entitled to the settlement royalty payments and do not need to waive any claims to get them.  The district judge, however, denied Lowery’s request because he did not name the NMPA in his suit.  Ultimately, the large percentage of the NMPA’s members opting in to the settlement may imperil or at least significantly weaken Lowery’s suit. F.        A Banner Year in Art Litigation  1.        The Battle Over VARA’s Scope Continues In 2016, courts limited the Visual Artists Rights Act of 1990’s ("VARA") already narrow protections.  While VARA was designed to protect the moral rights of artists, the statute explicitly limits its protection to works of "visual art."[121]  The definition of "visual art" is "a critical underpinning of the limited scope of the [Act]."[122]  And because "applied art" does not receive VARA protections, the distinction between visual and applied art is important.  In June, the Ninth Circuit weighed in on the battle, attempting to draw the line between visual and applied art: "an object constitutes a piece of ‘applied art’–as opposed to a ‘work of visual art’–where the object initially served a utilitarian function and the object continues to serve such a function after the artist made embellishments or alterations to it."[123]  In essence, the Ninth Circuit limited what can be considered "visual art."  In following the Second Circuit, the Ninth Circuit considered the purpose of the art to be determinative in its analysis.[124]  The Court ruled that a replica 16th Century Spanish galleon created out of a school bus for the Burning Man counterculture festival was not "visual art" and thus is not protected under VARA.[125]  Two artists, Simon Cheffins and Gregory Jones, created the galleon, "La Contessa," by adding a façade, hull, decking, and masts to a school bus.[126]  While the structure was being stored on private property, the landowner of the property burned La Contessa so that a scrap metal dealer could remove the underlying school bus.[127]  The artists sued for damages under VARA, with the Ninth Circuit holding that the artists could not recover because the structure "began as a rudimentary utilitarian object, and despite being visually transformed through elaborate artistry, it continued to serve a significant utilitarian function upon its completion."[128]  The structure was used at Burning Man as a vehicle providing rides, as a venue for hosting weddings, as a stage for poetry shows, and as a centerpiece for a children’s treasure hunt.[129]  In short, because the bus retained a largely practical function, it was not deserving of VARA protections. Despite the limitations on VARA, artists continue to attempt to utilize its protections to obtain damages awards.  In January 2016, a Detroit artist asked a district court for VARA protection for her mural on a brick building on one of Detroit’s main thoroughfares.[130]  The court’s ruling is anticipated this coming year. 2.        Authentication Triumph for Peter Doig In a case that had potential far-reaching consequences for artists in the market and courts dealing with art law, a district court judge ruled in favor of an artist in a bizarre suit that sought to determine the legitimacy of a painting where the alleged artist denied ever having painted it.  A private owner and art dealer filed an action against artist Peter Doig requesting a determination that a disputed work in their possession be ruled as an authentic Peter Doig painting, which would have rendered it very valuable (worth approximately $10 million, according to the complaint).[131]  The district judge, after a bench trial, however, found in favor of Doig.[132]  In a ruling that had the potential to significantly increase the courts’ power over the art market, the judge declined to find in favor of the owner of the disputed work where a living artist himself contested the authenticity of his alleged painting and the evidence did not establish otherwise. 3.        California Resale Royalty Act Preempted by Copyright Law In April 2016, a federal district judge ruled that the California Resale Royalty Act (CRRA) is preempted by federal copyright law.[133]  The CRRA requires the seller of fine art to pay the artist a five percent royalty as long as "the seller resides in California or the sale takes place in California."[134]  The act also applies to art agents, such as art galleries.[135]  In a long-running class action saga, plaintiff artists in several related suits have alleged that two auction houses and an online retailer failed to comply with the CRRA by selling art without paying royalties.[136]  In 2015, the Ninth Circuit held that the CRRA violated the dormant commerce clause, but that act could be saved because the offending provision was severable.[137]  The district court’s April ruling finding copyright preemption, however, may eviscerate the CRRA.  An appeal to the Ninth Circuit is again pending. 4.        Fair Use and Richard Prince Go Another Round As we recognized in our 2016 Mid-Year update, fair use issues in the copyright context have been front and center of late.  Blockbuster cases–Authors Guild v. Google, Inc. and Fox News Network, LLC v. TVEyes, Inc.–have set the stage for a continuing battle in 2017 over the scope of the fair use protection.  Although codified in the Copyright Act, the fair use defense remains an intensely factual issue making the application of the defense to different fact patterns through case law especially important. In August 2016, Richard Prince, the successful appropriation artist who has long pushed the boundaries of copyright law, was sued (along with the Gagosian Gallery) for his Instagram-based "New Portraits" series in which he created enlarged photographs of other users’ Instagram posts that he had commented on.  Below is an excerpt of Exhibit B to the latest lawsuit, Graham v. Prince et al., which centers around an Instagram post by an anonymous user containing a photograph that was taken by Donald Graham, on which Prince had commented and then enlarged into an artwork.  Prince previously secured a victory in a similar case by arguing that the fair use doctrine protects his work.  In 2013, the Second Circuit ruled in Prince’s favor finding that because the defense is based on an analysis of several factors, the application of one factor is not dispositive: "the law does not require that a secondary use comment on the original artist or work, or popular culture."[138]  At issue in that suit was Prince’s work based on photographs of another artist, Patrick Cariou.[139]  On appeal, the Second Circuit concluded that twenty-five of the thirty pieces of art at issue "make fair use Cariou’s copyrighted photographs."[140]  Prince has since been sued four times, three times in 2016 alone, over his appropriation of other artists’ works.[141]    Given the differences between the specific works and posts at issue, it remains unclear whether Prince’s fair use defense will be as successful as it was in the Cariou case.   In Cariou, Prince was sued over works where "the entire source photograph is used but is also heavily obscured and altered to the point that Cariou’s original is barely recognizable."[142]  But in Prince’s subsequent suits, he often does little to alter the allegedly appropriated work, including in the "New Portrait" series.[143]  Whether or not Prince’s latest works are protected fair use, they will continue to be featured in the age-old debate, "what is art?"    [1]   Brent Lang and Cynthia Littleton, NBCUniversal to Acquire DreamWorks Animation for $3.8 Billion, (Apr. 28, 2016), available at http://variety.com/2016/biz/news/dreamworks-animation-3-8-billion-nbcuniversal-comcast-1201762634/.    [2]   Borys Kit, Jeffrey Katzenberg Bids Farewell to DreamWorks Animation Staff as Comcast’s $3.8B Deal Closes, (Aug 22, 2016), available at http://www.hollywoodreporter.com/news/jeffrey-katzenberg-bids-farewell-dreamworks-921895.    [3]   Frank Pallotta and Matt Egan Comcast Buys DreamWorks Animation in $3.8 Billion Deal, (Apr. 28, 2016), available at http://money.cnn.com/2016/04/28/media/comcast-dreamworks-nbcuniversal/.    [4]   Etan Vlessing and Georg Szalai, Hollywood Feeding Frenzy: How DreamWorks Deal Could Impact Paramount, Lionsgate (April 28, 2016), available at http://www.hollywoodreporter.com/news/hollywood-feeding-frenzy-how-dreamworks-888597.    [5]   Oriana Schwindt, Lionsgate, Starz Close $4.4 Billion Acquisition, (Dec. 8, 2016), available at http://variety.com/2016/biz/news/starz-lionsgate-close-acquisition-1201937471/.    [6]   Anousha Sakoui & Alex Sherman, Lions Gate Buys Starz for $4.4 Billion in Premium Cable Push, (June 30, 2016), available at https://www.bloomberg.com/news/articles/2016-06-30/lions-gate-buys-starz-for-4-4-billion-for-premium-cable-outlet.    [7]   Chad Bray, 21st Century Fox Reaches $14.8 Billion Deal for Remainder of Sky, (Dec. 15, 2016), available at http://www.nytimes.com/2016/12/15/business/dealbook/21st-century-fox-reaches-14-8-billion-deal-for-remainder-of-sky.html?_r=1.    [8]   Sky and 21st Century Fox Agree 18.5bn Takeover Deal, (Dec. 15, 2016), available at http://www.bbc.com/news/business-38326530.    [9]   Georg Szalai, Europe’s Altice Closes Cablevision Acquisition, Expanding U.S. Presence, (June 21, 2016), available at http://www.hollywoodreporter.com/news/europes-altice-closes-cablevision-acquisition-889911. [10]   Nick Kostov, Altice Closes Buy of Cablevision, (June 21, 2016), available at http://www.wsj.com/articles/altice-closes-buy-of-cablevision-1466515394. [11]   Marie Mawad, Elco van Groningen and Gerry Smith, Altice to Acquire Suddenlink Stake in $9.1 Billion U.S. Deal, (May 19, 2015), available at https://www.bloomberg.com/news/articles/2015-05-19/altice-said-to-seek-purchase-of-suddenlink-in-u-s-expansion. [12]   Kostov, supra note 10. [13]   Paul Bond, DirecTV Exec Promises Return to Growth "Soon", (Mar. 2, 2016), available at http://www.hollywoodreporter.com/news/directv-executive-promises-return-growth-872122. [14]   Jason Lynch, AT&T and Hulu Share More Details About Their Upcoming Skinny Bundle Streaming Offerings Time Inc. Says Its New OTT platform is Off to a ‘Fantastic’ Start, (Sept. 28, 2016), available at http://www.adweek.com/news/television/att-and-hulu-share-more-details-about-their-upcoming-skinny-bundle-streaming-offerings-173786. [15]   Peter Kafka, How Skinny will Hulu’s New Bundle be?, (Nov. 1 2016), available at http://www.recode.net/2016/11/1/13490026/hulu-disney-fox-espn-fox-sports-streaming-tv. [16]   Matt Pressberg, Time Warner Just Made Hulu the Skinny Bundle to Beat, (Aug. 3, 2016), available at http://www.thewrap.com/time-warner-just-made-hulu-the-skinny-bundle-to-beat/. [17]   Kele Bigknife, Customers are NOT "Amused" by Chicago’s New 9% Streaming Tax, Michigan Business & Entrepreneurial Law Review, (Oct. 1, 2015), available at http://mbelr.org/consumers-are-not-amused-by-chicagos-new-9-streaming-tax/;  Chicago Provides Cloud Computing, Software, and Related Guidance on Nonpossessory Lease Tax Exemptions and Sourcing, PricewaterhouseCoopers LLP, (June 30, 2015), available at https://www.pwc.com/us/en/state-local-tax/newsletters/salt-insights/assets/pwc-chicago-provides-guidance-cloud-computing-software-lease-tax.pdf. [18]   Complaint for Declaratory and Injunctive Relief at 1, Labell v. City of Chicago, No. 2015-CH-13399 (Ill. Cir. Ct. Sept. 9, 2015). [19]   Id. [20]   Id. [21]   Id. [22] Bollea v. Gawker Media, LLC, No. 8:12-cv-02348-JDW-TBM (M.D. Fla. Oct. 16, 2012), Dkt. 1. [23] Bollea v. Clem, Case No. 12012447-CI-011 (Fla. 6th Cir. Ct. Oct. 15, 2012). [24] Bollea v. Gawker Media, LLC, No. 8:12-cv-02348-JDW-TBM (M.D. Fla. Nov. 14, 2012), Dkt. 47. [25] Bollea v. Gawker Media, LLC, No. 8:12-cv-02348-JDW-TBM (M.D. Fla. Jan. 4, 2013), Dkt. 70. [26] Bollea v. Clem, Case No. 12012447-CI-011 (Fla. 6th Cir. Ct. Dec. 28, 2012). [27] Bollea v. Clem, Case No. 12012447-CI-011 (Fla. 6th Cir. Ct. Apr. 25, 2013). [28] John Cook, A Judge Told Us to Take Down Our Hulk Hogan Sex Tape. We Won’t., available at https://web.archive.org/web/20130428130143/http://gawker.com/a-judge-told-us-to-take-down-our-hulk-hogan-sex-tape-po-481328088. [29] Bollea v. Clem, Case No. 12012447-CI-011 (Fla. 6th Cir. Ct. May 2, 2013). [30] Gawker Media, LLC v. Bollea, 129 So. 3d 1196 (Fla. Dist. Ct. App. Jan. 17, 2014).  [31] Id. at 1202. [32] Bolea v. Gawker Media, LLC, Case No. 12012447-CI-011 (Fla. 6th Cir. Ct. June 8, 2016). [33] Jackson v. Radar Online LLC, Case No. BC628510 (LA Sup. Ct. July 27, 2016). [34] Id. at 1-2. [35] Eramo v. Rolling Stone, LLC, Case No. 3:15-CV-00023-GEC, at ECF 1 (W.D.Va. May 29, 2015). [36] Eramo v. Rolling Stone, LLC, Case No. 3:15-CV-00023-GEC, at ECF 189 (W.D.Va. Sept. 22, 2016). [37] Eramo v. Rolling Stone, LLC, Case No. 3:15-CV-00023-GEC, at ECF 366 (W.D.Va. Nov. 4, 2016). [38] Ashley Cullins, Why the Defamation Verdict Against Rolling Stone Could Chill Media Apologies, (Nov. 7, 2016), available at http://www.hollywoodreporter.com/thr-esq/why-defamation-verdict-rolling-stone-could-chill-media-apologies-944393. [39] Eramo v. Rolling Stone, LLC, Case No. 3:15-CV-00023-GEC, at ECF 400 (W.D.Va. Dec. 8, 2016). [40] Id. at 7-8. [41] Sarver v. Hurt Locker LLC, Case No. 2:10-cv-09034-JHN-JCx, 2011 WL 11574477 (C.D. Cal. Oct. 13, 2011). [42] Sarver v. Hurt Locker LLC, 813 F.3d 891 (9th Cir. 2016). [43] Id. at 899. [44] Id. at 902. [45] Id. at 903-07. [46] Id. [47] Heller v. NBCUniversal, Inc., Case No. 2:15-cv-09631, at ECF 1 (C.D. Cal. Dec. 15, 2015). [48] Heller v. NBCUniversal, Inc., Case No. 2:15-cv-09631, at ECF 54 (C.D. Cal. June 29, 2016). [49]  Heller v. NBCUniversal, Inc., Case No. 2:15-cv-09631, at ECF 65 (C.D. Cal. Jan. 4, 2017). [50]  Capitol Records LLC v. Vimeo, LLC, 826 F.3d 78, 93 (2d Cir. 2016). [51] Id. at 97-99. [52] 17 U.S.C. § 512(c) (1998). [53] Sound Recording Act of 1971, Pub. L. No. 92-140, 85 Stat. 391 (1971), amended by Pub. L. No. 93-573, 88 Stat. 1873 (1974) (codified as amended at 17 U.S.C. § 102). [54] UMG Recordings, Inc. v. Escape Media Group Inc., 964 N.Y.S.2d 106 (N.Y. App. Div. 2013). [55] See Federal Copyright Protection for Pre–1972 Sound Recordings, (Dec. 2011), available at http://www. copyright.gov/docs/sound/pre–72–report.pdf.  Although the Copyright Office Report notes that there is "no reason" why DMCA safe harbors should not apply to the use of pre–1972 recordings, based on a reading of the statute it concludes that "it is for Congress, not the courts, to extend the Copyright Act to pre–1972 sound recordings." Id. at 130, 132. [56] Capitol Records Inc. v. MP3tunes, LLC, 821 F.Supp.2d 627 (S.D.N.Y. 2011). [57] Capitol Records, LLC v. Vimeo, LLC, 972 F.Supp.2d 500, 537 (S.D.N.Y. 2013). [58] Id. at 524-525. [59] Capitol Records, LLC v. Vimeo, LLC, 972 F.Supp.2d 537, 552 (S.D.N.Y. 2013) ("This issue is a question of first impression in the Second Circuit, and aside from these two decisions [Grooveshark and MP3tunes] no other federal court appears to have addressed the issue."). [60] Capitol Records v. Vimeo, 826 F.3d at 90. [61] Id. [62] Id. at 97. [63] 676 F.3d 19 (2012). [64] Capitol Records v. Vimeo, 826 F.3d at 98. [65] Id. at 99. [66] Petition for Reh’g en banc, Capitol Records v. Vimeo, 826 F.3d 78 (2d Cir. 2016), denied. [67] Petition for Writ of Certiorari, Capitol Records v. Vimeo, 826 F.3d 78 (2d Cir. 2016) (No. 14-1048). [68] Andy, Universal Music Settles In-Flight Music Lawsuit for $30m+, (Aug. 17, 2016), available at https://torrentfreak.com/universal-music-settles-in-flight-music-lawsuit-for-30m-160817/. [69] UMG Recordings, Inc. v. Global Eagle Entm’t, Inc., Case No. 14-cv-3466-MMM, 2015 U.S. Dist. LEXIS 102659, at *26 (C.D. Cal. Jun. 22, 2015). [70] Daniel Siegal, UMG, Media Co. Delay In-Flight IP Trial to Try and Settle, (Apr. 28, 2016), available at http://www.law360.com/articles/790409/umg-media-co-delay-in-flight-ip-trial-to-try-and-settle?article_related_content=1. [71] Kaveh Waddell, Why In-Flight Music Is In Trouble, (July 9, 2015), available at http://www.theatlantic.com/politics/archive/2015/07/why-in-flight-music-is-in-trouble/458478/. [72] VMG Salsoul, LLC v. Ciccone, 824 F.3d 871 (9th Cir. 2016). [73] 410 F.3d 792, 801 (6th Cir. 2005) ("Get a license or do not sample. We do not see this as stifling creativity in any significant way."). [74] Colin Stutz, Justin Bieber & Skrillex Sued Over ‘Sorry’: Report, (May 26, 2016), available at http://www.billboard.com/articles/columns/pop/7385928/justin-bieber-skrillex-sued-sorry-white-hinterland-dance. [75] VMG Salsoul  v. Ciccone, 824 F.3d at 883, 885. [76] 136 S. Ct. 1979, 1986-87 (2016). [77] 510 U.S. 517 (1994). [78] Kirtsaeng v. John Wiley & Sons, Inc.,133 S.Ct. 1351, 1356 (2013). [79] John Wiley & Sons, Inc. v. Kirtsaeng, No. 08-cv-07834 (DCP), 2013 WL 6722887, at *2-3 (S.D.N.Y. Dec. 20, 2013); John Wiley & Sons, Inc. v. Kirtsaeng, 605 Fed.Appx 48, 49 (2d Cir. 2015). [80] 136 S.Ct. at 1981-82. [81] Id. at 1983 ("Its language at times suggests that a finding of reasonableness raises a presumption against granting fees, and that goes too far in cabining the district court’s analysis."). [82] Id. at 1987. [83] Id. at 1986. [84] Id. at 1988. [85] Solid Oak Sketches, LLC v. 2K Games, Inc., No. 16CV724-LTS, 2016 WL 4126543, at *4 (S.D.N.Y. Aug. 2, 2016). [86] Id. at *3. [87] Found. for Lost Boys and Girls of Sudan, Inc. v. Alcon Entm’t, LLC, No. 1:15-cv-00509-LMM (N.D. Ga. Mar. 22, 2016). [88] Id. at *21. [89] Eriq Gardner, Judge Lets 54 Sudanese Refugees Pursue Copyright and Fraud Claims Over Reese Witherspoon Film, (Mar. 24, 2016), available at http://www.hollywoodreporter.com/thr-esq/judge-lets-54-sudanese-refugees-878021. [90] Complaint, Paramount Pictures Corp. v. Axanar Prods., Inc., No. 2:15-cv-09938-RGK-E (C.D. Cal. Dec. 29, 2015). [91] Josh Rottenberg, Remember How J.J. Abrams Said the Lawsuit Against the ‘Star Trek: Axanar’ Fan Film Had Been Dropped? Not Quite., (June 20, 2016), available at http://www.latimes.com/entertainment/movies/la-et-mn-star-trek-axanar-lawsuit-update-20160617-snap-story.html. [92] Id.. [93] Paramount Pictures Corp. v. Axanar Prods., Inc., Order Re: Plaintiffs’ Motion for Partial Summary Judgment and Defendants’ Motion for Summary Judgment, Case No. 2:15-CV-09938-RGK-E (C.D. Cal. January 3, 2017), at 13. [94] Bill Donahue, Paramount Settles ‘Star Trek’ Fan Film Copyright Suit (January 20, 2017), available at https://www.law360.com/articles/883119/paramount-settles-star-trek-fan-film-copyright-suit. [95] Case C-160/15, GS Media BV v. Sanoma Media Netherlands BV, 2016 http://curia.europa.eu (Sept. 8, 2016). [96] Court of Justice of the European Union Press Release No 92/16, Judgment in Case C-160/15 GS Media BV v. Sanoma Media Netherlands BV (Sept. 8, 2016). [97] Case C-160/15, GS Media BV v. Sanoma Media Netherlands BV, 2016 http://curia.europa.eu (Sept. 8, 2016). [98] Bill Donahue, FilmOn Wins Big Ruling on Compulsory Copyright License, (July 16, 2015), available at http://www.law360.com/articles/680282. [99] Bill Donahue, FilmOn Can’t Use Compulsory Copyright License, Judge Says, (Nov. 12, 2015), available at http://www.law360.com/articles/726444. [100] Creative Artists Agency, Inc. v. United Talent Agency, LLC, Case No. SC123994 (LA Sup. Ct. Apr. 2, 2015). [101] Creative Artists Agency, Inc. v. United Talent Agency, LLC, Case No. SC123994 (LA Sup. Ct. May 31, 2016). [102] See Antonick v. Elec. Arts Inc., No. C-11-1543-CRB, 2014 WL 245018, at *1 (N.D. Cal. Jan. 22, 2014), aff’d, 841 F.3d 1062 (9th Cir. 2016). [103] Id. [104] Compl., Antonick v. Electronic Arts, Inc., 2011 WL 7942206 , (No. CV-11-1548-EDL) (N.D. Cal. Mar. 30, 2011). [105] Appellant’s Br., Antonick v. Electronic Arts, Inc., 2014 WL 3909266, at *20 (No. 14-15298) (9th Cir. Aug. 1, 2014). [106] Compl., Antonick, 2011 WL 7942206. [107] Antonick, 2014 WL 245018, at *1. [108] Id. at *6 (citing Mattel, Inc. v. MGA Entm’t, Inc., 616 F.3d 904, 913–14 (9th Cir.2010)). [109] Id. [110] Id. at *7. [111]   Id. at *6, *7. [112] Id. at *12. [113] Antonick v. Elec. Arts, Inc., 841 F.3d 1062, 1066, 1069 (9th Cir. 2016). [114]   Matthew Strauss, Streaming Now Officially the Number One Way We Listen to Music in America, (Jan. 6, 2017), available at http://pitchfork.com/news/70724-streaming-now-officially-the-number-one-way-we-listen-to-music-in-america/. [115] Class Action Compl. for Damages and Injunctive Relief at 8, Lowery v. Spotify USA Inc., (No. 2:15-cv-09929-BRO-RAO) (C.D. Cal. Dec. 28, 2015). [116] Id. [117] Id. [118] Ryan Faughnder, Spotify Hit with Second Songwriter Lawsuit in Two Weeks, (Jan. 8, 2016), available at http://www.latimes.com/entertainment/envelope/cotown/la-et-ct-spotify-songwriter-lawsuits-20160108-story.html. [119] See Kia Kokalitcheva, Jay-Z’s Tidal Music Streaming Service Hit with $5 Million Copyright Lawsuit, (Feb. 29, 2016), available at http://fortune.com/2016/02/29/tidal-copyright-lawsuit/. [120] Plaintiffs’ Notice of Mtn and Mtn for Corrective Action to Prevent Misrepresentations to Putative Class Members, Case No. 2:15-cv-09929-BRO-RAO, (C.D. Cal. Apr. 18, 2016). [121] 17 U.S.C. § 106A(a)(3). [122] Pollara v. Seymour, 344 F.3d 265, 269 (2d Cir. 2003) (quoting H.R.Rep. No. 101–514, at 1990 U.S.C.C.A.N. 6915, 6920–21) (internal quotations omitted). [123] Cheffins v. Stewart, 825 F.3d 588, 593 (9th Cir. 2016). [124] Id. at 593. [125] Id. at 595. [126] Id. at 591. [127] Id. [128] Id. at 595. [129] Id. [130] Compl. at 1-2, Katherine Craig v. Princeton Enterprises LLC, (No. 2:16-cv-10027) (E.D. Mich. Jan. 5, 2016). [131] Verified Compl. for Declaratory and Other Relief, Robert Fletcher v. Peter Doig, 2013 WL 3058713, (No. 1:13-cv-03270) (N.D.Ill. Apr. 30, 2013). [132] J. in a Civil Case, Robert Fletcher v. Peter Doig, 2016 WL 4708999, (No. 1:13-cv-03270) (N.D.Ill. Aug. 23, 2016). [133] Estate of Graham v. Sotheby’s, Inc., 178 F. Supp. 3d 974, 991 (C.D. Cal. 2016). [134] Cal. Civ. Code § 986(a). [135] Id. [136] Graham, 178 F. Supp. 3d at 980. [137] Sam Francis Found. v. Christies, Inc., 784 F.3d 1320, 1326 (9th Cir. 2015), cert. denied, 136 S. Ct. 795 (2016). [138] Cariou v. Prince, 714 F.3d 694, 698–99 (2d Cir. 2013), cert. denied, 134 S. Ct. 618 (2013). [139] Id. at 697. [140] Id. at 698-99. [141] Compl., Donald Graham v. Richard Prince, (No. 1:15-cv-10160-SAS), (S.D.N.Y. Dec. 30, 2015); Compl. for Copyright Infringement, Dennis Morris v. Richard Prince (No. 2:16-cv-03924) (C.D. Cal. June 3, 2016); Compl., Ashley Salazar v. Richard Prince, (No. 2:16-cv-04282) (C.D. Cal. June 15, 2016); Compl., Eric McNatt v. Richard Prince, No. 1:16-cv-08896 (S.D.N.Y. Nov. 16, 2016). [142] Cariou, 713 F.3d at 710. [143] See, e.g., Compl., Ashley Salazar v. Richard Prince, (No . 2:16-cv-04282). The following Gibson Dunn lawyers assisted in the preparation of this client update:  Scott Edelman, Ruth Fisher, Howard Hogan, Nathaniel Bach, Corey Singer, Colleen Kenny, Sean O’Neill, Sara Ciccolari-Micaldi and Lauryn Togioka. Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding these developments.  Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or the following leaders and members of the firm’s Media, Entertainment & Technology Practice Group: Scott A. Edelman – Co-Chair, Los Angeles (+1 310-557-8061, sedelman@gibsondunn.com)Ruth E. Fisher – Co-Chair, Los Angeles (+1 310-557-8057, rfisher@gibsondunn.com)Orin Snyder – Co-Chair, New York (+1 212-351-2400, osnyder@gibsondunn.com)Howard S. Hogan – Washington, D.C. (+1 202-887-3640, hhogan@gibsondunn.com) Ari Lanin – Los Angeles (+1 310-552-8581, alanin@gibsondunn.com)Benyamin S. Ross – Los Angeles (+1 213-229-7048, bross@gibsondunn.com)Helgi C. Walker – Washington, D.C. (+1 202-887-3599, hwalker@gibsondunn.com) © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

February 9, 2017 |
2016 Year-End Aerospace and Related Technologies Update

This February 2017 edition of Gibson Dunn’s Aerospace and Related Technologies Update discusses newsworthy developments, trends, and key decisions from 2016 that are of interest to aerospace and defense, satellite, and drone companies, and new market entrants in the commercial space and related technology sectors, including the private equity and other financial institutions that support and enable their growth. Specifically, this update covers the following areas:  (1) commercial unmanned aircraft systems ("UAS"), or drones; (2) government contracts litigation involving companies in the aerospace and defense industry; and (3) the commercial space sector.  We discuss each of these areas in turn below. I.  COMMERCIAL UNMANNED AIRCRAFT SYSTEMS Unmanned aircraft systems ("UAS") technology has improved rapidly while becoming reasonably affordable for most organizations.  The commercial applications of UAS, more commonly referred to as "drones," include sensory data collection, building inspections, utility inspections, agriculture monitoring and treatment, railway inspections, pipeline inspections, mapping of mines, and photography.  New applications are being created on a regular basis.  For years, the law prohibited commercial drone operations absent a special exemption.  However, in 2016, a comprehensive set of regulations governing non-recreational drone operations was finalized, thus creating sweeping opportunities to implement commercial drone operations. In 2016, many organizations incorporated drones into their operations and tested future concepts.  The drone delivery concept was validated through multiple corporate deliveries:  Amazon Prime Air made its first delivery in the United Kingdom; DHL delivered packages to a mountain plateau in Germany; Google and Chipotle tested burrito deliveries at Virginia Tech; and 7-Eleven and Flirtey delivered products in Reno, Nevada.  Disney World, in collaboration with Intel, revealed a new holiday show consisting of drones performing in the night sky, rather than traditional fireworks.  Walmart announced it would use drones to better track inventory at distribution centers.  And CNN became the first U.S. broadcaster to launch a drone division.   Overall, 2016 was an historic year that officially ushered in a new industry.  We expect that the industry will continue to develop in the coming year, and that key topics such as rules governing flights over non-participating people, litigation concerning property owners’ rights to airspace, privacy, and operations beyond visual line of sight will be addressed.  Related jurisdictional disputes are likewise on the horizon. Expanded drone operations also created controversy.  Citizens and police shot down drones on several occasions, news organizations reported collisions between drones and commercial aircraft (all stories were proven false after investigations), and concerns about privacy continued to build.  To get you caught up on 2016’s groundbreaking drone developments, below we have briefly summarized:  (A) Part 107 drone regulations; (B) the likely Proposed Rule for Operations Over Non-Participating People; (C) Privacy; and (D) the Intersection of Federal and State/Local Drone Laws. A.  Part 107 – Drone Regulations On August 29, 2016, the long-awaited comprehensive regulations for Small Unmanned Aircraft Systems ("sUAS"), drones weighing 55 pounds or less, became law under Part 107 of Title 14 of the Code of Federal Regulations ("Part 107").[1]  These regulations are monumental for commercial drone operations because they provide the regulatory foundation for the burgeoning industry.  Prior to Part 107, the law prohibited commercial drone operations unless an operator obtained a Section 333 exemption from the Federal Aviation Administration ("FAA").  Part 107 permits commercial operations within certain parameters and eliminates the need for an exemption, unless one wants to operate outside of those parameters. Significantly, Part 107 removed the time-consuming and expensive Section 333 requirement that commercial drone operators obtain a recreational or sport pilot license.  Under the new regulations, commercial drone pilots must obtain the newly created remote pilot certificate with a sUAS rating or be under the direct supervision of a person with a certificate.  To obtain the certificate, a person must pass an aeronautical knowledge test at an FAA-approved center, be vetted by the Transportation Security Administration, be able to speak English, and be at least 16 years old.  Individuals with an existing pilot license need only take an online sUAS training course to obtain a remote pilot certificate.[2]  In 2016, the FAA issued over 14,000 remote pilot certificates. In addition, Part 107 set forth several key operational limits for commercial drones[3]: maximum weight is 55 pounds; maximum groundspeed is 100 mph (87 knots); maximum altitude is 400 feet above ground level or within 400 feet of a structure; flights must be within daylight hours or civil twilight if the drone utilizes anti-collision lighting; drones must remain within visual line of sight of the remote pilot or an optional visual observer; minimum flight visibility must be no less than three statute miles;  minimum distance from clouds must be no less than 500 feet below the cloud and 2000 feet horizontally from the cloud; drones may not operate over persons not directly participating in the operation; drones must yield the right of way to other aircraft; remote pilots cannot operate drones from a moving vehicle unless the flight is over a sparsely populated area; and remote pilots cannot operate more than one drone at a time (i.e., no swarming).               1.  Part 107 Waivers The FAA’s willingness to provide waivers is one of the most promising aspects of Part 107 and will allow regulations to expand as technology progresses.  The waivers permit remote pilots to deviate from the following operational limits:[4] operations from a moving vehicle; daylight operations; operations beyond a pilot’s visual line of sight; visual observer requirements; operations of multiple drones; yielding the right of way; operations over people; operating limitations; and operations in certain airspace. Applications for a Certificate of Waiver are completed online and granted on a case-by-case basis.  In 2016, the FAA granted 239 waivers.[5]  The majority of these waivers were for nighttime operations.  Notably, the following organizations received waivers: CNN received a waiver for operations over people; Precision Hawk and BNSF Railway Company received waivers allowing operations beyond visual line of sight; and Project Wing, Intel Corporation, and Walt Disney Parks and Resorts received waivers for the operation of multiple drones. If an organization needs an exemption from a particular section in Part 107 that is not subject to a waiver, it can request a Section 333 exemption or apply for a type certification.  This will be particularly relevant for operators wishing to fly drones greater than 55 pounds because Part 107 only applies to drones weighing 55 pounds or less.                2.  Airspace Authorization  In addition to applying for waivers, operators can now seek airspace authorization for operations in restricted airspace.  However, obtaining airspace authorization has been a source of frustration for many operators.  Part 107 allows operations "in Class B, Class C, or Class D airspace or within the lateral boundaries of the surface area of Class E airspace" if the remote pilot obtains "prior authorization from Air Traffic Control."[6]  But an FAA guidance letter from October 3, 2016, restricted Air Traffic Control from granting such authorization, stating that FAA headquarters will approve airspace waivers and coordinate with the relevant air traffic facility.[7]  The FAA UAS website’s authorization portal requires that applications be submitted at least 90 days prior to the operation, which can seriously hinder timely operations. *      *      * Although the waiver and airspace authorization process is far from perfect, the mere existence of an institutionalized waiver and airspace authorization program is promising.  We expect that the FAA will streamline the process in 2017, making waivers and airspace authorization more accessible to remote pilots. We also expect that Part 107 is the beginning, and not the end, of drone regulations.  For example, in the next few years, the FAA will likely propose rules for drones heavier than 55 pounds, and within the next few months, the FAA will likely publish a Notice of Proposed Rule Making for operating drones over non-participating people.  B.  Proposed Rule for Operations Over Non-Participating People is Expected in 2017 In February 2016, the FAA assembled an aviation rulemaking committee ("ARC") to recommend standards that would allow certain drones to be operated over people.  The ARC submitted its recommendations on April 1, 2016, dividing drones into four categories based on the level of risk correlated to a weight or impact energy equivalent.[8] The FAA’s Notice of Proposed Rulemaking ("NPRM") is expected to significantly vary from the ARC’s recommendations.  The FAA sent the proposed rule to the White House Office of Information and Regulatory Affairs ("OIRA") in November 2016.  Once OIRA approves the proposed rule, the NPRM will be published in the Federal Register and a public comment period will begin.  As with the NPRM for Part 107, there likely will be thousands of public comments concerning the proposed rule.  Timing for publishing the NPRM is uncertain.  On January 20, 2017, President Trump issued a memorandum to all executive departments and agencies freezing new or pending regulations for 60 days. The proposed rules have the potential to remove a tremendous obstacle for certain drone operators.  Under Part 107, drones are prohibited from flying over unsheltered people unless they are "[d]irectly participating in the operation."[9]  Individuals "[d]irectly participating" include the remote pilot, the person on the controls, a visual observer, and anyone else essential to the operation.  Those who have merely given consent for the operations are excluded.[10]  Therefore, under Part 107, implementing certain commercial drone operations may be a challenge, or impossible, due to the presence of non-participating people in the operational area.  For example, drone operations cannot take place over active construction or mining sites without first clearing the area of people, and news organizations may be prohibited from flying directly over a newsworthy event.  Part 107 does provide waivers for flights over non-participants on a case-by-case basis, but the waiver process is not always a practical option for addressing time-sensitive commercial needs.  The upcoming proposed rule will create standards for safe flights over non-participating people and should be a catalyst for many commercial operations.  Flights over non-participating people will likely increase privacy concerns.   C.  Privacy–Voluntary Best Practices As the popularity of both commercial and hobbyist drones increases, concerns over privacy and personal data collection continue to swell.  In February 2015, President Obama issued a Presidential Memorandum directing that privacy, civil rights, and civil liberties concerns be taken into account as drones are integrated into the national airspace.[11]  Obama ordered the National Telecommunications and Information Administration ("NTIA") of the U.S. Department of Commerce to create a private-sector engagement process to help develop voluntary best practices for privacy, accountability, and transparency issues regarding commercial and private drone use.  That process took place over the past year, with the participation of multiple private-sector groups.  On May 19, 2016, the NTIA released voluntary best privacy practices for drones.[12]  The voluntary best practices received agreement from technology companies, insurance companies, media organizations, drone industry associations, and privacy groups.  Although these best practices do not create any legal standards, they set useful guidelines for any organization conducting drone operations.  Many of the recommended best practices take into account the size and complexity of the operator (e.g., a large public company is expected to have a more comprehensive privacy policy with respect to its use of drones than an individual real estate photographer).  Moreover, newsgathering organizations, to which strong First Amendment protections apply, are expressly excluded.  The following summarizes the recommended best practices:   Covered Data:  The best practices focus heavily on the collection and storage of "covered data."  Covered data is information collected by drones that identifies a particular person.  If the data is unlikely to be linked to a particular person, or if it is altered so that a particular person is not recognizable, it is not considered covered data.  Privacy Policy:  Organizations collecting covered data should make reasonable efforts to inform individuals directly impacted by those organizations’ use of drones, and they should maintain a publicly available privacy policy appropriate to their size.  The policy should identify: the kind of covered data the drone operations will collect; the purpose for which the data is collected; retention and de-identification practices; the types of entities with whom the data will be shared; information on how to submit a privacy or security complaint; and the organization’s practices with respect to responding to law enforcement requests for data.  Reasonable Expectation of Privacy:  Absent a compelling need, drone operators should avoid collecting covered data when the subject has a reasonable expectation of privacy.  Operators should avoid intentional, persistent, and continuous collection of covered data about individuals.  Further, operators should make reasonable efforts to minimize flights over private property without consent of the owner or without appropriate legal authority. Data Sharing and Use Limits:  Drone operators should only use covered data for those purposes identified in their privacy policy.  Without consent, the data should not be shared for marketing purposes or publicly disclosed without reasonable efforts to obfuscate (e.g., blur) the data.  Further, without consent, operators should not use covered data for employment eligibility, promotion or retention, credit eligibility, or healthcare treatment eligibility, unless expressly permitted by a sector-specific regulatory framework.  Data Storage:  Covered data should not be stored longer than necessary for the purposes for which it was collected (as disclosed to the public in a privacy policy).  Further, organizations should develop easily accessible processes to receive privacy or security complaints about the organization’s use of drones.  These processes should include mechanisms by which individuals can request that an organization delete, de-identify, or otherwise obfuscate a person’s covered data. Data Security:  Organizations storing covered data should implement a program to address and manage cybersecurity risks.  The program should have reasonable administrative, technical, and physical safeguards appropriate to the organization’s size and the nature of the covered data.  Appropriate safeguards include those described in guidance from the Federal Trade Commission, the National Institute of Standards and Technology Cybersecurity Framework, and the International Organization for Standardization’s 27001 standard for information security management.  Corporations should consider the below practices to secure covered data: establish a written security policy detailing the collection, use, storage, and dissemination of covered data; regularly monitor systems for breach and data security risks; provide security training to employees with access to covered data; and limit access to covered data. Part 107 does not address privacy.  In the NPRM for Part 107, the FAA stated that privacy issues were "beyond the scope" of the rule, and "that state law and other legal protections for individual privacy may provide recourse for a person whose privacy may be affected through another person’s use of a UAS."[13]  During the comment period for the NPRM, the FAA received around 180 comments regarding privacy concerns, but declined to include privacy regulations within Part 107.[14]              1.  Litigation Regarding Whether the FAA Needs to Address Privacy The Electronic Privacy Information Center ("EPIC") challenged the FAA’s decision to exclude privacy regulations from Part 107 by filing a petition for review in August 2016.[15]  EPIC had previously sought review of the NPRM because it excluded privacy regulations, but in May 2016, the D.C. Circuit held that EPIC’s challenge was premature because the proposed rule was not final.[16]  After the rule became final, EPIC filed a new petition of review asking the court to vacate Part 107 and remand it to the FAA for further proceedings.[17]  EPIC contends that the FAA Modernization and Reform Act of 2012 requires the FAA to address privacy concerns related to drones, while the FAA asserts that privacy is beyond its charge to regulate aviation safety in the national airspace.  All eyes will be on the D.C. Circuit to determine if the FAA will be required to issue rules related to privacy. Regardless of whether or not there are federal rules directed towards drone privacy, corporations should make their best efforts to comply with the NTIA Voluntary Best Practices, as well as state and local privacy laws.  D.  Uncertainty Clouds the Intersection of Federal and State/Local Drone Laws Although Part 107 created a federal regulatory framework for commercial drone operations, there is still significant confusion as to what constitutes a legal flight under evolving state and local laws.  Laws regulating the drone industry exist in 32 states, and five states have adopted resolutions regarding drones.[18]  In 2016, at least 38 state legislatures considered legislation to regulate the drone industry, and 17 states (Alaska, Arizona, California, Delaware, Idaho, Illinois, Indiana, Kansas, Louisiana, Oklahoma, Oregon, Rhode Island, Tennessee, Utah, Vermont, Virginia and Wisconsin) passed 31 pieces of legislation.[19]  In addition, countless local governments proposed and passed ordinances impacting the drone industry at the local level.  Thus, it will be critical for companies launching commercial drone enterprises to work closely with counsel to determine which, if any, state and local laws apply to each commercial operation.  They will also need to evaluate preemption issues.  In the developing drone community, confusion stems from the FAA’s position that it controls the airspace "from the ground up," and that the notion that it does not control airspace below 400 feet is a "myth."[20]  However, many state and local governments do not agree with the FAA’s interpretation.  There are major implications for where navigable airspace begins, and the question ultimately will be settled by federal courts over the next several years.  This is one of the most important legal issues for the industry because, without clarification, legal compliance and enforcement may be impossible within some localities.  While the FAA governs the "navigable airspace" of the United States,[21]  navigable airspace is defined as the "airspace above the minimum altitudes of flight prescribed by regulations . . . including airspace needed to ensure safety in the takeoff and landing of aircraft."[22]  The FAA regulations list the minimum safe altitude as 500 feet above the surface in non-congested areas (lower in sparsely populated areas) and 1,000 feet above the highest obstacle in congested areas.[23]  Although aircraft can fly below these minimum safe altitudes for takeoff or landing, when these laws and regulations were created, the very concept of low-flying, low-price drones–which can take off and land on anyone’s property–only existed in science fiction.  The proliferation of drones requires clarification of where private property rights end and navigable airspace begins. The Supreme Court provided some guidance on property rights and navigable airspace in 1946 in United States v. Causby.[24]  In Causby, a chicken farm was located near an airport, and the glide path for one of the runways was 83 feet above the property.  The Court examined whether military aircraft flying 83 feet above the property was a taking.  The Court held that it was a taking and stated:  "[I]t is obvious that if the landowner is to have full enjoyment of the land, he must have exclusive control of the immediate reaches of the enveloping atmosphere.  Otherwise buildings could not be erected, trees could not be planted, and even fences could not be run."[25]  The court also acknowledged that an invasion of air above one’s property can be in the "same category as invasions of the surface."[26]  The Court declined to determine the exact boundary between one’s property and public airspace:  "We need not determine at this time what those precise limits are."[27]  Even if the Court did determine precise limits, a military aircraft landing at an airport in 1946 is fundamentally different from today’s low-flying, low-price, consumer and commercial drones.  In 2016, two pending lawsuits began to address the key question of defining navigable airspace in the context of drones.                    Boggs v. Merideth, No. 3:16-cv-00006 (W.D. Ky. Jan. 4, 2016) In Boggs v. Merideth (also known as the "Drone Slayer" case), a drone operator in the Western District of Kentucky filed a lawsuit against a landowner (the self-proclaimed "Drone Slayer") who downed the plaintiff’s drone with a shotgun.[28]  The drone was flying around 200 feet above the Defendant’s property, and the defendant claimed it was trespassing and invading his privacy.  After a state judge found the defendant was "within his rights," the plaintiff filed a complaint in federal court for declaratory judgement to "define clearly the rights of aircraft operators and property owners."[29]  The district court has not yet ruled on the issue.                     Huerta v. Haughwout, No. 3:16-cv-358, Dkt. No. 30 (D. Conn. Jul. 18, 2016) The most notable case of 2016 regarding the FAA’s authority over low-level airspace was Huerta v. Haughwout (also known as the "flamethrower drone" case).  The Haughwouts posted YouTube videos of a drone flying a few feet above their property.  In one video, a drone fired an attached handgun, and in another video, a drone roasted a turkey with an attached flamethrower.  The FAA sent the Haughwouts an administrative subpoena to acquire more information about these activities.  The Haughwouts declined to comply with the subpoenas and claimed their activities were not subject to investigation by the FAA.  The FAA sought enforcement of the subpoenas.  The District Court for the District of Connecticut found the administrative subpoenas to be valid and ordered the Haughwouts to comply.[30]  In his order, Judge Jeffrey Meyer included dicta that casts doubt on the FAA’s claim to controlling airspace from the ground up:  "the FAA believes it has regulatory sovereignty over every cubic inch of outdoor air in the United States . . . [T]hat ambition may be difficult to reconcile with the terms of the FAA’s statute that refer to ‘navigable airspace.’"  The dicta addressed the question of where the FAA’s authority begins, but noted that the "case does not yet require an answer to that question."[31]  Notably, the Judge stated: Congress surely understands that state and local authorities are (usually) well positioned to regulate what people do in their own backyards.  The Constitution creates a limited national government in recognition of the traditional police power of state and local government.  No clause in the Constitution vests the federal government with a general police power over all of the air or all objects that leave the ground.  Although the Commerce Clause allows for broad federal authority over interstate and foreign commerce, it is far from clear that Congress intends–or could constitutionally intend–to regulate all that is airborne on one’s own property and that poses no plausible threat to or substantial effect on air transport or interstate commerce in general.[32] The dicta in Huerta may indicate how federal courts will address this vital issue.  As drone operations continue to expand, the importance of the question will continue to grow.   E.  Looking Ahead 2017 will be an important year for the development of the commercial drone industry.  We can expect to see more organizations adopting drone operations; the FAA streamlining Part 107 waivers and airspace authorization; a proposed rule governing flights over non-participating people; litigation regarding property owners’ rights to airspace; more dialogue regarding privacy issues; and significant progress in operations beyond-the-visual-line-of-sight ("BVLOS"), given the approval obtained by the Northern Plains UAS Test Site for conducting BVLOS flights in 2017.  This approval will allow companies to develop, test, and evaluate BVLOS concepts and platforms without the need for a Part 107 waiver.  Progress in BVLOS operations combined with the upcoming proposed rule for flights over non-participating people will greatly expand commercial applications. In addition, the Trump administration’s approach to commercial drones, and any judicial decisions regarding federal preemption and privacy, will shape the future of this burgeoning industry. II.  GOVERNMENT CONTRACTS LITIGATION IN THE AEROSPACE AND DEFENSE INDUSTRY Gibson Dunn’s 2016 Year-End Government Contracts Litigation Update and 2016 Mid-Year Government Contracts Litigation Update cover the waterfront of the most important opinions issued by the U.S. Court of Appeals for the Federal Circuit, U.S. Court of Federal Claims, Armed Services Board of Contract Appeals ("ASBCA"), and Civilian Board of Contract Appeals ("CBCA"), among other tribunals.  We invite you to review those publications for a full report on case law developments in the government contracts arena. In this update, we summarize key court decisions related to government contracting from 2016 that involve players in the aerospace and defense industry.  The cases discussed herein, and in the Government Contracts Litigation Updates referenced above, address a wide range of issues with which government contractors in the aerospace and defense industry are likely familiar, including issues of contract interpretation, jurisdictional requirements, limitations on the remedies available to contractors, and the various topics of federal common law that have developed in the government contracts tribunals.  In addition, we highlight the uncertainty surrounding the direction federal contracting policy will take under the new Trump administration. A.  Select Decisions of Interest to Government Contractors in the Aerospace and Defense Industry             1.  Jurisdictional Issues (Defining the Claim) Whether the courts and boards of contract appeals have jurisdiction over a matter turns on whether there is a valid "claim" and, relatedly, how that claim is defined.  Because the Contract Disputes Act, 41 U.S.C. §§ 7101‒7109 ("CDA") does not define the term "claim," the courts and boards of contract appeals look to the definition set forth in the Federal Acquisition Regulation ("FAR").  FAR 33.201 defines a "claim" as "a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to this contract." In 2016, two decisions from the ASBCA that involved the aerospace and defense industry touched on jurisdictional issues.  In Military Aircraft Parts, ASBCA No. 60290 (Feb. 4, 2016), the ASBCA addressed whether a contractor’s claims could "merge" into or be precluded by related claims that would otherwise not be within the board’s jurisdiction.  In Alaska Aerospace Corp., ASBCA No. 59794 (Sept. 13, 2016), the ASBCA considered whether the contractor had submitted a claim as required by the CDA.                    Military Aircraft Parts, ASBCA No. 60290 (Feb. 4, 2016) Between 2009 and 2011, the Government issued three orders for parts for the C-130 aircraft from Military Aircraft Parts ("MAP").  MAP shipped two units under the first order for first-article testing, but the Government asserted that the parts had failed the "form, fit, and function" test, and subsequently issued a unilateral modification canceling the order.  The Government thereafter unilaterally canceled the second order, and the parties bilaterally canceled the third.  MAP submitted a claim for breach of contract, which was denied by the contracting officer.  The contracting officer admitted that the unilateral cancellation of the first order was improper, but converted the cancellation to a termination for convenience and denied relief for all three orders.  After MAP appealed, the Government moved to dismiss, arguing that MAP could not appeal before responding to the Government’s termination for convenience with a termination settlement proposal pursuant to FAR part 49. The board (O’Sullivan, A.J.) found that MAP was not required to make a termination settlement proposal prior to appealing the denial of its breach claim.  Relying upon the Federal Circuit’s decision in James M. Ellett Construction Co. v. United States, 93 F.3d 1537 (1996), Judge O’Sullivan held that "a contractor is not precluded by a pending termination settlement proposal from pursuing contract claims independent of that proposal."  Because the Government’s termination for convenience came later than its unilateral cancellation, the board reasoned, the relief available to MAP for a breach claim could be considerably different from the relief available for a claim arising from the termination for convenience.  (At the very least, MAP could have been eligible for interest on its breach claim.)  Therefore, MAP’s breach claim did not "merge" into the government’s termination for convenience, and the board denied the Government’s motion to dismiss for lack of jurisdiction.                    Alaska Aerospace Corp., ASBCA No. 59794 (Sept. 13, 2016) In 2003, the Missile Defense Agency awarded a contract to Alaska Aerospace for the use of a launch complex and support services.  The contract incorporated, by reference, FAR 52.216-7, Allowable Cost And Payment (Dec. 2002), which allows reimbursement of contributions to employee pension plans.  In 2014, the Government partially disallowed costs for employee pension plans and sought to recover the disallowed costs. The Board (Melnick, A.J.) first noted that because the Government was seeking to recoup money, the case was a Government claim for which the Government bore the burden of proof.  In finding that the Government failed to meet its burden, the Board explained that the Government’s reliance on the contracting officer’s final decision as evidence of overpayment was improper.  The contracting officer’s final decision attempted to impose a penalty, not establish recoupment as a basis for the demand for payment.  Further, findings of fact in the contracting officer’s final decision are not binding upon the parties and are not entitled to any deference.              2.  Jurisdictional Issues (Timeliness of Appeals at the Board of Contract Appeals) A host of recent cases addressed the CDA’s jurisdictional requirement to timely file an appeal after receipt of a contracting officer’s final decision.  Two such cases involve aerospace and defense companies and are discussed below.  Under the CDA, a board has jurisdiction over appeals taken within 90 days of receiving the contracting officer’s final decision; whereas, there is a one-year statutory clock applicable to appeals filed in the Court of Federal Claims.  In a pair of appeals before the ASCBA, Military Aircraft Parts attempted–unsuccessfully–to argue that the Federal Circuit’s ruling that the CDA’s six-year statute of limitations period is not jurisdictional, Sikorsky Aircraft Corp. v. United States, 773 F.3d 1315 (Fed. Cir. 2014), should give the board discretion to waive the 90-day appeal period.  Although the two cases were decided differently on the merits, the ASBCA made clear, in both instances, that it would not interpret Sikorsky to allow a waiver of the appeal period.                    Military Aircraft Parts, ASBCA No. 60336 (Apr. 25, 2016); and Military Aircraft Parts, ASBCA No. 60139 (June 3, 2016) In the first case, Military Aircraft Parts appealed the termination for default of its contract to provide aircraft frames to the Defense Logistics Agency and the cancellation of two purchase orders for more frames, claiming that the termination and cancellation were breaches of the contract.  The board (McIlmail, A.J.) held that it could not review the appeal from the termination of the original contract because it was not brought within 90 days after the termination decision.  Although the contractor urged the board to adopt a "good cause" exception to the 90-day deadline in light of the Federal Circuit’s ruling that the CDA’s statute of limitations is not jurisdictional, Judge McIlmail reiterated that the 90-day appeals period cannot be waived. In the second case, Military Aircraft Parts appealed the contracting officer’s final decisions that denied a number claims for breach of contract arising out of a contract that the Government terminated for default.  The Government argued that Military Aircraft Parts did not timely appeal the default terminations and was using its breach of contract claims on appeal to the board in an attempt to skirt the CDA’s 90-day jurisdictional deadline for appeal of the contracting officer’s final decision on the default termination.  Military Aircraft Parts denied the assertion that its complaint was merely a challenge to default terminations "clothed in breach of contract language" and, in the alternative, argued again that the reasoning in Sikorsky should allow the board to find that the 90-day appeal period is not jurisdictional.  The board (O’Sullivan, A.J.) agreed with the Government, finding that the board lacked jurisdiction over the claims because they were implicit challenges to the default termination.  In doing so, Judge O’Sullivan cited pre-Sikorsky precedent to reaffirm its long line of precedent holding that the 90-day deadline is "jurisdictional, absolute, and may not be waived."             3.  Contract Interpretation The following decision from the second half of 2016 articulates broadly applicable contract interpretation principles that government contractors should consider.                    King Aerospace, Inc., ASBCA No. 57057 (July 26, 2016) In 2005, the Government awarded a contract to King for the maintenance of a fleet of aircraft.  In 2009, King presented a certified claim incorporating a Request for an Equitable Adjustment ("REA") based on additional maintenance required as a result of aircraft conditions inferior to those represented in the contract.  The contracting officer denied the claim and King appealed.   The Board (McImail, A.J.) concluded that King was entitled to additional compensation, noting that in order to prevail on a claim of misrepresentation, the contractor needed to show that there was a false representation of material fact that the contractor reasonably relied on to the contractor’s detriment.  The Board determined that the contract represented that aircraft would be maintained in accordance with industry practices, and that the aircraft were not maintained in such a fashion.  Further, this misrepresentation was material because the condition of the aircraft was likely to affect the inducement of King in assenting to maintaining the aircraft.  Moreover, King honestly relied on the misrepresentation to its detriment because King would have bid higher had it known of the substandard condition of the aircraft.  The Board also found that King’s reliance was reasonable as there was no contrary representation of the aircrafts’ conditions.              4.  Cost Issues                    Raytheon Co., Space & Airborne Sys., ASBCA No. 58068 (Aug. 9, 2016) In 2007, Raytheon SAS revised its cost accounting practices, one of which the Defense Contract Audit Agency ("DCAA") determined to result in a $142,000 increase to the Government across all contracts with the business.  DCAA did not consider decreased costs to the Government from one of the related changes, which more than offset the modest increase from the first change, due to a revision to FAR 30.606 in 2005, that prohibits such offsets, as discussed in an earlier decision in this case covered in the 2015 Mid-Year Government Contracts Litigation Update .  The contracting officer subsequently issued a final decision on the alleged increased costs and Raytheon SAS appealed. The Board (O’Connell, A.J.) sustained the appeal, ruling for Raytheon SAS, because it found that the contracting officer improperly determined the amount at issue was "material" based solely upon the dollar value of the increased cost, without considering other required factors, such as the magnitude of the dollar value in relation to Raytheon SAS’s total contracting relationship with the Government (here, less than 0.005%), the cost impact per contract (here, $36 per contract, per year), or the benefit of reduced administrative processing costs by the Government.  The Board concluded that the contracting officer’s failure to consider these factors was an "abuse of discretion," which is significant because there was no evidence of bad faith by the contracting officer.                    Exelis, Inc., ASBCA No. 60131 (Aug. 29, 2016) Exelis appealed from a contracting officer’s final decision finding that Exelis improperly accounted for the costs of a building lease pursuant to Cost Accounting Standard ("CAS") 404, which governs Capitalization of Tangible Assets.  Exelis moved to dismiss and asserted that there was no CAS 404 violation, and that while the CAS 404 claim asserted a sum certain, it did not assert a sum certain with regard to a FAR violation, which the Government was also asserting. The Board (D’Alessandris, A.J.) determined that there was no CAS 404 violation.  First, the Board found the plain language of CAS 404 to be clear, that it applied to "tangible" assets, and that a building lease is an "intangible" asset since it does not have "physical substance."  Second, even if the language was not clear, the preamble to CAS 404 showed that the CAS Board did not intend that all leases should be "tangible capital assets."  Third, in considering other interpretive aids, the Board continued to find that the Government could not establish a CAS 404 violation. Regarding the alleged FAR violation, the Board first noted that new theories or new damages that arise from the same operative facts do not constitute new claims, and that the sum certain requirement simply requires a specified dollar amount for a claim.  The Board also explained that estimated or approximate costs in determining the value of a claim is sufficient, as long as the overall demand is for a sum certain.  In light of this, the Board found that the relevant facts in the appeal included the lease in question, and that the FAR and CAS claims involved the same operative facts and were the same claim for CDA purposes.  Thus, despite the Government’s sum certain being calculated based on a purported CAS violation rather than a FAR violation, the claim was still proper because the two purported violations were the same for CDA purposes. B.  Uncertainty in the Direction that Federal Contracting Policy Will Take Under the New Trump Administration The direction that federal contracting policy will take under the new Trump administration remains somewhat vague, and we will continue to keep you informed as the administration’s policy develops.  But we note that President Trump’s willingness to use Twitter to address the price of federal contracts will likely have implications in the industry.  Although prior administrations have been critical about allegedly wasteful spending, President Trump’s Twitter activity suggests that the President is willing to directly intervene in the negotiation and execution of government contracts, which is something federal contractors will have to take into account. III.  COMMERCIAL SPACE SECTOR A.  Developments in the Commercial Crew Program The National Aeronautics and Space Administration ("NASA") has lacked the domestic capability to transport astronauts to space since the expiration of the Space Shuttle Program in July 2011.  Since then, NASA has relied upon the Russian Federal Space Agency ("Roscosmos") to ferry astronauts to the International Space Station ("ISS"), at prices ranging from $21 million to $82 million per roundtrip.  To remedy this situation, NASA instituted the Commercial Crew Program to work with commercial companies to develop manned spaceflight systems.  In September 2014, NASA selected two companies to participate in this program:  The Boeing Company ("Boeing") and Space Exploration Technologies Corporation ("SpaceX"). On September 1, 2016, NASA announced that both companies were facing technical challenges that would delay the first flights carrying NASA astronauts to the ISS until late 2018–more than three years after NASA’s original 2015 goal.[33]  Boeing was experiencing issues related to vehicle mass and the effects of vibrations generated during launch.  SpaceX was experiencing delays from its decision to change its capsule design to enable water-based landings.  In light of these developments, NASA extended its contract with Roscosmos for astronaut transportation through 2018, at an additional cost of $490 million for six more seats. On January 4, 2017, NASA announced that it awarded additional space missions to Boeing and SpaceX.[34]  Originally, each firm was offered two roundtrip missions to the ISS.  Now each firm will launch six missions.  Boeing has scheduled an unmanned flight test for June 2018 and a crewed flight test for August 2018.  It has even released new spacesuit designs.[35]  SpaceX has scheduled an unmanned flight test for November 2017 and a crewed flight test for May 2018. B.  NOAA Policies on Commercial Activity The National Oceanic and Atmospheric Administration ("NOAA") released a commercial space policy on January 8, 2016.[36]  Among other things, it designated the Office of Space Commerce as a point of contact for commercial providers to promote more efficient commercial engagement.  The policy was part of NOAA’s efforts to understand better how partnerships with private firms in the rapidly changing commercial space sector could help the agency perform its functions.[37] NOAA’s National Environmental Satellite, Data, and Information Service ("NESDIS") published a Commercial Space Activities Assessment Process on January 6, 2017.[38]  This report indicated NOAA’s interest in commercially provided data satisfying its technical requirements at a lower cost than government alternatives.  It then set out a four-part process for future government contracts.  First, NESDIS will release one or more Requests for Information to convey its interest in new data sets and gather information about new, emerging, and existing commercial observation capabilities.  Based on these responses, NESDIS will then release one or more solicitations to acquire and evaluate commercial data satisfying the requisite specifications.  NOAA may then purchase data from one or more vendors for analysis and evaluations through a demonstration project.  Following these demonstrations, NESDIS may issue one or more solicitations to purchase on-orbit observations from commercial sources for operational use by NOAA. On September 15, 2016, NOAA announced that it awarded contracts to GeoOptics, Inc. ($695,000), and Spire Global, Inc. ($370,000), as part of its Commercial Weather Data Pilot.[39]  The firms will provide space-based GNSS radio occultation data to NOAA for the agency to evaluate.  They have until April 30, 2017, to complete the delivery of their data.  NESDIS will conduct an assessment of the data through the end of FY 2017 and produce a final report in early FY 2018. C.  For the First Time, Federal Agencies Authorize Private Company to Land on Moon On July 20, 2016, the Federal Aviation Administration approved a private company’s plans to land a robotic lander on the Moon, capping a series of unprecedented regulatory approvals from NASA and the State Department that blaze a trail for commercial lunar expeditions.[40]  The company, Moon Express, is an early-stage startup founded for the purpose of establishing commercial travel to, and gathering resources and metals from, the Moon.[41]  As previously there was "no existing regulatory framework for private missions beyond Earth orbit," Moon Express CEO Bob Richards says that "Moon Express created a proposed framework" for the necessary approvals.[42]  While more details have yet to emerge about Moon Express’s framework, it purportedly focused on "the safety of its payload as well as outlining [how] the United Nation’s Outer Space Treaty would not be violated."[43]  The framework uses "existing payload review and launch license processes under authorities of the Secretary of Transportation, and adds to them a series of voluntary disclosures intended to provide the Federal Government with sufficient information to help fulfill its supervisory obligations under the Outer Space Treaty."[44]   The approval is for a lunar mission in 2017, but Moon Express is still assembling its lander and coordinating for its rocket with Los Angeles-based "Rocket Lab."[45]  If Moon Express reaches the Moon by December 31, 2017, it may win the "Google Lunar X Prize competition for the first private organization to reach the moon" and also reap a $20 million reward.[46]  Four others teams from around the world purportedly have obtained 2017 launch contracts from their respective governments.[47]  Moon Express recently announced it has raised an additional $20M in series B-1 funding, which it claims "fully finance[s]" its 2017 launch.[48]  D.  Congress Passes Law Expanding Federal Aviation Administration and Secretary of Transportation Authority to Consider Proposed Construction’s Impacts on Space Operations On November 28, 2016, President Obama signed into law H.R. 6007,[49] a bill "[t]o amend title 49, United States Code, to include consideration of certain impacts on commercial space launch and reentry activities in a navigable airspace analysis, and for other purposes."  The bill amended 49 U.S.C. § 44718, which has long permitted the Secretary of Transportation to conduct studies and issue reports on any adverse impact on navigable airspace resulting from proposed construction.  H.R. 6007 required the Secretary of Transportation to conduct an aeronautical study if the Secretary determines that any proposed construction or alteration would interfere with "air or space navigation facilities."[50]  And in conducting such a study, the bill required the Secretary to consider "the impact on launch and reentry for launch and reentry vehicles arriving or departing from a launch site or reentry site licensed by the Secretary."[51]  The bill’s purview included "space ports established at existing airports," as airports are considered "General Aviation" facilities.[52]  By May 28, 2018, the FAA Administrator must "initiate a rulemaking to implement" the aforementioned amendments.[53]  H.R. 6007 came on the heels of "officials at California’s Mojave Air and Space Port criticiz[ing an] FAA decision to allow the construction of taller electric transmission lines near the airport."[54]  The bill’s sponsor, California Representative Kevin McCarthy, said on the House floor that the bill gave "the FAA the authority they now lack to examine whether structures being built near spaceports will obstruct spaceflight."[55]  McCarthy’s explicit intent was that the bill "ensures [] government policies keep up with the progress" of "commercial space flight."[56]  Both the House and Senate unanimously approved H.R. 6007.[57]  E.  FAA Rule on Reciprocal Waivers In August 2016, the Federal Aviation Administration (FAA) revised its rule on reciprocal waivers of claims for commercial launches and reentries.  The new rule simplifies the procedure for customers who contract with a first-tier customer, as opposed to the licensee or permittee.  Under the rule, these customers enter into a waiver agreement with the first-tier customer, not the licensee or permittee.  The rule also mandates that all customers waive claims against every other customer regardless of whether those customers sign a different set of reciprocal waivers.[58] F.  President Trump’s Commercial Space Policy The Trump administration has the potential to be the most supportive ever for the commercial space industry.  During the campaign, two of President Trump’s advisors wrote in an op-ed that "government must recognize that space is no longer the province of governments alone."  The advisors mentioned the work of Boeing/ULA, Orbital ATK, Virgin Galactic, Blue Origin, Paragon, Sierra Nevada, and Xcor, and they praised SpaceX for its "Made in America policy."  They also promised to resurrect the National Space Council under Vice President Mike Pence to coordinate space policy.[59] Since winning the election, Trump has consulted several advocates of commercial spaceflight.  Elon Musk of SpaceX and Jeff Bezos of Blue Origin both attended a meeting with Trump in December, and Peter Thiel, an investor in SpaceX, has been named to the President’s Strategic and Policy Forum.[60] But Senator Jeff Sessions, Trump’s nominee for attorney general, supports a more traditional space policy.  Sessions, whose state is home to NASA’s Marshall Space Flight Center, reportedly has been involved in choosing Trump’s NASA landing team and a nominee for NASA administrator.[61] This division is reflected in the composition of Trump’s NASA landing team.  After initially appointing a head of the team who appears to support a more traditional policy, the transition added several members who support commercial space exploration.[62] Trump has yet to nominate an administrator for NASA, but the early favorite is Congressman Jim Bridenstine, who has advocated for commercial space interests in Congress.  Other candidates reportedly include former NASA deputy administrator Shana Dale, former NASA administrator Mike Griffin, former NASA astronaut Eileen Collins, and Scott Pace of George Washington University.[63] IV.  CONCLUSION We will continue to keep you informed on these and other related issues as they develop.    [1]   Operation and Certification of Small Unmanned Aircraft Systems, 81 Fed. Reg. 42064 (June 28, 2016).    [2]   14 C.F.R §§ 107.12, 107.53–107.79 (2016).    [3]   Id. §§ 107.3, 107.25, 107.35, 107.51, 107.37, 107.39, 107.41 (2016).    [4]   Id. § 107.205 (2016).    [5]   See FAA, Part 107 Waivers Granted (Dec. 31, 2016), available at https://www.faa.gov/uas/ request_waiver/waivers_granted/.    [6]   14 C.F.R. § 107.41 (2016).    [7]   FAA Order JO 7200.23, Air Traffic Organization Policy (Oct. 3, 2016), available at https://www.faa.gov/ documentLibrary/media/Order/FAA_JO_7200_23_2.pdf.      [8]   See FAA, Micro Unmanned Aircraft Systems ARC Recommendations Final Report (April 1, 2016), available at https://www.faa.gov/uas/resources/uas_regulations_policy/media/Micro-UAS-ARC-FINAL-Report.pdf.    [9]   14 C.F.R. § 107.39 (2016). [10]   See 81 Fed. Reg. at 42128. [11]   The White House, Office of the Press Secretary, Presidential Memorandum:  Promoting Economic Competitiveness While Safeguarding Privacy, Civil Rights, and Civil Liberties in Domestic Use of Unmanned Aircraft Systems (Feb. 15, 2015), available at https://www.whitehouse.gov/the-press-office/2015/02/15/ presidential-memorandum-promoting-economic-competitiveness-while-safegua. [12]   Voluntary Best Practices for UAS Privacy, Transparency, and Accountability, NTIA-Convened Multistakeholder Process (May 18, 2016), available at https://www.ntia.doc.gov/files/ntia/publications/ uas_privacy_best_practices_6-21-16.pdf. [13]   Notice of Proposed Rule Making, Operation and Certification of Small Unmanned Aircraft Systems, 80 Fed. Reg. 9544, 9552 (Feb. 23, 2015). [14]   81 Fed. Reg. at 42190. [15]   EPIC v. FAA, No. 16-1297 (D.C. Cir. 2016). [16]   EPIC v. FAA, 821 F.3d 39, 43 (D.C. Cir. 2016). [17]   See EPIC v. FAA, No. 16-1297 (D.C. Cir. 2016). [18]   Id. [19]   Current Unmanned Aircraft State Law Landscape, National Conference of State Legislatures (Dec. 16, 2016), available at http://www.ncsl.org/research/transportation/current-unmanned-aircraft-state-law-landscape.aspx. [20]   FAA, Busting Myths About the FAA and Unmanned Aircraft (Mar. 7, 2014), available at https://www.faa.gov/news/updates/?newsId=76240. [21]   See 49 U.S.C. § 40103. [22]   Id. § 40102(32). [23]   14 C.F.R. § 91.119(b)(c). [24]   328 U.S. 256, 266 (1946). [25]   Id. at 264. [26]   Id. at 265. [27]   Id. at 266. [28]   See Boggs, No. 3:16-cv-00006, Dkt. No. 1 (W.D. Ky. Jan. 4, 2016). [29]   See id. [30]   See Huerta, No. 3:16-cv-358, Dkt. No. 30. [31]   Id. [32]   Id. [33]   NASA’s Commercial Crew Program:  Update on Development and Certification Efforts, NASA, Office of Inspector General, Office of Audits (Sept. 1, 2016), available at https://oig.nasa.gov/audits/reports/ FY16/IG-16-028.pdf. [34]   Steven Siceloff, Mission Awards Secure Commercial Crew Transportation for Coming Years, NASA (Jan. 3, 2017), available at https://www.nasa.gov/feature/mission-awards-secure-commercial-crew-transportation-for-coming-years. [35]   Steven Siceloff, New Spacesuit Unveiled for Starliner Astronauts, NASA (Jan. 25, 2017), available at https://www.nasa.gov/feature/new-spacesuit-unveiled-for-starliner-astronauts. [36]   NOAA Commercial Space Policy, NOAA (Jan. 8, 2016), available at http://www.noaanews.noaa.gov/ stories2016/images/NOAA%20Commercial%20Space%20Policy.pdf. [37]   NOAA Issues Commercial Space Policy, NOAA (Jan. 8, 2016), available at http://www.noaanews.noaa.gov/ stories2016/010816-noaa-statement-commercial-space-policy.html. [38]   Commercial Space Activities Assessment Process, NOAA/NESDIS (Jan. 6, 2017), available at https://www.nesdis.noaa.gov/NESDOCS/pdf/8000_8999/nesdis_commercial_space_activities_assessment_process_final%201.6.17%20readable.pdf.  See also NESDIS Commercial Space Activities Assessment Process, Office of Space Commerce (Jan. 6, 2017), available at http://www.space.commerce.gov/business-with-noaa/nesdis-commercial-space-activities-assessment-process/. [39]   NOAA Awards Commercial Weather Data Pilot Contracts, Office of Space Commerce (Sept. 15, 2016), available at http://www.space.commerce.gov/noaa-awards-commercial-weather-data-pilot-contracts/. [40]   Jordan Rice, The First Private Spaceflight Company Is Cleared for a Moon Landing, Astronomy Magazine (Aug. 4, 2016), http://www.astronomy.com/news/2016/08/next-stop-the-moon.  Up until this point, private companies have flown only 22,236 miles above the Earth–Moon Express intends to send its lander ten times that distance.  See Kenneth Chang, Florida Company Gets Approval to Put Robotic Lander on Moon, The New York Times (Aug. 3, 2016), available at https://www.nytimes.com/2016/08/04/science/moon-express-faa.html?_r=0. [41]   Saki Knago and AJ Barbosa, The New Space Biz:  Companies Seek Cash in the Cosmos, The Huffington Post (July 22, 2011), http://www.huffingtonpost.com/2011/07/22/new-space-business_n_907358.html. [42]   Rice, supra note 40. [43]   Rice, supra note 40. [44]   US Government Approves Plan for Moon Express to Become First Private Company to Venture Beyond Earth’s Orbit, Moon Express, http://www.moonexpress.com/files/moon-express-press-kit.pdf (last visited Jan. 27, 2016). [45]   Chang, supra note 40. [46]   Chang, supra note 40. [47]   Homepage, Google Lunar XPrize, http://lunar.xprize.org/ (last visited Jan. 27, 2016). [48]   Sam Levin, Moon Express Raises $20m for 2017 Voyage to the Moon, The Guardian (Jan. 17, 2017, https://www.theguardian.com/science/2017/jan/17/moon-express-raises-20m-for-2017-voyage-to-moon; see also Emily Calandrelli, Moon Express Raises $20M in Series B-1, Fully Funds Trip to the Moon, TechCrunch (Jan. 13, 2017), https://techcrunch.com/2017/01/13/moon-express-raises-20-million-in-series-b-1-fully-funds-trip-to-the-moon/. [49]   H.R. Rep No. 6007 (2016), available at https://www.congress.gov/bill/114th-congress/house-bill/6007/text.  [50]   49 U.S.C. § 44718(b)(1) (emphasis added).  [51]   49 U.S.C. § 44718(b)(1)(F). [52]   Steven Mayer, Obama Signs McCarthy Bill to Protect Space Ports, Bakersfield.com (Nov. 29, 2016), http://www.bakersfield.com/news/obama-signs-mccarthy-bill-to-protect-space-ports/article_317b54d7-dffc-590d-b121-c7a8e6b3b32e.html.  [53]   H.R. Rep No. 6007 (2016), available at https://www.congress.gov/bill/114th-congress/house-bill/6007/text.  [54]   Id.  [55]   Jeff Foust, House Advances Commercial Space and Astronaut Health Bills, SpaceNews (Sep. 22, 2016), http://spacenews.com/house-advances-commercial-space-and-astronaut-health-bills/#sthash.pqkTLvBT.dpuf. [56]   Mayer, supra note 52. [57]   Foust, supra note 55. [58]   Reciprocal Waivers of Claims for Licensed or Permitted Launch and Reentry Activities, 81 Fed. Reg. 55115 (2016) (codified at 14 C.F.R. § 440). [59]   Robert S. Walker & Peter Navarro, Op-ed:  Trump’s Space Policy Reaches for Mars and the Stars, SpaceNews (Oct. 19, 2016), http://spacenews.com/trumps-space-policy-reaches-for-mars-and-the-stars/. [60]   Eric Berger, Peter Thiel Now Leading the Fight for Commercial Space in Trump’s NASA, Ars Technica (Dec. 20, 2016, 6:31 PM), https://arstechnica.com/science/2016/12/peter-thiel-now-leading-the-fight-for-commercial-space-in-trumps-nasa/. [61]   Andy Pasztor, Sen. Jeff Sessions Exerts Wide Influence Over Trump Space Plans, Wall St. J. (Dec. 13, 2016, 6:56 PM), http://www.wsj.com/articles/sen-jeff-sessions-exerts-wide-influence-over-trump-space-plans-1481673405. [62]   Andy Pasztor, Thiel Pushes to Add Commercial-Space Backers to Trump NASA Team, Wall St. J. (Dec. 21, 2016, 11:22 AM), http://www.wsj.com/articles/thiel-others-push-for-trump-nasa-team-expansion-1482263645. [63]   Eric Berger, Will Trump Pick an "Agent of Change" or an Insider to Lead NASA, Ars Technica (Nov. 17, 2016, 9:58 AM), https://arstechnica.com/science/2016/11/will-trump-pick-an-agent-of-change-or-an-insider-to-lead-nasa/. Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding the issues discussed above.  Please contact the Aerospace and Related Technologies practice group co-chairs, Karen L. Manos, David Wilf, Perlette M. Jura, and William J. Peters; the additional authors of this update, Dhananjay S. Manthripragada, Jared Greenberg, and David M. Wolber; the Gibson Dunn lawyer with whom you usually work; or any of the following: Los Angeles David A. Battaglia (+1 213-229-7380, dbattaglia@gibsondunn.com) Perlette Michèle Jura (+1 213-229-7121, pjura@gibsondunn.com)William J. Peters (+1 213-229-7515, wpeters@gibsondunn.com)Eric D. Vandevelde (+1 213-229-7186, evandevelde@gibsondunn.com)Matthew B. Dubeck (+1 213-229-7622, mdubeck@gibsondunn.com) Dhananjay S. Manthripragada (+1 213-229-7366, dmanthripragada@gibsondunn.com) London Mitri J. Najjar (+44 (0)20 7071 4262, mnajjar@gibsondunn.com) Orange County Jared Greenberg (+1 949-451-3819, jgreenberg@gibsondunn.com)Casper J. Yen (+1 949-451-4105, cyen@gibsondunn.com) Rustin K. Mangum (+1 949-451-4069, rmangum@gibsondunn.com) New York David M. Wilf (+1 212-351-4027, dwilf@gibsondunn.com)Eric D. Vandevelde (+1 213-229-7186, evandevelde@gibsondunn.com)Nicolas H.R. Dumont (+1 212-351-3837, ndumont@gibsondunn.com) Eun Sung Lim (+1 212-351-2483, elim@gibsondunn.com) San Francisco Matthew Reagan (+1 415-393-8314, mreagan@gibsondunn.com) Washington, D.C. Karen L. Manos (+1 202-955-8536, kmanos@gibsondunn.com) David A. Wolber (+1 202-887-3727, dwolber@gibsondunn.com)Lindsay M. Paulin (+1 202-887-3701, lpaulin@gibsondunn.com)Erin N. Rankin (+1 202-955-8246, erankin@gibsondunn.com) Justin P. Accomando (+1 202-887-3796, jaccomando@gibsondunn.com)Brian M. Lipshutz (+1 202-887-3514, blipshutz@gibsondunn.com) © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

January 3, 2017 |
Supreme Court to Review Federal Circuit’s Decisions in Heartland and Lexmark

This past month the Supreme Court decided to review two cases that could change the patent litigation landscape in important ways, and that may have broad implications for the licensing and distribution of patented goods, domestically and internationally.  They have the potential to narrow the range of venues available to patent plaintiffs, and to broaden the geographic scope of the exhaustion defense for patent defendants.  Below, we review the issues presented in each case, and how the Court’s decisions may affect business interests in the United States and abroad.  Our intellectual property, appellate, and technology transactions attorneys are available to discuss further and to advise on these issues at your convenience.    I.     Executive Summary On December 14, 2016, the Supreme Court announced that it had granted certiorari in TC Heartland LLC v. Kraft Food Brands Group LLC, No. 16-341 (Fed. Cir., 821 F.3d 1338).  The Heartland case concerns the range of venues available to patent plaintiffs.  Specifically, the issue is whether a plaintiff may sue a corporation for patent infringement in any district where the defendant is subject to personal jurisdiction (as the United States Court of Appeals for the Federal Circuit has long held), or only in the districts where the defendant is incorporated, or has committed acts of infringement and has a regular and established place of business (as the petitioner and several amici have argued).  Under the current approach to venue, patent plaintiffs have enjoyed relatively broad latitude in choosing a forum, and many have gravitated to certain districts such as the Eastern District of Texas and the District of Delaware.  The Supreme Court is being asked to interpret a jurisdictional statute to restrict the available venues in patent cases, an invitation which, if accepted, could lead to a dramatic change in where such suits are filed.         The Supreme Court’s decision to review Heartland comes just shortly after the Court granted certiorari in Impression Products, Inc. v. Lexmark International, Inc., No. 15-1189 (Fed. Cir., 816 F.3d 721; cert. granted Dec. 2, 2016).  The Lexmark case concerns patent exhaustion, a doctrine that limits a patentee’s rights regarding activities that occur after the initial authorized sale of a patented item.  The exhaustion doctrine is analogous to the first-sale doctrine in copyright law, which allows buyers of books and other copyrighted materials to resell them without risk of copyright liability (provided that the initial purchase was authorized by the copyright owner).  In a recent decision, the Supreme Court held that the first-sale doctrine applies to copyrighted items made or sold abroad, not only to items made or sold in the United States.  Kirtsaeng v. John Wiley & Sons, Inc., 133 S. Ct. 1351, 1363 (2013).  One issue now before the Court in Lexmark is whether the patent exhaustion doctrine likewise applies to foreign sales, such that an authorized sale of a patented article outside of the United States exhausts the U.S. patent rights in that article.  The Federal Circuit held below that patent exhaustion does not apply to foreign sales–notwithstanding Kirstsaeng–and the Supreme Court will review that holding.  The second issue before the Court in Lexmark is whether a patentee can avoid the patent exhaustion doctrine by employing a "conditional sale" that transfers title to the patented item while specifying post-sale restrictions on the article’s use or resale. Below, we provide more information about Heartland and Lexmark, and the implications that different outcomes could have for the business community. II.     Heartland – Venue in Patent Infringement Cases In Heartland, the Supreme Court has decided to consider where venue is proper in a patent infringement case against a corporate defendant.  Before addressing the facts and possible outcomes in Heartland, it is useful to review the statutory venue framework at issue and how it has been interpreted to date.             A.     Venue Before Heartland The United States Code contains a special venue statute for patent cases (28 U.S.C. § 1400(b)), and a general venue statute for federal cases (28 U.S.C. § 1391).  The patent-specific venue statute provides that "[a]ny civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business."  28 U.S.C. § 1400(b). In 1957, the Supreme Court held in the Fourco case that the patent-specific venue statute is controlling, and that the general venue statute does not apply to patent cases.  Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222, 229 (1957) ("We hold that 28 U.S.C. § 1400(b) is the sole and exclusive provision controlling venue in patent infringement actions, and that it is not to be supplemented by the provisions of 28 U.S.C. § 1391(c).").  The Court also clarified in Fourco that for corporate defendants, the language "where the defendant resides" (in the patent-specific statute) refers to the corporation’s place of incorporation.  Thus, under Fourco, venue in a patent case against a corporate defendant is limited to (1) the defendant’s state of incorporation, or (2) where the defendant has committed acts of infringement and has a regular and established place of business. Fourco remained settled law for over three decades.  Then, in 1988, Congress amended the general venue statute to provide that "[f]or purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced."  28 U.S.C. § 1391(c) (1988).  Two years later, the Federal Circuit held in the VE Holding case that this 1988 amendment superseded the Fourco decision, and supplied a definition of where a corporate defendant "resides" for purposes of not only the general venue statute, but also the patent-specific venue statute in section 1400(b).  VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1579 (Fed. Cir. 1990) ("Section 1391(c) as it was in Fourco is no longer."); id. at 1580 ("[As amended,] Section 1391(c) applies to all of chapter 87 of title 28, and thus to § 1400(b), as expressed by the words ‘For purposes of venue under this chapter.’").  Thus, under VE Holding, venue in a patent case against a corporate defendant is proper not only in the districts identified by Fourco, but also in any other district where the defendant is subject to personal jurisdiction at the time the action is commenced.  Many corporations sell products that reach most, and often all, districts of the United States, and such corporations can expect to be held subject to personal jurisdiction in patent cases in a wide range of districts.  See, e.g., Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1566 (Fed. Cir. 1994).  Under VE Holding, venue is proper in any such district – i.e., once personal jurisdiction is established, venue is automatically proper.   Twenty-one years after VE Holding, in 2011, Congress again amended the general venue statute.  The provision "[f]or purposes of venue under this chapter," was replaced with "[f]or all venue purposes" in section 1391(c), and a new provision "Applicability of Section. – Except as otherwise provided by law" was added in section 1391(a).  28 U.S.C. § 1391.  These latest amendments are at issue in the Heartland case, explained below.             B.     Heartland and the Issue Under Review The defendant in the Heartland case, TC Heartland LLC, is incorporated and headquartered in the state of Indiana.  The plaintiff, Kraft Foods Group Brands LLC, sued Heartland for infringement of three Kraft patents in the United States District Court for the District of Delaware.  Kraft Foods Grp. Brands LLC v. TC Heartland, LLC, No. 14-28-LPS (D. Del. Aug. 13, 2005).  Heartland moved to dismiss the case for lack of personal jurisdiction, and to dismiss for improper venue or alternatively to transfer venue to the Southern District of Indiana.  In relevant part, Heartland argued that Congress’ 2011 amendments to the general venue statute nullified VE Holding and re-confirmed the narrower venue rule of Fourco, under which venue for this suit would not be proper in the District of Delaware.  The district court denied Heartland’s motions, and Heartland then petitioned the Federal Circuit for a writ of mandamus.  In re TC Heartland LLC, 821 F.3d 1338 (Fed. Cir. 2016).  The Federal Circuit denied Heartland’s petition, holding in relevant part that the VE Holding decision from 1990 is still controlling and was not displaced by the 2011 amendments.  Id. at 1341-43.  Specifically, the Federal Circuit held that the definition of corporate residency in section 1391(c) continues to apply in patent infringement actions despite the 2011 amendments, and therefore venue in a patent suit against a corporate defendant is proper anywhere the defendant is subject to personal jurisdiction.  Id.  After the Federal Circuit denied its mandamus petition, Heartland petitioned the Supreme Court for a writ of certiorari.  Heartland argued that the Federal Circuit’s venue decision in VE Holding conflicts with Fourco and should be overruled.  Heartland also argued that Congress’ 2011 amendments eliminated any basis for the Federal Circuit to continue relying on VE Holding, in two ways:  First, Congress removed the general venue introductory language "[f]or purposes of venue under this chapter" (which the Federal Circuit had relied on in VE Holding) and replaced it with "[f]or all venue purposes" (which is closer to the statutory language "for venue purposes" that existed at the time of Fourco).  Second, Congress added a new provision that the general venue statute applies "[e]xcept as otherwise provided by law."  Heartland argued that the patent-specific venue statute, as interpreted by the Supreme Court in Fourco, satisfies this exception and thus controls over the general venue statute. Gibson Dunn filed a brief for amici Dell Inc. and the Software & Information Industry Association in support of Heartland’s petition.  Several other amici also filed briefs urging review, and on December 14, 2016, the Supreme granted certiorari.  TC Heartland LLC, No. 16-341.             C.     Possible Effects of Supreme Court Review in Heartland Looking ahead, depending on how the Supreme Court rules on the merits of the venue question in Heartland, the patent landscape could change in important ways for patentees and corporate defendants.  Under the Federal Circuit’s existing interpretation of venue in VE Holding, patent plaintiffs have many options for where to file infringement suits, and often gravitate to certain districts perceived to be plaintiff-friendly, such as the Eastern District of Texas.  Corporate defendants often move for transfer out of such districts and into districts that are more convenient for their employees and witnesses.  But the transfer analysis is complex, and district courts retain discretion to deny transfer motions in many cases, such that defendants are often required to litigate in districts that they contend have little or no connection to the facts and witnesses at issue.  If the Supreme Court affirms in Heartland, this regime will continue. However, if the Supreme Court reverses the Federal Circuit in Heartland, then patent plaintiffs may not be able to file as often in their preferred districts.  Instead, plaintiffs will have to file either where the defendants are incorporated, or where the defendants have both committed acts of infringement and have regular and established places of business.  That may mean that new patent cases will be spread more evenly across a broader range of districts than they are at present.  But it may also encourage the concentration of cases in certain districts.  For example, the District of Delaware is already a popular venue for patent cases, but it may become even more so if the Supreme Court reinstates Fourco, as many potential defendants are incorporated in Delaware even if they do not maintain regular places of business there.  Alternatively, or in addition, some patent plaintiffs may decide to continue filing in their preferred districts regardless of Heartland, by invoking the "regular and established place of business" prong of the patent-specific venue statute.  This approach risks dismissal for improper venue, however, depending on how this prong of the statute is applied on a case-by-case basis.  See, e.g., In re Cordis Corp., 769 F.2d 733, 737 (Fed. Cir. 1985) (denying petition for mandamus seeking dismissal for improper venue) ("[I]n determining whether a corporate defendant has a regular and established place of business in a district, the appropriate inquiry is whether the corporate defendant does its business in that district through a permanent and continuous presence there and not as Cordis argues, whether it has a fixed physical presence in the sense of a formal office or store."). Finally, regardless of how the Court resolves the venue question on the existing statutes, Congress may adjust venue in patent cases by legislation; affirmance in Heartland could give further impetus to legislative change.  Bills are currently pending in both the House and the Senate which could result in modifications to the patent venue statute.  See H.R. 9, 114th Cong. § 3(g) (2015); S. 2733, 114th Cong. § 2 (2016).  Previous bills addressing the issue have failed to pass both houses, however.  See H.R. 1908, 110th Cong. § 10(c) (2007) (proposing corporate residence be defined under section 1400 as the "judicial district in which the corporation has its principal place of business or in the State in which the corporation is incorporated"); S. 3818, 109th Cong. § 8 (2006) (same).  III.     Lexmark – Patent Exhaustion In Lexmark, the Supreme Court will consider (1) whether patent exhaustion applies to foreign authorized sales, and (2) whether a patentee may contract around exhaustion via a "conditional sale."  As with Heartland, the Court’s decision on the merits of Lexmark could change the patent landscape in the United States.  But it could also affect business interests abroad.  These cases also present the Court an opportunity to provide guidance on critical patent licensing issues in light of Quanta and Kirtsaeng. Below, we review the exhaustion doctrine, the key facts and issues in Lexmark, and possible outcomes.             A.     Exhaustion Before Lexmark Under the common law patent exhaustion doctrine, the initial authorized sale of a patented article generally extinguishes the patentee’s right to bring an infringement action as to post-sale use of that article.  Nonetheless, judicial decisions have articulated limits on the scope of the doctrine in particular contexts.  As relevant to the Lexmark case, certain conditional sales have been held not to trigger exhaustion.  In 1938, the U.S. Supreme Court held in General Talking Pictures Corp. v. Western Electric Co. that a patentee’s rights are not exhausted by a licensee’s unauthorized sale when the licensee knows the sale is outside the scope of its license.  See 304 U.S. 175, 181-83 (1938).  In 1992, the Federal Circuit held in Mallinckrodt, Inc. v. Medipart, Inc. that a patentee may also preserve its rights to bring an infringement action after the first sale by imposing, and clearly communicating, a single-use or resale restriction on the patented article.  976 F.2d 700, 709 (Fed. Cir. 1992).  However, in 2008 the U.S. Supreme Court held in Quanta Computer, Inc. v. LG Electronics, Inc. that a patentee’s right to bring an infringement action was exhausted upon a licensee’s sale of a product substantially embodying the patentee’s method patent when the patentee had granted the licensee unrestricted authorization to make, use, or sell products embodying the patent, notwithstanding separate obligations upon the licensee to notify  downstream customers of purported post-sale restrictions on combinations of the licensed products.  553 U.S. 617, 636-37 (2008) (distinguishing General Talking Pictures, 304 U.S. 175). Further, the exhaustion doctrine has historically been focused on domestic sales.  As early as 1890, the U.S. Supreme Court observed in Boesch v. Graff that "[t]he sale of articles in the United States under a United States patent cannot be controlled by foreign laws."  133 U.S. 697, 703 (1890).  Relatedly, in 2001, the Federal Circuit held in Jazz Photo Corp. v. International Trade Commission that the foreign sale of a U.S. patented article does not exhaust U.S. patent rights.  264 F.3d 1094, 1105 (Fed. Cir. 2001) (citing Boesch, 133 U.S. at 703).  However, without reference to Jazz Photo or the patent exhaustion doctrine, in 2013 the Supreme Court held in Kirtsaeng v. John Wiley & Sons, Inc. that a copyright owner’s rights over a copy of its copyrighted work are exhausted under the first-sale doctrine in section 109(a) of the Copyright Act even when the copy is manufactured abroad.  133 S. Ct. at 1355-56.             B.     The Lexmark Case Plaintiff Lexmark International, Inc. owns a variety of patents covering certain printer cartridges and their use.  Lexmark manufactures and sells the patented cartridges both in the United States and abroad.  Some of the cartridges sold by Lexmark are subject to express post-sale restrictions on reuse and resale.  Without affirmative authorization from Lexmark, defendant Impression Products, Inc. acquired restricted Lexmark cartridges, some of which had been modified to enable refilling and reuse, and resold the cartridges in the United States.  A number of the cartridges resold by Impression were acquired abroad and imported into the United States.  Lexmark brought suit against Impression alleging infringement based on the reuse and resale of the restricted cartridges acquired both in the United States and abroad.  Lexmark Int’l, Inc. v. Impression Products, Inc., 816 F.3d 721, 727-28 (Fed. Cir. 2016). The district court dismissed Lexmark’s infringement claim regarding cartridges Lexmark initially sold in the United States, but denied Impression’s motion to dismiss as to the cartridges Impression acquired abroad.  See generally Lexmark Int’l, Inc. v. Ink Techs. Printer Supplies, LLC, No. 1:10-CV-564, 2014 WL 1276133 (S.D. Ohio Mar. 27, 2014); Lexmark Int’l, Inc. v. Ink Techs. Printer Supplies, LLC, 9 F. Supp. 3d 830 (S.D. Ohio 2014).  The district court first held that, despite imposing post-sale restrictions, Lexmark’s patent rights were exhausted at the initial domestic sale.  Lexmark, 2014 WL 1276133, at *6-7 (citing Quanta, 533 U.S. 617).  However, relying on the Federal Circuit’s 2001 decision in Jazz Photo, the district court held that Lexmark’s foreign sales of the cartridges did not exhaust its patent rights.  Lexmark, 9 F. Supp. 3d at 833; see also Jazz Photo, 264 F.3d 1094.  The parties agreed to a stipulated final judgment and cross-appealed to the Federal Circuit.  After oral argument, the Federal Circuit sua sponte decided to review the Lexmark case en banc.  The en banc court then reversed the district court in part, holding that a patentee can retain patent law rights after the sale of a patented article by expressly specifying restrictions on post-sale use or resale, but affirmed the district court’s analysis of Jazz Photo, holding that, regardless of whether restrictions are attached, foreign sales of a U.S.-patented article do not exhaust United States patent rights.  Lexmark, 816 F.3d at 726-27.             1.     Post-Sale Restrictions In reaching its decision that a patentee may preserve certain exclusive rights by imposing post-sale restrictions on its initial sale of a patented article, the Federal Circuit noted that the patent exhaustion doctrine arises under section 271(a) of the Patent Act, which provides that infringement occurs when an individual "without authority" makes, uses, or sells a patented article in the United States.  Lexmark, 816 F.3d at 742.  The court reasoned that by imposing express post-sale restrictions, a patent owner withholds "authority" from the purchaser (or licensee), and therefore preserves its right to bring a subsequent infringement action under section 271(a).  See id. at 742-43 (noting that absent an express restriction, the sale presumptively grants authority to the purchaser to use and resell the patented article). The Federal Circuit’s holding reaffirmed its prior decision in Mallinckrodt that a clearly communicated restriction imposed on the first sale of a patented article can preserve the patentee’s right to later bring an infringement action.  Id. at 726.  The court rejected the district court’s determination that Mallinckrodt had been implicitly overruled by the Supreme Court’s 2008 decision in Quanta.  The Federal Circuit distinguished Quanta in affirming its Mallinckrodt rule, noting that in Quanta there were no restrictions on the licensee’s sales.  Id. at 737-38.  The Federal Circuit held that the Mallinckrodt rule therefore applied, and that the doctrine of patent exhaustion does not foreclose a patentee’s right to bring an infringement action after the initial sale of a patented article that was subject to a clearly communicated and otherwise lawful post-sale restriction.  Id. at 735.            2.     Foreign Sales The Federal Circuit then affirmed the district court’s holding that a patentee’s foreign sale neither conclusively nor presumptively waives the patentee’s U.S. patent rights under the exhaustion doctrine.  Id. at 753-54.  In reaching this determination, the court reaffirmed its earlier decision in Jazz Photo, and rejected Impression’s argument that Jazz Photo had been overruled by the Supreme Court’s recent decision in Kirtsaeng.  Id. at 754-56.  The Federal Circuit reasoned that Kirtsaeng’s holding was limited to the copyright context, and therefore did not affect the exhaustion doctrine under the Patent Act.  Id. at 757-58.  Therefore, the court affirmed the Jazz Photo rule, and held that a foreign sale does not foreclose U.S. patent rights under the exhaustion doctrine.  Id. at 754.             C.     Possible Effects of Supreme Court Review in Lexmark The Supreme Court’s decision to review Lexmark has the potential to affect a variety of industries and markets, including secondary markets for patented goods generally, and markets for products containing components designed, manufactured, or assembled abroad. First, the Court’s decision could significantly affect secondary markets for patented goods.  Generally, the patent exhaustion doctrine protects participants in these secondary markets by limiting a patentee’s ability to bring an infringement claim for downstream use or resale after the patentee’s own sale (or an authorized sale) of the patented good.  However, the Federal Circuit’s decisions in Lexmark and Mallinckrodt permit patent holders to retain the right to bring such claims if they impose post-sale restrictions at the time of the initial sale.  If the Supreme Court reverses this Federal Circuit holding, then a patent holder’s right to enforce use or resale restrictions could be curtailed.  Patentees might still be able to assert breach-of-contract claims against parties who fail to abide by contractual restrictions on post-sale activity, but would no longer be able to assert patent infringement claims based on secondary market sales.  As some commentators have noted, if relief is limited to contract claims, then patentees may face challenges establishing standing against downstream buyers, and injunctive relief may be harder to obtain.  The Court’s decision in Lexmark could provide guidance regarding the requirements for purported post-sale restrictions to be effective. Second, the Court’s decision to review Lexmark could affect the markets for products sold at different prices in different countries, and for products that include components purchased abroad (such as consumer electronics).  The Court may reverse the Federal Circuit’s holding in Lexmark and Jazz Photo regarding foreign sales, and may hold that foreign sales do indeed exhaust domestic patent rights, either conclusively or presumptively.  A brief filed by the Solicitor General on behalf of the United States advocates such a presumption.  See Brief for the U.S. as Amicus Curiae at 16-17, Impression Products, Inc. v. Lexmark Int’l, Inc., No. 15-1189, (filed Oct. 12, 2016).  Either would make it more difficult for patentees to maintain different prices for patented products in foreign versus domestic markets, by allowing others to engage in price arbitrage.  And while a reversal could align patent law with the copyright rule adopted in Kirtsaeng, it might have different effects on the markets for patented goods as compared to copyrighted works.  For example, many components of complex technology products sold in the United States are designed, manufactured, or sold abroad before assembly into the finished products.  A reversal of the Jazz Photo rule could affect the incentives for choosing where to manufacture or sell these components, as patentees consider how best to retain rights under a new exhaustion rule.  Patentees may consider expressly reserving their U.S. patent rights in future foreign sale contracts, to rebut the presumption of exhaustion if the Court adopts the Solicitor General’s proposed approach. IV.     Conclusion Between Heartland and Lexmark, the upcoming Supreme Court term has the potential to change the patent landscape significantly in ways that will affect courts, rights-holders, defendants, and indeed all participants in the intellectual property economy.  Our intellectual property, appellate, and technology transactions attorneys are available to advise on these issues at your convenience. The following Gibson Dunn lawyers assisted in the preparation of this client update:  Stuart Rosenberg and Emma Strong.   Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this update.  Please contact the Gibson Dunn lawyer with whom you usually work, author Stuart M. Rosenberg in Palo Alto (650-849-5389, srosenberg@gibsondunn.com), any member of the firm’s Intellectual Property,Appellate and Constitutional Law orTechnology Transactions practice groups, or the following practice leaders and members: Intellectual Property Group:Josh Krevitt – New York (212-351-4000, jkrevitt@gibsondunn.com)Wayne Barsky - Los Angeles (310-552-8500, wbarsky@gibsondunn.com)Mark Reiter – Dallas (214-698-3100, mreiter@gibsondunn.com) Appellate and Constitutional Law Group:Mark A. Perry – Washington, D.C. (202-887-3667, mperry@gibsondunn.com)James C. Ho – Dallas (214-698-3264, jho@gibsondunn.com) Caitlin J. Halligan – New York (212-351-4000, challigan@gibsondunn.com) Technology Transactions Group:David H. Kennedy – Palo Alto (650-849-5304, dkennedy@gibsondunn.com)Shaalu Mehra – Palo Alto (650-849-5282, smerhra@gibsondunn.com)John A. Squires – New York (212-351-4089, jsquires@gibsondunn.com)David Angel – New York (212-351-2329, dangel@gibsondunn.com)   © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

August 4, 2016 |
Media, Entertainment and Technology Group – 2016 Mid-Year Update

As we cross the mid-point of 2016, Gibson Dunn’s Media, Entertainment and Technology practice group has been reflecting on many of the notable recent deals, cases, rulings, and trends that we have been closely following, and which we expect to continue to shape these industries.  From big movements toward consolidation in the cable industry, to regulatory trends, to an active copyright docket (especially in the fair use field), to stakeholders’ new forays into the streaming landscape and the challenges presented to industry groups and copyright holders, the field remains as dynamic as ever and presents ever newer legal challenges and opportunities.   Table of Contents I.        Transaction & Regulatory Overview              A.     Cable Mergers & Acquisitions: A Trend Toward Consolidation?              B.     The Relativity Media Bankruptcy              C.     Net Neutrality Goes to Court Again              D.     Exclusivity Rules for Cable Transmissions              E.      Trans-Pacific Partnership & Effect on the Industry II.       Recent Litigation Highlights              A.     Copyright Litigation                       1.   "Fair Use" Goes Front and Center                                 a.   Authors Guild v. Google, Inc. and Impact on Fair Use Doctrine                                 b.   Fox News Network, LLC v. TVEyes, Inc.                                 c.   The "Dancing Baby" Case:  The DMCA and Fair Use Assessments                                 d.   Parody Is Entitled Its Own Copyright Protection (The Point Break Case)                       2.   Roundup: A New Stampede of Older Copyright Claims                       3.   Copyrightable Subject Matter: New Revelations in an Old Doctrine              B.     Entertainment Litigation                       1.   Online Piracy: Two Steps Forward, One Step Back                                  a.   The MPAA Battles Content Piracy                                         (i)         Popcorn Time: the "Netflix for Piracy"                                         (ii)        MovieTube                       2.   Profit Participation Lawsuits March On                       3.   Developments in Defamation              C.     Right of Publicity                        1.   Athletes and Their Avatars                        2.   Antitrust Claims Brought by College Athletes                        3.   Restrictions on the Use of Likenesses Obtained in Public Places I.    Transaction & Regulatory Overview A.    Cable Mergers & Acquisitions: A Trend Toward Consolidation? "Bundling" is a term familiar to those in the cable television industry, and indeed it holds a second meaning for those keeping an eye on M&A developments.  On July 24, 2015, the Federal Communications Commission approved the $48.5 billion acquisition of DIRECTV by AT&T.  In approving the merger, the FCC found it to be in the public interest, despite previous regulatory pressure against similar deals in the recent past. The AT&T-DIRECTV transaction appears to have signaled the FCC’s receptiveness to approval of expansive media and communications deals, and may have opened the door to other mergers in the media and satellite cable fields.  For example, on April 25, 2016, the FCC approved Charter Communications’ proposed $65.5 billion acquisition of Time Warner Cable and Bright House Networks.  The FCC’s approval of that deal would pave the way for the creation of the country’s third largest cable provider with approximately 17.3 million subscribers.  As in the FCC’s approval of the AT&T-DIRECTV deal, we see in the Charter Communications’ approval examples of what companies can expect from the FCC.  Attached to the FCC’s approval of the AT&T-DIRECTV deal were targeted conditions focused on fair access to content, transparency of operations, and investment in fiber-optic infrastructure.  These conditions will remain effective for four years following the closing date of the AT&T-DIRECTV deal.  (Disclosure: Gibson Dunn represented AT&T in the acquisition.)  In approving the Charter Communications deal, the FCC and DOJ set a number of conditions, including measures seeking to protect streaming video enterprises and ensuring that cheaper broadband can be provided to low-income households.  FCC chairman Tom Wheeler stated, "The cumulative impact of these conditions will be to provide additional protection for new forms of video programming services offered over the Internet."[1] B.    The Relativity Media Bankruptcy After claiming debts totaling $1.2 billion, Relativity Media filed for Chapter 11 bankruptcy on July 30, 2015.  During the bankruptcy process, Relativity sold its unscripted television division to a group of its leading creditors.  Relativity also settled with other investors leading to a total reduction of $630 million in debt.  On Tuesday, February 2, 2016, U.S. Judge Michael Wiles conditionally approved Relativity’s reorganization.  The reorganization was conditioned on Relativity proving that it had secured $80 million in new funding and completed deals making Kevin Spacey the studio’s chairman and producer, and Dana Brunetti the studio’s president.  Despite the facts that Relativity was unable to hire Kevin Spacey as the studio’s chairman and producer, and that it raised only $75 million in funding, on March 18, 2016, Judge Wiles approved Relativity’s exit plan from bankruptcy.  (Disclosure: Gibson Dunn represented a creditor in the bankruptcy.)  C.    Net Neutrality Goes to Court Again The debate surrounding the FCC’s effort to regulate broadband Internet access service providers continues.  In March 2015, the FCC released an order that reclassified high-speed Internet as a telecommunications service rather than an information one, thereby subjecting providers to common carrier regulation under Title II of the Communications Act.  The FCC also issued specific rules governing broadband providers’ treatment of traffic.  Pursuant to the FCC’s reclassification, the FCC now has broad authority to regulate broadband providers like public utilities, with general authority to prohibit, among other things, unjust and unreasonable practices and charges.  Following the release of the FCC action, the U.S. Telecom Association, CTIA-The Wireless Association, the National Cable & Telecommunications Association, the American Cable Association, AT&T, and other stakeholders challenged the FCC’s open internet order principally on the bases that the FCC’s reclassification of internet access as a telecommunications service contravenes the Communications Act and was arbitrary and capricious.  These petitioners also challenged the FCC’s reclassification of mobile broadband internet as a common-carrier service.  On December 4, 2015, the Court of Appeals for the D.C. Circuit heard argument, and on June 14, 2016, a divided three-judge panel voted to uphold the FCC’s order.2  (Disclosure: Gibson Dunn is representing CTIA and NCTA in the appeal.) The Court of Appeals had previously ruled twice against the FCC since 2010.  In 2010, the Court of Appeals ruled against the FCC and in favor of Comcast on the issue of whether the FCC had lawfully sanctioned Comcast in a dispute regarding alleged slowing of Internet access to a popular file-sharing service.3  The court determined that the FCC lacked the requisite authority over broadband services to make the action against Comcast legal.4  The FCC relied upon various provisions of the Communications Act of 1934, which the court held did not support the exercise of ancillary authority over Comcast’s broadband services.5  In 2014, the Court of Appeals struck down the FCC’s attempt to adopt, for the first time, net neutrality rules, determining that the rules violated the Communications Act because they constituted prohibited common carrier regulation (at the time broadband was classified as an information source, which the statute immunizes from such regulation).6 D.    Exclusivity Rules for Cable Transmissions In August 2015, FCC Chairman Tom Wheeler announced the commission’s proposal to eliminate broadcast exclusivity rules.  These rules prevent a cable or satellite company from providing subscribers an out-of-market broadcast station, thereby allowing local stations to carry certain programming exclusively.  Supporters of exclusivity rights argue that the rules are a counterbalance to the compulsory licenses for cable companies.  Licenses ensure operators are able to retransmit programming contained in broadcast signals at set rates.  Proponents of exclusivity rights fear that without these agreements, and the ability to enforce them, cable providers would retransmit programming allowed in one market wherever they want, regardless of local agreements.  Without a similar decision by Congress to end compulsory copyright licenses, broadcasters worry that their bargaining power would be weakened relative to the cable companies.  They warn that the consequences would be programming "blackouts" and a depletion of local programming.  The FCC and supporters of the proposal argue that the rules in effect worsen TV blackouts and distort the free market, hurting the consumer more by prohibiting the broadcasting of distant signals.  Additionally, they argue that broadcasters are able to charge cable companies retransmission fees which are passed on to the consumer.  Supporters frequently point to the changed landscape from when the copyright laws were enacted as a reason to eliminate exclusivity.  Broadcasters now typically include exclusivity provisions in their contracts.  Furthermore, legislation passed in 1992 gave broadcasters the ability to negotiate for retransmission consent, all making the exclusivity rules superfluous and unnecessary. Senior lawmakers from both parties are moving to block the Commission’s proposal.  In October 2015, Senators Chuck Grassley (R-Iowa), Patrick Leahy (D-Vt.), John Thune (R-S.D.) and Bill Nelson (D-Fla.) wrote the Chairman arguing that the FCC risks "disrupt[ing] local television businesses and viewing households" if the agency moves forward with eliminating broadcast exclusivity rules.  Senators Chuck Schumer (D-N.Y.) and Diane Feinstein (D-Calif.) have also come out publicly in opposition to the proposal.[2]  In November 2015, Chairman Wheeler defended his proposal in letters posted online.  Responding to Congressional criticism, Wheeler argued that the current rules hurt consumers by "prohibiting the importation of distant signals, as well as strengthen the position of broadcasters in retransmission disputes."[3] E.    Trans-Pacific Partnership & Effect on the Industry Last year, the Trans-Pacific Partnership (TPP) was negotiated between 12 countries which account for more than 40% of U.S. exports.  The agreement creates the world’s largest free-trade area, spanning from Chile to Japan.  The final TPP agreement was announced in October 2015, signed on February 4, 2016, and despite well-publicized opposition, a vote may come up in Congress in 2016 (possibly during the lame duck session).  Proponents of the TPP emphasize the benefits of the largest regional trade accord in history, arguing that the agreement will abolish a large number of tariffs currently levied on U.S. exports.  This in turn will allow for better competition in lucrative partner markets, benefiting domestic producers back in the U.S. The service industry is likely to be one of the biggest beneficiaries of the TPP, particularly the software and entertainment sectors.  Motion Picture Association of America ("MPAA") chairman Chris Dodd announced his support for the pact last year:  "Enacting a high-standard TPP is an economic priority for the American motion picture and television industry, which registered nearly $16 billion in exports in 2013 and supports nearly two million jobs throughout all fifty states."[4] Copyright regulations stand to be particularly impacted.  The TPP is expected to adopt the U.S. term of life-plus-70 years for copyrighted films, music and other works.  This would exceed the international standard of life-plus-50 years from the Berne Convention.  The entertainment industry has strongly backed such a change.  Proponents of the new copyright terms argue that the world is moving away from the 50-year standard toward a much longer period that would "reduce friction, help protect content and open up rapidly growing foreign markets."[5]  The TPP would also require signatory countries to adopt the U.S. Digital Millennium Copyright Act Internet Intermediaries copyright regime in its entirety, which would require countries to "establish or maintain a framework of copyright safe harbors" for ISPs.[6]   However, ISPs will not be required to monitor their systems for infringing activity. The TPP attempts to bring uniformity to the fight against piracy, which has long been a challenge due to the varied levels of enforcement of infringement in different countries.  According to the United States Trade Representative, the pact specifically requires countries to have "strong enforcement systems, including, for example, civil procedures and penalties for commercial-scale trademark counterfeiting and copyright or related rights piracy."[7]  Proponents of the uniform enforcement say this will encourage expansion into other markets for U.S. movies, television shows and music.  The TPP also eliminates digital tariffs, specifically prohibiting "the imposition of customs duties on electronic transmissions," while at the same time prohibiting countries from "favoring national producers or suppliers of such products though discriminatory measures or outright blocking."[8] II.    Recent Litigation Highlights A.    Copyright Litigation 1.    "Fair Use" Goes Front and Center It has been a particularly fertile period for copyright cases considering fair use issues, with blockbuster cases being heard in the Second Circuit’s trial and appellate courts, and in the Ninth Circuit.  The "Google Books" and Fox News v. TVEyes cases can rightly be seen as a pair of companion cases in which the courts have been asked to weigh the rights of creators and copyright holders against transformative uses by companies that claim to offer social utility. a.    Authors Guild v. Google, Inc. and Impact on Fair Use Doctrine After a protracted ten-year lawsuit, in October 2015, the Second Circuit unanimously affirmed a lower court’s ruling that Google Books, a digital library, is protected by fair use and thereby does not amount to copyright infringement.[9]  Launched in 2004, Google Books is an ambitious project that seeks to scan every book in existence by working with participating libraries.  Google then makes those books searchable and provides short excerpts of the content while providing information for where consumers can purchase a full-length version.  In 2005, the Authors Guild sued Google.  The parties agreed to a $125 million settlement in 2008, but the District Court rejected the proposal in 2011, finding that it was unfair to class members and would grant Google a "de facto monopoly."[10]  In 2013, the District Court granted summary judgment in favor of Google, finding a fair use, and the Authors Guild appealed.  At issue in the appeal were (i) the user’s ability to search a book’s text under the Google Books system and (ii) the user’s ability to view the excerpts.  The Court of Appeals reasoned, in an opinion by Judge Pierre Leval, that "Google’s making of a digital copy to provide a search function is a transformative use, which augments public knowledge by making available information about Plaintiffs’ books without providing the public with a substantial substitute for matter protected by the Plaintiffs’ copyright interest in the original works or derivatives of them."[11]  Judge Leval noted that "while authors are undoubtedly important intended beneficiaries of copyright, the ultimate, primary intended beneficiary is the public, whose access to knowledge copyright seeks to advance by providing rewards for authorship."[12] The Court recognized that Google’s intended use of the scanned content may be for commercial purposes, but weighed that concern against the other statutory fair use factors.  The court concluded that "[t]he purpose of the copying is highly transformative, the public display of text is limited, and the revelations do not provide a significant market substitute for the protected aspects of the originals.  Google’s commercial nature and profit motivation do not justify denial of fair use."[13] At a recent IP conference attended by Gibson Dunn attorneys, Judge Leval commented on the case and how the Second Circuit’s Authors Guild decision may have impacted application of the fair use doctrine.  Asked about whether the 4-factor fair use test has collapsed into the "transformative use" factor that Judge Leval articulated, he demurred and said that if it has, then such a judicially created result would be a mistake, and reiterated the continuing importance of the economic factor (i.e., the effect of the use upon the potential market).  Judge Leval speculated that if the Authors Guild panel had found that the service had made the scanned works fully free to all (rather than only providing excerpts), for example, the court might have reached a very different result.  The Second Circuit’s decision is likely to be cited by research institutions that copy or make other uses of copyright-protected works.  The opinion suggests that where an unauthorized work has such an overwhelming public benefit or utility, courts will be more willing to find a transformative value.  On April 18, 2016, the Supreme Court denied (with no noted dissents) the Authors Guild’s petition for a writ of certiorari.[14]  b.    Fox News Network, LLC v. TVEyes, Inc.  While Authors Guild attracted most of the attention in the fair use arena, another case considered similar issues in the television context, and may provide the first indications of how Authors Guild will impact the fair use doctrine going forward.  In 2013, Fox News sued the media-monitoring service TVEyes–a tool used by journalists, politicians and companies to track cable news programming–for copyright infringement.  TVEyes records approximately 1,400 television and radio stations and charges users a flat fee of $500 a month for a searchable index of real-time clips.  In September 2014, the District Court for the Southern District of New York granted a partial summary judgment to TVEyes, holding that the indexing and excerpting functions of TVEyes were transformative uses and thus protected under the fair use doctrine.[15]  The Court denied judgment–and granted Fox News further discovery–with respect to TVEyes’ other functions, including tools allowing users to archive, download, and share videos as well as to search for clips. In May 2015, CBS Studios, NBCUniversal, CNN, Bright House Networks and News 12 Networks filed an amicus brief in support of Fox News’ motion for summary judgment on the remaining issues, arguing that TVEyes "systematically records content from over a thousand television channels, and charges subscription fees to its customers in exchange for distributing to them massive amounts of content it has neither created nor licensed."[16]  The amici also criticized the court’s September 2014 ruling, claiming the service "undermines the value of television news" and "encourages the mass appropriation of news that was created at great cost, and sometimes risk, while at the same time eviscerates copyright owners’ greatest commodity: control over content."[17] In August 2015, the District Court entered a second summary judgment order, resolving the remaining issues as to liability.  Importantly, the court held that TVEyes’ downloading, sharing and searching by date and time functions were not protected fair use.[18]  Although the court acknowledged that sharing clips can facilitate access for news reporting, commentary, criticism, teaching, scholarship, and other permitted uses under the Copyright Act, TVEyes lacked sufficient protections to "prevent indiscriminative sharing" and "risks becoming a substitute for Fox’s own website, thereby depriving Fox of advertising revenue."[19]  Rather, the court found that TVEyes "must develop protocols to reasonably assure that, when subscribers share video clips, they do so consistent" with the principles of fair use.[20]  In addition, on the issue of downloading clips, the court held that while "TVEyes is transformative because it allows users to search and monitor television news," "[d]ownloading [unlimited clips] also is not sufficiently related to the functions that make TVEyes valuable to the public, and poses undue danger to content-owners’ copyrights."[21]  The court did find that the archiving function was a fair use, reasoning as follows: Democracy works best when public discourse is vibrant and debate thriving.  But debate cannot thrive when the message itself disappears after airing into an abyss.  TVEyes’ service allows researchers to study Fox News’ coverage of an issue and compare it to other news stations; it allows targets of Fox News commentators to learn what is said about them on the network and respond; it allows other media networks to monitor Fox’s coverage in order to criticize it.  TVEyes helps promote the free exchange of ideas, and its archiving feature aids that purpose.[22] In November 2015, the court issued a broad permanent injunction that would have banned users from downloading Fox News Channel or Fox Business News clips; viewing such content by searching by date and time; and sharing video clips on social media websites.[23]  The order further limited TVEyes users to emailing clips to no more than five recipients, and then only from a registered work email address.[24]  Fox News had requested a more extensive injunction with additional limitations on use of its clips, including barring the emailing of clips until 72 hours after the original telecast, expiration dates for clips, and the requirement that all clips contain a watermark. The parties then agreed to appeal the injunction ruling to the Second Circuit, staying part of the injunction for the time being.  Unsurprisingly, TVEyes’ opening appellate brief cites heavily to the Second Circuit’s Authors Guild decision, including for the proposition that TVEyes’ various functions are transformative uses with significant public benefit.  Fox News indicated its intent "to cross-appeal to address the Court’s refusal to enter an injunction with a broader scope."[25] c.    The "Dancing Baby" Case:  The DMCA and Fair Use Assessments Eight years ago, Stephanie Lenz posted a 29-second video of her thirteen month-old son on YouTube.  The toddler danced, clumsily, in the family kitchen while the late, great Prince’s "Let’s Go Crazy" plays in the background.  Upon receiving Universal Music Group’s ("UMG") Digital Millennium Copyright Act ("DMCA") takedown request, YouTube removed the video, and after two rounds of protests and counter-requests, Lenz sued UMG under 17 U.S.C. § 512(f) for "knowingly" misrepresenting that her video infringed copyright.[26] On September 14, 2015, the Ninth Circuit issued its ruling that a copyright holder must assess whether the allegedly infringing work is a fair use before issuing a takedown notice under the DMCA.[27]  While the Ninth Circuit ruled for Lenz, it did not issue the sweeping ruling that some advocates sought to counter what they view as improperly aggressive steps to remove even non-infringing material from the web.  Rather, the Court of Appeals held that in considering whether Lenz’s use was "authorized" under the DCMA, UMG had to consider in good faith whether Lenz’s video was authorized by the fair use doctrine.[28]  The Court of Appeals noted that while fair use is often considered to be an affirmative defense because it is expressly authorized by the Copyright Act, a copyright owner must consider it before serving a DMCA takedown notice. In response to concerns regarding the workability of a hosting service conducting such a fair use determination, the opinion stated that such an analysis need not be an onerous or even an objective undertaking.  Rather, the Court of Appeals held that the copyright holder need only reach a subjective good-faith belief that their copyright has been infringed: "If []a copyright holder forms a subjective good-faith belief the allegedly infringing material does not constitute fair use, we are in no position to dispute the copyright holder’s belief even if we would have reached the opposite conclusion."[29]  According to the opinion, UMG would face liability if it misrepresented that "it had formed a good faith belief the video was not authorized by the law, i.e., did not constitute fair use," but that a jury would have to weigh such a determination.[30]  At the end of the day, the bar for copyright holders appears relatively low: they need only formulate a good faith belief that the material does not constitute fair use, and only if they either fail to consider fair use (or misrepresent such consideration) would liability attach under 17 U.S.C. § 512(f).  On March 17, 2016, the Ninth Circuit refused to rehear the case, but did make some amendments to its September 14, 2015 opinion.[31]  Notably, the court removed from its amended opinion a passage addressing the burden on the copyright holder, which had stated that a "copyright holder’s consideration of fair use need not be searching or intensive," and had also noted the "pressing crush of voluminous infringing content that copyright holders face in a digital age."  The amended opinion also removed dicta that could have been used to validate the use of automated enforcement programs; the original opinion stated that the implementation of such programs "appears to be a valid and good faith middle ground for processing a plethora of content while still meeting the DMCA’s requirements to somehow consider fair use."[32] d.    Parody Is Entitled Its Own Copyright Protection (The Point Break Case) The Second Circuit handed down another significant ruling in November 2015, regarding whether a creator of an unauthorized work, protected by fair use, may hold its own copyright in that unauthorized work.  In Keeling v. Hars, the court affirmed a lower court’s ruling and found that a parody can itself be entitled to copyright protection where it adds sufficient originality.[33]  The case involved Point Break Live!, playwright Jaime Keeling’s theatrical adaptation of the 1991 film Point Break.  While the parody "parallel[ed] the character and plot elements from Point Break and relie[d] almost exclusively on selected dialogue from the screenplay," the adaptation "added jokes, props, exaggerated staging, and humorous theatrical devices to transform the dramatic plot and dialogue of the film into an irreverent, interactive theatrical experience."[34]  The tongue-in-cheek nature of Point Break Live! is summed up by the fact that each production of the play includes the random selection of an audience member to play the part of Keanu Reeves’ character–"thereby lampooning Reeves’s reputedly stilted performance in the movie."[35]  Defendants had executed a production agreement with plaintiff for a two-month run of Point Break Live!, but continued to produce the play after its initial run for an additional four years without paying Keeling; so she registered a copyright in the parody and filed suit.   At the December 2012 trial, the jury returned a $250,000 verdict in Keeling’s favor, finding that her use of the material from Point Break was fair use and that defendants infringed her copyrighted parody.  Defendant Hars then appealed, claiming that Keeling’s parody was an unauthorized derivative work and thus was not entitled to copyright protection as a matter of law. The Second Circuit rejected Hars’ arguments and held that the Copyright Act made clear that "an unauthorized but lawful fair use employing preexisting copyrighted material may itself merit copyright protection" when there is sufficient originality in the derivative work.[36]  Invoking the Supreme Court’s ruling in Feist Publications, Inc. v. Rural Telephone Service Co., Inc., 499 U.S. 340 (1991), the appeals court held that Keeling was entitled to copyright protection for the way she selected, coordinated, and arranged the elements of her work to create a new parodic meaning.[37] What was most striking about Keeling was its unusual procedural posture.  As the court noted, "[t]ypically, fair use is invoked as a defense against a claim of copyright infringement brought by the source-material rightsholder.  Here, however, Keeling invoked the fair-use principle to establish an affirmative claim against defendants."[38]  The Second Circuit has thereby broadened the scope of the fair use doctrine and now permits plaintiffs to use it as a "sword" to litigate fair use as the basis for an affirmative claim for copyright infringement. 2.    Roundup: A New Stampede of Older Copyright Claims We continue to see fallout from the Supreme Court’s unexpected 2014 decision in Petrella v. Metro-Goldwyn-Mayer, Inc. (i.e., the "Raging Bull" case), which held that laches is not an applicable defense to allegations of copyright infringement.  In that case, the plaintiff brought a claim for alleged infringement of a 1963 screenplay written by her father based on acts alleged to have occurred in 2009, in connection with DVD distribution of Raging Bull, a film released in 1980.  Taking up the issue of whether the plaintiff had delayed too long in bringing her claim, the Supreme Court wrote, "[W]e have never applied laches to bar in their entirety claims for discrete wrongs occurring within a federally prescribed limitations period."[39]  (Disclosure: Gibson Dunn represented MGM at the Supreme Court.)  Following the decision, critics warned that the decision would encourage plaintiffs to lie in wait as their infringement actions increase in value.  And indeed, we have recently seen copyright plaintiffs bringing claims premised on decades-old art. For example, Led Zeppelin’s 1971 song "Stairway to Heaven" was released 45 years ago, but members of Led Zeppelin faced a 2016 jury trial in Los Angeles regarding whether aspects of "Stairway to Heaven" were substantially similar to a little-known 1968 recording titled "Taurus" by the band Spirit.[40]  On June 23, 2016, the jury returned a verdict in favor of Led Zeppelin, finding that although the band might have heard "Taurus" before writing "Stairway" (the two bands toured together), the two songs were not extrinsically similar.  The "Stairway" lawsuit followed another high-profile copyright case of song similarity, last year’s "Blurred Lines" case–which pitted Pharrell Williams and Robin Thicke against the heirs of Marvin Gaye.[41]  In that case, Gaye’s heirs cross-claimed against Williams and Thicke for infringing Marvin Gaye’s "Got to Get it Up" in their hit song "Blurred Lines."  Unlike in the "Stairway" trial, a jury agreed that the songs were substantially similar, awarding almost $7.4 million to Gaye’s heirs.  After the verdict, a juror admitted that testimony from the Gaye heirs’ expert witness, who testified about a "constellation" of non-coincidental similarities between the works, was highly influential to the outcome.  While these copyright claims were premised upon older acts, recent legal music news also includes a California federal judge’s dismissal of a lawsuit against Jay Z over the 1999 anthem "Big Pimpin’," which was premised solely on infringement of moral rights.[42]  Electronic DJ Deadmau5 filed a lawsuit soon thereafter, in Canada, against his former manager over unauthorized remixes, which is also premised almost entirely on infringement of moral rights (which are broader in Canada than the U.S.).[43]  Last year, Dr. Dre was sued for charges that–26 years ago–he improperly sampled portions of an obscure track in the making of NWA’s "If It Ain’t Ruff."[44]  And Warner recently faced claims for licensing fees dating back to 1949 regarding the song "Happy Birthday to You."[45] Looking at these cases together, Gibson Dunn partner Mark Perry was correct when he warned the Supreme Court at oral argument in the Raging Bull case that if laches was not recognized as an applicable defense in the copyright context, courts would see a number of seemingly stale claims filed over older art.  It would seem likely that this trend will continue. 3.    Copyrightable Subject Matter: New Revelations in an Old Doctrine Over the past year, several key copyrightability controversies came to the fore.  In an important case, a majority of the Sixth Circuit approved a copyright suit premised on a competitor’s use of some of the elements of the cheerleading outfits below.[46]   Weighing in on the issue of whether clothing designs are copyrightable, the court determined that the stripes and chevrons were not "utilitarian aspects of the article," under 17 U.S.C. § 101, and thus the maker could hold a valid copyright in the design.[47]  On May 2, 2016, the Supreme Court agreed to take up the case.[48] In a related decision, the Eleventh Circuit found a valid copyright in a laminate flooring design that was made to look "aged and rustic," and the Supreme Court later denied certiorari.[49] Recently, the Batmobile was also held to be a copyrightable character, and the Supreme Court declined to take up the matter, handing DC Comics a victory.[50]  But a few things have recently been deemed non-copyrightable as well: for one thing, a district court confirmed that copyrights subsist only in human artists, not primates, dismissing Naruto the monkey’s claim that he owned the selfie taken with a wildlife photographer’s camera.[51]  Also, the Ninth Circuit ultimately found that a copyright does not subsist in an actress through the reading of her lines.[52]  And it was determined that Yoga poses are uncopyrightable ideas or systems,[53] as are chicken sandwich recipes.[54] B.    Entertainment Litigation 1.    Online Piracy: Two Steps Forward, One Step Back In the wake of the internet piracy boom, ISPs and copyright owners settled upon a notice and tracking system, designed to shut down repeat infringers.  In essence, music labels identify putative piracy on the part of individual internet users and send notices to the associated ISP, which is supposed to take increasingly severe action to halt the infringement.  And ISPs have been targeted for an alleged unwillingness to take on the role of piracy enforcer.  But a jury verdict in December 2015 indicates the risk to ISPs.  In that case, Cox Communications allegedly "ripp[ed] up" 7.62 million notices of piracy that it had received from record labels, which demanded "settlement payments" or account suspension.[55]  Cox claimed that the entire system was flawed by reliance merely on the IP address of the putative pirate, and thus, it refused to take part in the labels’ "scheme."  The Virginia federal jury sided with the labels, ordering Cox to pay $25 million.[56] On the other hand, 2015 brought a court-imposed end to the partnership between copyright owners and the International Trade Commission ("ITC") in the fight against internet piracy.  In 2014, the ITC began blocking the "importation" of pirated media, concluding that digital data transmissions were "articles" within the meaning of 19 U.S.C. § 1337(a).[57]  The Federal Circuit reversed that decision in November 2015, with a majority concluding that "there is a fundamental difference between electronic transmissions and ‘material things.’"[58]  Notwithstanding the deference due the ITC’s interpretation under Chevron, U.S.A., Inc., v. Natural Resources Defense Council, Inc.,[59] "commonsense dictate[d]" that the ITC cannot get involved in blocking piracy.[60]  a.    The MPAA Battles Content Piracy Content piracy remains a pressing issue in the entertainment industry and has resulted in several lawsuits in the United States and internationally.                                  (i)    Popcorn Time: the "Netflix for Piracy" The MPAA has recently succeeded in bringing international legal actions against next-generation torrent site Popcorn Time, an application dubbed the "Netflix for piracy" that allowed viewers to stream pirated movies and television shows, and its derivatives.  The developers of Popcorn Time shut down their website in March 2014, under pressure from the MPAA.  However, several copycat versions of the site have since popped up, such as Popcorn Time IO, Flixtor, and others.  The original developers have endorsed these sites. In April 2015, the MPAA persuaded the United Kingdom’s High Court of Justice to issue website-blocking orders against several Popcorn Time websites.[61]  The court reasoned that "[t]he Popcorn Time application is the key means which procures and induces the user to access the host website and therefore causes the infringing communications to occur.  The suppliers of Popcorn Time plainly know and intend that to be the case. They provide the software and provide the information to keep the indexes up to date."[62]  The court then held that "the suppliers of Popcorn Time have a common design with the operators of the host websites to secure the communication to the public of the claimants’ protected works, thereby infringing copyright."[63] In October 2015, the MPAA won an injunction from the Canadian courts, ordering the shutdown of the Canadian operation of popcorntime.io.  That same month, the MPAA also obtained a preliminary injunction from a New Zealand court against the operator of YTS, another torrent site that provides movie content, shuttering the site.  About the MPAA’s campaign against such sites, Chairman Chris Dodd said, "This coordinated legal action is part of a larger comprehensive approach being taken by the MPAA and its international affiliates to combat content theft.  Popcorn Time and YTS are illegal platforms that exist for one clear reason: to distribute stolen copies of the latest motion picture and television shows without compensating the people who worked so hard to make them."                                  (ii)    MovieTube In November 2015, the MPAA additionally obtained a final default judgment of $10.5 million against the anonymous operators of the MovieTube website.  Like Popcorn Time, MovieTube is an Internet streaming service that has posted full-length films such as Avengers: The Age of Ultron prior to their U.S. theatrical release.  The MPAA sued the "John Doe" operators of the MovieTube sites in July 2015 for copyright and trademark infringement.  The complaint originally called for a sweeping preliminary injunction against "third parties used in connection with any of the MovieTube websites," including website providers and social-media platforms.[64]  In response to such broad-based relief, Google, Yahoo, Facebook, Twitter and Tumblr filed a joint amicus brief in August 2015, accusing the MPAA of trying to "resurrect" the Stop Online Piracy Act, which caused a well-publicized backlash in 2012.[65]  The MPAA swiftly withdrew its demand for a preliminary injunction, and instead requested a permanent injunction and $10.5 million.  When the "John Doe" defendants failed to respond to the complaint, the District Court for the Southern District of New York granted the MPAA’s motion.[66]  The filing of lawsuits seeking to permanently enjoin websites like MovieTube continues to be a successful strategy for the MPAA in its efforts to curtail content piracy.  However, the answers to the questions of whether the anonymous perpetrators will ever be held to account and who might ultimately be liable for the infringement remain unknown.  Even though litigation may be the only avenue for content providers to collect on lost revenues, it seems unlikely that they will be able to do so unless better methods are devised to identify these anonymous figures.  Until that time, content providers’ efforts may continue to resemble a high-stakes game of "Whack-a-Mole" as new sites pop up to replace the old ones. 2.    Profit Participation Lawsuits March On In an era in which content has become king, unsurprisingly the battles over the profits from successful films and shows continues, primarily in California and New York state courts.  The creator of the AMC television series The Walking Dead and the producers and stars of the Fox television series Bones brought two of the highest-profile profit participation suits over the past year.  And as the explosion of content continues across cable and streaming platforms, we expect that profit participation lawsuits will continue to be brought by Hollywood talent and producers. The creator of The Walking Dead, Frank Darabont, brought suit against AMC, claiming that it owes him millions of dollars after he was ousted as showrunner from the hit series to which he claims he gave life.  In 2013, immediately after AMC fired him, Darabont filed suit in New York state court alleging breach of contract, wrongful termination, and other claims.  Darabont amended his complaint in August 2015 to add an allegation that his profit participation had been wrongly reduced, and has in a recently unsealed deposition alleged that AMC created budget problems for the series.  In February 2016, a New York Supreme Court judge denied defendants’ motion to dismiss the added claims and permitted Darabont’s amended lawsuit to proceed. In November 2015, Bones executive producer Barry Josephson filed suit in Los Angeles Superior Court against Twentieth Century Fox Television claiming that he had been cheated out of millions of dollars in advertising, syndication, foreign sales, streaming, and other revenues from the show.[67]  Days later, Emily Deschanel and David Boreanaz, the two leads of Bones, along with executive producer Kathy Reichs filed an independent lawsuit making similar claims.[68]  They allege that they have seen zero profits for years despite the success of the series.  In April 2016, Fox’s motion to compel arbitration was granted and superior court proceedings were ordered stayed as to other, non-arbitrable claims when the court found that "the arbitrable claims are inextricably bound with the non-arbitrable claims, necessitating a stay."[69] 3.    Developments in Defamation Defamation suits, often involving the depiction of real-life figures in biopics, continue to be a regular occurrence in Hollywood.  Most notably, former N.W.A. manager Jerry Heller filed suit against the producers of the hit film Straight Outta Compton, along with Legendary Pictures, Comptown Records, director F. Gary Gray, and others, claiming that the film falsely portrayed him as responsible for instigating the breakup of N.W.A.[70]  In December 2015, the case was removed to federal court.[71]  Heller amended his complaint the following month.  On March 30, 2016, the court dismissed Heller’s misappropriation of likeness claim without leave to amend, finding that NWA’s history and Heller’s role in its rise is a matter of public interest, although Heller was permitted leave to amend his defamation claim.  A second amended complaint was filed in late April 2016.  On June 29, 2016, the Court granted defendants’ motion to strike as to all the allegedly defamatory scenes listed in the second amended complaint, except for two scenes stating or implying that Heller discouraged the rapper Ice Cube from retaining an attorney during contract negotiations.  The judge has permitted limited discovery on this issue and litigation remains ongoing. Elsewhere, a New York federal judge dismissed certain claims (including right of privacy) brought by former Stratton Oakmont director Andrew Greene regarding his alleged depiction in the film The Wolf of Wall Street, though the judge permitted Greene’s libel claim to proceed.[72]  And last fall, Sean Penn filed a $10 million defamation lawsuit against Empire creator Lee Daniels in New York Supreme Court, charging that in an interview with The Hollywood Reporter, Daniels falsely accused Penn of hitting women when comparing Penn to Empire star Terrence Howard.[73]  On May 4, 2016, it was reported that Penn and Daniels reached a settlement, which included Daniels issuing a letter of apology and making a donation to the J/P Haitian Relief Organization, one of Penn’s favorite charities.[74] C.     Right of Publicity A number of cases in recent months have tested the application of states’ right of publicity law to emerging technologies.  1.    Athletes and Their Avatars Three years ago, in Keller v. Electronic Arts, the Ninth Circuit ruled that video game developers’ use of the likenesses of college athletes in their games is not protected by the First Amendment.[75]  The suit specifically targeted Electronic Arts, Inc.’s ("EA") NCAA Football series of video games, in which the real-life football players on each college team have "a corresponding avatar in the game with the player’s actual jersey number and virtually identical height, weight, build, skin tone, hair color, and home state"[76], though the players’ names did not appear on their jerseys in the video game, and their hometowns were inaccurate.[77]  EA’s principal argument was that the Rogers test, which protects the unauthorized use of trademarks unless the trademark has "no artistic relevance to the underlying work whatsoever,"[78] should be applied in the right of publicity context as well.  Instead, the Ninth Circuit applied California’s "transformative use" test for right of publicity claims, and concluded that the "realisti[c] portray[al] of college football players in the context of college football games" is not transformative.[79] Following Keller, we saw the conclusion of the parallel right of publicity claim of former NFL players, in Davis v. Electronic Arts, Inc.[80]  In Davis, EA provided five First Amendment affirmative defenses (i.e., transformative use, the public interest defense, the public affairs exception to Cal. Civil Code § 3344(d), the Rogers test and the incidental use defense).[81]  The former players prevailed when the Ninth Circuit concluded that the outcome was dictated by Keller: "If EA did not think there was value in having an avatar designed to mimic each individual player, it would not go to the lengths it does to achieve realism in this regard."[82] 2.    Antitrust Claims Brought by College Athletes Courts heard multiple antitrust suits on behalf of college athletes in 2015.  Gibson Dunn represented OUTFRONT Media Sports, Inc. (formerly CBS Collegiate Sports Properties, Inc.) in Marshall v. ESPN and successfully argued that former college athletes’ claims against sports broadcasters for damages for alleged unauthorized broadcast of the athletes’ images during sporting events should be dismissed.[83]  The district court granted the defendants’ demurrer in its entirety, concluding, inter alia, that there is no individual right of publicity in sports broadcasts and that the defendants’ role "in complying with NCAA rules, [cannot] be said to be the cause of reduced competition and any concomitant antitrust injury."[84]  The former athletes’ appeal is currently pending before the Sixth Circuit. Recently, college athletes also sued the NCAA directly for antitrust violations, with both sides being rebuffed by the Ninth Circuit over the principal relief each sought.  In O’Bannon v. NCAA, the NCAA sought a declaration that, by virtue of its amateurism mission, it is immune to antitrust suits altogether.[85]  Alternatively, the NCAA contended that its activities are noncommercial, and that the players, in any event, lacked standing to bring a claim under the Sherman Act.[86]  The NCAA lost each of those arguments.  Instead, the Ninth Circuit determined that the NCAA’s existing amateurism rules violated the Sherman Act.[87]  On the other hand, the players sought a declaration that, even during college, they have the right to compensation for use of their likenesses.[88]  The Ninth Circuit disagreed, and instead applied a "Rule of Reason" analysis that ultimately hinged on the availability of substantially less restrictive alternatives for maintaining amateurism in college athletics.[89]  The appeals court ordered the NCAA to permit schools to cover the full cost of attendance, not merely the cost of tuition.[90]  But, to maintain amateurism, the Court of Appeals determined that NCAA may ban any additional payments, for a player’s likeness or otherwise. 3.    Restrictions on the Use of Likenesses Obtained in Public Places For years, manufacturers, restaurants, bars, film producers, and others claimed the right to shoot photographs or videos in public places for use in advertising.  Indeed, the right of publicity doctrine was established in part as a result, and, in 1902, New York became the first state to judicially recognize the right of publicity in response to public outrage over a flour company’s unconsented-to use of a girl’s image on its packaging.[91]  For years, complaints about the use of public-place images for commercial use have met varying degrees of success, but recent cases indicate that the tide may be turning against unconsented-to uses of likenesses in advertising. Targeting the use of photos obtained at locations from beaches and bars to photos found on the internet, over the past year, plaintiffs brought a series of suits arguing that their publicly available likenesses were wrongfully stolen.  Though most of the litigation remains in early stages, the overall trend is against the unconsented-to exploitation of another’s likeness, whether it was obtained in public or not.  In the end, courts may draw distinctions between commercial and noncommercial use of such likenesses, but much remains unresolved. [1] Ted Johnson, Charter-Time Warner Cable Deal Clears Justice Department; FCC Chairman Recommends Approval, (April 25, 2016), available at  http://variety.com/2016/biz/news/charter-time-warner-cable-fcc-1201741129/. 2 U.S. Telecom Ass’n v. FCC, 2016 WL 3251234 (D.C. Cir. June 14, 2016). 3 Comcast Corp. v. FCC, 600 F.3d 642, 661 (D.C. Cir. 2010).  4 Id. at 660-61.  5 Id. at 644.  6 Verizon v. FCC, 740 F.3d 623, 628 (D.C. Cir. 2014).  [2] Bryan Fung, The FCC’s proposed changes to TV rules are running into Senate resistance, (Oct. 9, 2015), available at https://www.washingtonpost.com/news/the-switch/wp/2015/10/09/the-fccs-proposed-changes-to-tv-rules-are-running-into-senate-resistance/. [3] Federal Communications Commission, Office of the Chairman, (Nov. 10, 2015), available at https://apps.fcc.gov/edocs_public/attachmatch/DOC-336580A1.pdf. [4] John Eggerton, MPAA, Others Hail TPP Agreement, (Oct. 5, 2015), available at http://www.broadcastingcable.com/news/washington/mpaa-others-hail-tpp-agreement/144714. [5] Don Lee, Hollywood joins push for Obama’s Trans-Pacific Partnership trade deal, (April 6, 2015), http://www.latimes.com/business/la-fi-trade-pact-hollywood-20150407-story.html. [6] Executive Office of the President, Officer of the U.S. Trade Representative, (Oct. 10, 2015), available at https://ustr.gov/about-us/policy-offices/press-office/press-releases/2015/october/summary-trans-pacific-partnership. [7] Id. [8] Id. [9] Authors Guild v. Google, Inc., 804 F.3d 202 (2d Cir. 2015).  [10] Authors Guild v. Google, Inc., 2011 WL 986049 (S.D.N.Y. Mar. 22, 2011).  [11] Authors Guild, 804 F.3d at 207. [12] Id. at 212. [13] Id. at 229. [14] Authors Guild v. Google, Inc., 136 S.Ct. 1658 (U.S. 2016). [15] Fox News Network, LLC v. TVEyes, Inc., 2014 WL 4444043 (S.D.N.Y. Sept. 9, 2014).  [16] Fox News Network, LLC v. TVEyes, Inc., Case No. 1:13-cv-05315-AKH, Dkt. 118-1, at 3 (S.D.N.Y. May 22, 2015). [17] Id. at 6, 10. [18] Fox News Network, LLC v. TVEyes, Inc., 2015 WL 5025274 (Aug. 25, 2015).  [19] Id. at *8. [20] Id. [21] Id. [22] Id. at *6. [23]Fox News Network, LLC v. TVEyes, Inc.,  2015 WL 7769374; 2015 WL 8148831.  [24] Id.  [25] Fox News Network, LLC v. TVEyes, Inc., Case No. 1:13-cv-05315 (S.D.N.Y. Nov. 30, 2015), at Dkt. 190.  [26] Lenz v. Universal Music Corp., 801 F.3d 1126, 1129 (9th Cir. 2015). [27] Id. [28] Id. at 1131. [29] Id. at 1134-35. [30] Id. at 1139. [31] Lenz v. Universal Music Corp., 815 F.3d 1145 (9th Cir. 2016). [32] Lenz, 801 F.3d at 1129. [33] Keeling v. Hars, 2015 WL 6600571, at *1 (2d Cir. Oct. 30, 2015), [34] Id.  [35] Id.  [36] Id. at *5.  [37] Id. at *7. [38] Id. at *5.  [39] Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962, 1975 (2014). [40] Skidmore v. Led Zeppelin, et al., Case No. 2:15-cv-03462 (C.D. Cal. 2015) [41] Williams, et al. v. Bridgeport Music, Inc., et al., Case No. 2:13-cv-06004 (C.D. Cal. 2013). [42] Fahmy v. Jay-Z, et al., Case No. 2:07-cv-05715 (C.D. Cal. 2007). [43] Zimmerman v. Play Records, Inc., Case No. cv-15-539129 (Sup. Ct. Ontario 2015). [44] Mitchell v. Universal Music Group, Inc., et al., 3:15-cv-00174 (C.D. Cal. 2015). [45] Marya v. Warner Chappel Music, Inc., Case No. 2:13-cv-04460 (C.D. 2013). [46] Varsity Brands, Inc. v. Star Athletica, LLC, 799 F.3d 468 (6th Cir. 2015).  [47] Id.  [48] Varsity Brands, Inc. v. Star Athletica, LLC, 136 S.Ct. 1823 (U.S. 2016). [49] Home Legend, LLC v. Mannington Mills, Inc., 784 F.3d 1404, 1407 (11th Cir. 2015). [50] DC Comics v. Towle, 802 F.3d 1012 (9th Cir. 2015). [51] Naruto v. Slater, 2016 WL 362231 (N.D. Cal. Jan. 28, 2016). [52] Garcia v. Google, Inc., 786 F.3d 733 (9th Cir. 2015). [53] Bikram’s Yoga College of India, L.P. v. Evolation Yoga, LLC, 803 F.3d 1032 (9th Cir. 2015). [54] Lorenzana v. South Am. Restaurants Corp., 799 F.3d 31 (1st Cir. 2015). [55] Bill Donahue, Cox Says Plaintiffs In Pirating Suit Wanted It To Join Scheme, (September 22, 2015), available at http://www.law360.com/articles/705612/cox-says-plaintiffs-in-pirating-suit-wanted-it-to-join-scheme?article_related_content=1. [56] Jimmy Hoover, Cox Must Pay BMG $25M For User Piracy, Jury Finds, (Dec. 17, 2015), available at http://www.law360.com/articles/739353/cox-must-pay-bmg-25m-for-user-piracy-jury-finds. [57] In re Certain Digital Models, Inv. No. 337-TA-833 at 55 (Apr. 3, 2014). [58] ClearCorrect Operating, LLC v. ITC, 810 F.3d 1283, 1286 (Fed. Cir. 2015).  [59] 467 U.S. 837, 843 (1984) [60] ClearCorrect Operating, LLC, 810 F.3d at 1286. [61] Twentieth Century Fox Film Corp. v. Sky UK Ltd., 2015 EWHC 1082 (Ch) (Apr. 28, 2015).  [62] Id. [63] Id. [64] Paramount Pictures Corp. v. John Doe, Case No. 15-cv-5819 (S.D.N.Y. July 24, 2015).   [65] Paramount Pictures Corp. v. John Doe, Case No. 15-cv-5819 (S.D.N.Y. Aug. 10, 2015), at Dkt. 32-1.  [66] Paramount Pictures Corp. v. John Doe, Case No. 15-cv-5819 (S.D.N.Y. Nov. 24, 2015), at Dkt. 46. [67] Wark Entm’t, Inc. v. Twentieth Century Fox Film Corp., Case No. BC602287 (L.A. Sup. Ct. Nov. 25, 2015).  [68] Temperance Brenann, L.P. v. Twenty-First Century Fox, Inc., Case No. BC602548 (L.A. Sup. Ct. Nov. 30, 2015).  [69] Wark Entm’t, Case. No. BC602287 (Apr. 8, 2016 Ruling). [70] Heller v. NBCUniversal, Inc., Case No. BC599499 (L.A. Sup. Ct. Oct. 30, 2015).  [71] Heller v. NBCUniversal, Inc., Case No. 2:15-cv-09631 (C.D. Cal.).  [72] Greene v. Paramount Pictures Corp., Case No. 2:14-cv-01044 (E.D.N.Y. Sept. 30, 2015), at Dkt. 25.   [73] Penn v. Daniels, Case No. 159710/2015 (N.Y. Sup. Ct. Sept. 22, 2015). [74] Ted Johnson, Sean Penn Reaches Settlement With Lee Daniels in Defamation Case, (May 5, 2016), available at  http://variety.com/2016/biz/news/sean-penn-lee-daniels-defamation-case-settlement-1201766360/. [75] Keller v. Elec. Arts, Inc., 724 F.3d 1268, 1283 (9th Cir. 2013) (en banc). [76] Id. at 1271. [77] Id. [78] Rogers v. Grimaldi, 875 F.2d 994, 999 (2d Cir. 1989). [79] Id. at 1279. [80] 775 F.3d 1172, 1176-81 (9th Cir. 2015). [81] Id. [82] Id. (quoting Keller v. Elec. Arts, Inc., 724 F.3d 1268, 1276 n.7 (9th Cir. 2013) (en banc)). [83] Marshall v. ESPN Inc., 111 F.Supp.3d 815, 824 (M.D. Tenn. 2015). [84] Id. at 835-36. [85] 802 F.3d 1049, 1061 (9th Cir. 2015). [86] Id. [87] Id. at 1075 (ordering the NCAA to allow player compensation up to the full cost of attendance). [88] Id. at 1076. [89] Id. at 1074. [90] Id. at 1075. [91] See Roberson v. Rochester Folding Box Co., 64 N.E. 442, 448 (N.Y. App. Div. 1902). The following Gibson Dunn lawyers assisted in the preparation of this client update:  Scott Edelman, Ruth Fisher, Ari Lanin, Ben Ross, Steve Tsoneff, Howard Hogan, Helgi Walker, Nathaniel Bach, Corey Singer, Colby Davis, Andria Montoya, Colleen Kenny, and Caitlin Forsyth. Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding these developments.  Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or the following leaders and members of the firm’s Media, Entertainment & Technology Practice Group: Scott A. Edelman – Co-Chair, Los Angeles (+1 310-557-8061, sedelman@gibsondunn.com)Ruth E. Fisher – Co-Chair, Los Angeles (+1 310-557-8057, rfisher@gibsondunn.com)Orin Snyder – Co-Chair, New York (+1 212-351-2400, osnyder@gibsondunn.com)Stephen Tsoneff – Co-Chair, Los Angeles (+1 310-552-8698 stsoneff@gibsondunn.com)Howard S. Hogan – Washington, D.C. (+1 202-887-3640, hhogan@gibsondunn.com) Ari Lanin – Los Angeles (+1 310-552-8581, alanin@gibsondunn.com)Benyamin S. Ross – Los Angeles (+1 213-229-7048, bross@gibsondunn.com)Helgi C. Walker – Washington, D.C. (+1202-887-3599, hwalker@gibsondunn.com) © 2016 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

July 27, 2016 |
New Rules are Monumental for Commercial Drones

​Orange County associate Jared Greenberg is the author of "New Rules are Monumental for Commercial Drones" [PDF] published on July 27, 2016 by Daily Journal.