Petition for Writ of Certiorari — Los Angeles News Service v. Reuters Television International, Ltd.

Supreme Court brief2004

Ask Donna

What actually matters in this document.

Text

ee i se le ee ee

_ Suprem.> Court, U.S.

4 FILe Oo

No. 03-965 DEC 3 1 2003

OFFICE OF THE CLERK

In The

Supreme Court of the Anited States

LOS ANGELES NEWS SERVICE,

Petitioner,

REUTERS TELEVISION INTERNATIONAL,

LIMITED; VISNEWS INTERNATIONAL (USA),

LIMITED; REUTERS AMERICA HOLDINGS, INC-.;

REUTERS AMERICA, INC.,

Respondents.

On A Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Ninth Circuit

PETITION FOR A WRIT OF CERTIORARI

STEVEN S. ROSENTHAL

Counsel of Record

KAYE SCHOLER LLP

901 Fifteenth Street, N.W., Suite 1100

Washington, D.C. 20005

(202) 682-3500

GEORGE T. CAPLAN

J. ANDREW SJOBLOM

KAYE SCHOLER LLP

1999 Avenue of the Stars, Suite 1700

Los Angeles, California 90067

(310) 788-1000

Attorneys for Petitioner

COCKLE LAW BRIEF PRINTING CO. (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTION PRESENTED

The Copyright Act grants victims of infringement the

right “to recover the actual damages suffered by him or

her as a result of the infringement, and any profits of the

infringer that are attributable to the infringement and are

not taken into account in computing the actual damages.”

17 U.S.C. § 504(b). The Copyright Act provides the victim

of domestic infringement compensation for his or her

actual damages to discourage infringement, regardless of

the profitability of the infringement to the infringer. The

Ninth Circuit nonetheless held, in conflict with the plain

language of the Copyright Act, the Second Circuit and its

own prior precedent in this very case, that recovery for the

international dissemination of works infringed in the

United States is limited to the infringer’s profits, if any, no

matter how devastating the infringement is to the copy-

right holder. The Ninth Circuit even precluded recovery of

the value of a license that respondents should have ob-

tained in order to have legally disseminated the copy-

righted works to their foreign subscribers.

The question presented is whether a copyright holder

is entitled to recover its actual damages flowing from the

unauthorized exploitation abroad of copyrighted work

infringed in the United States.

STATEMENT PURSUANT TO RULE 29.6

Petitioner Los Angeles News Service states that it is

not a not a corporate entity, has no corporate parents, and

has no publicly-traded stock.

iii

TABLE OF CONTENTS

Page

RCMP BRIS B MRMIMIN LIED 0.....00cccescccevevcesessevscosvcesvesseess i

STATEMENT PURSUANT TO RULE 29.6.............000.. ii

PP OE BIOL osesccsesscnevsssscasesascrsocsescvsococesoveess iii

TABLE OF AUTHORITTES.............cccccccccososccososcsccees vi

PETITION FORA WRIT OF CERTIORARI................. 1

SEMEN MINOT oc nsccnscssssccnnsascussssnaccecccesessevenorsonances 1

STATEMENT OF JURISDICTION .....00.........cccccceesees 1

STATUTORY PROVISIONS INVOLVED ..............00.00. 2

STATEMENT OF THE CASE .............c:c.ccccccosscosscessees. 2

I. FACTUAL BACKGROUND ...............ccccccesscceess 3

Il. LEGAL BACKGROUND.....0.........ccccccsscssssecseees 5

A. Prior Proceedings in the District Court

and the Ninth Circuit......................cccscsees. 5

B. Proceedings on Remand in the District

Court After Reuters TIT ...........ccccccccccsssseceeees 7

C. Proceedings in the Court of Appeals........... 7

REASONS FOR GRANTING THE WRIT...............00.6.. 8

I. CERTIORARI SHOULD BE GRANTED

BECAUSE REUTERS IV ERRONEOUSLY

APPLIES THE COPYRIGHT ACT AND CRE-

ATES A CONFLICT BETWEEN THE NINTH

AND SECOND CIRCUITS BY SHIELDING

DOMESTIC INFRINGERS WHO EXPLOIT

COPYRIGHTED WORKS OVERSEAS FROM

AN AWARD OF ACTUAL DAMAGES ............... 8

TABLE OF CONTENTS - Continued

Page

A. The Copyright Act Provides That Victims

of Infringement Can Recover Both Their

Actual Damages and the Profits of the In-

fringer Resulting From Any Domestic In-

FrINGEMENE .........r.ccrrrccrcesssecesesesrrersensecsorssses 8

B. Prior to Reuters IV, Copyright Law Per-

mitted the Recovery of Actual Damages

Resulting from the Foreign Exploitation of

Domestic Infringements ..............::eeeeeeeeeeeees 10

C. Reuters IV Erroneously Reversed Reuters III,

Upset Established Copyright Law, and Cre-

ated a Conflict With the Second Circuit .......... 14

D. Reuters IV’s Reliance on Sheldon v. Metro-

Goldwyn Pictures Corp. and Subafilms,

Ltd. v. MGM-Pathe Communications Co.

Oe I a ocisescseisncinnachnsincaptoonainnesbarasassunens 17

E. Reuters IV Also Inexplicably Denies LANS

a Reasonable License Fee for Respondents’

Unlawful Infringement of Its Works, in

Conflict With the Law of Other Circuits..... 18

II. CERTIORARI SHOULD BE GRANTED BE-

CAUSE THE CONFLICT REGARDING THE

AVAILABILITY OF EXTRATERRITORIAL DAM-

AGES ARISING FROM DOMESTIC IN-

FRINGEMENTS INVOLVES AN ISSUE OF

EXTRAORDINARY IMPORTANCE...............::00+++ 19

. CONCLAIBION ...00ccscesscecvcsnscessensasonscoesccsoesvenssevenvenecccecense 21

APPENDIX

Order and Amended Opinion of the Ninth Circuit

Court of Appeals dated October 7, 2003 (“Reuters

FY iiareidtascisemneintttninsseltnisaciknemnaioninas dancin App. 1

TABLE OF CONTENTS - Continued

Page

District Court Order Granting Motion for Sum-

mary Adjudication of Plaintiff’s Claim for Actual

Damages dated November 17, 2000..................6+. App. 17

Opinion of the Ninth Circuit Court of Appeals as

Amended August 25, 1998 (“Reuters III”)............. App. 35

- District Court Findings of Fact and Conclusions

of Law dated October 4, 1996 (“Reuters IT’)......... App. 56

District Court Order Granting Defendants Motion

for Summary Judgment in Part and Denying It in

Part dated July 22, 1996 (“Reuters I”).........ccccs00000- App. 76

SPURS 6 ic kere ee App. 101

TABLE OF AUTHORITIES

Page

CASES:

Data General Corp. v. Grumman Sys. Support

Corp., 36 F.3d 1147 (1st Cir. 1994)........sseseessereeneene sees 9

Davis v. The Gap, Inc., 246 F.3d 152 (2d Cir. 2001).....9, 18, 19

Deltak v. Advanced Systems, Inc., 767 F.2d 357 (7th

Che, NIB) vaca nse sccesecessssnereicvncassasessavsstonmtannsessaccteenmnanteneess 18

Famous Music Corp. v. Seeco Records, Inc., 201

F. Supp. 560 (S.D.N.Y. 1961)........::ceseseeeesseeeereeeennees 10, 17

Los Angeles News Service v. Reuters Tel. Int'l, Ltd.,

942 F. Supp. 1275 (C.D. Cal. 1996)...........seseeseerseeeseees 3, 6

Los Angeles News Service v. Reuters Tel. Int'l, Ltd.,

942 F. Supp. 1265 (C.D. Cal. 1996)...........sssseeesesseeeeees 3,6

Los Angeles News Service v. Reuters Tel. Int'l, Ltd.,

149 F.3d 987 (9th Cir. 1998)...........cccccccccccserrrrrreees passim

Los Angeles News Service v. Reuters Tel. Int'l, Ltd.,

340 F.3d 926 (9th Cir. 2008)..............sssceeeeereseeeeee passim

Mills Music, Inc. v. Snyder, 469 U.S. 153 (1985) ............4+ 3

Rogers v. Koons, 960 F.2d 301 (2d Cir. 1992).........:ssseseee 9

Sheldon v. Metro-Goldwyn Pictures Corp., 106 F.2d

45 (2d Cir. 1988) ..00.ssscsssssesesoncescssstvssssasccnnssvanntanaes 7, 17, 18

SubaFilms, Ltd. v. MGM-Pathe Communications

Co., 24 F.3d 1088 (9th Cir. 1994) .........eeeesseeeeeeeees 17, 18

Update Art, Inc. v. Modiin Publishing, Ltd., 843

F.2d 67 (2d Cir. 1988)..............cccccccsssssesseesseessecsssees passim

Vii

TABLE OF AUTHORITIES — Continued

Page

STATUTES AND RULES:

Fe ee TIE ascend ncocnsocnsocsngcicccnesemenneiontouacetacantvas 2

ee es Bei canraicibiacistulihitatanpehaenstentennsndaccneniaieleaauanin: 2,9

ee MED sicticiasoiicipioinsnndssieieeversasaasenisueniacaemebenaenaante 1

SOI CUR TE TIA) issiosicsninvniceccetniinsansvnsesasesscasavonavarss 15

SECONDARY SOURCES:

4 Melville B. Nimmer & David Nimmer, Nimmer on

5 No. 11 Andrews Intellectual Property Litigation

Reporter 5 (January 13, 1999) ............ccccscccsessececesessceees 14

Paul Goldstein, 3 Copyright § 16.2, at 16:6-1 (2001

ILD aise: Sesniebisesiadswasnidngnteaccemeeebesisenieasnida in cient la aoa 13

Paul Edward Geller, 1 International Copyright Law

& Practice § 3[{1][b][i], INT-48 (2008)............c cc eee eee 14

William Patry, Choice of Law and International

Yakub Hazzard & Mark Mayer, Territorial Impera-

tive, 22 Los Angeles Lawyer 45 (1999) .........ccccceeeeeeeeee 13

OW ETF HEL II RELY OPN TTT

PETITION FOR A WRIT OF CERTIORARI

Petitioners respectfully petition for a writ of certiorari

to review the judgment of the United States Court of

Appeals for the Ninth Circuit in this case.

OPINIONS BELOW

The October 7, 2003 order denying rehearing and

amended opinion of the United States Court of Appeals for

the Ninth Circuit that gives rise to this petition is reported

at 340 F.3d 926, and is reprinted in the attached appendix

(“App.”) at 1 through 16. The district court’s unreported

order granting summary judgment in favor of respondents is

reprinted at App. 17 through 34. The previous Ninth Circuit

opinion in this case dealing with this same issue is reported

at 149 F.3d 987, and is reprinted at App. 35 through 55. Two

previous district court decisions in this case are reported at

942 F. Supp. 1275 and 942 F. Supp. 1265, respectively, and

are reprinted at App. 56 through 75 and 76 through 100.

STATEMENT OF JURISDICTION

The initial judgment and opinion of the court of

appeals was entered on August 21, 2003. A timely petition

for rehearing was filed on September 4, 2003. In response

to the petition for rehearing and rehearing en banc, the

Ninth Circuit entered an amended opinion and order on

October 7, 2003, and otherwise denied the petition for

rehearing and rehearing en banc. App. at 1-2. Petitioners

invoke this Court’s jurisdiction under 28 U.S.C. § 1254(1).

———

STATUTORY PROVISIONS INVOLVED

The provisions of the Copyright Act of 1976, 17 U.S.C.

§ 101, et seg., relevant to this petition are reprinted at

App. 101 through 103.

— a \

STATEMENT OF THE CASE

_ Respondents in this case infringed Petitioner’s copy-

rights to iconic video footage of the Los Angeles riots,

including images of the beating of truck driver Reginald

Denny, by unlawfully copying the footage in New York and

distributing it via satellite to their foreign subscribers. In

a ruling that upsets established copyright law in both the

Ninth and Second Circuits, the Ninth Circuit ruled that

Petitioner cannot recover its actual damages resulting

from the infringement, even though the infringement took

place entirely within the United States.

By this ruling, the Ninth Circuit has jeopardized the

statutory rights of all United States copyright holders

whose works are subject to domestic infringement and

exploitation abroad. The Copyright Act provides for the

recovery of “actual damages ... and any profits of the

infringer that are attributable to the infringement and are

not taken into account in computing the actual damages.”

17 U.S.C. § 504(b) (emphasis added). Without the avail-

ability of actual damages, the Copyright Act can do noth-

ing to deter infringers who do not profit directly from

infringement that occurs domestically and results in the

destruction of overseas markets for copyrighted works.

The opinion below creates a massive fissure between the

Ninth and Second Circuits in the application of American

product produced in Southern California and New York.

Furthermore, the opinion below is particularly dis-

turbing in this age of rampant piracy, when American

copyrights are under siege all over the world, and copy-

right holders are having great difficulty protecting the

value of their work. This issue has, unfortunately, become

of paramount importance to all media and technical work

product produced in the United States. The recovery of full

copyrighted works infringed in the United States is

elemental. Accordingly, this issue is of exceptional impor-

tance and merits review. See Mills Music, Inc. v. Snyder,

469 U.S. 153, 163 (1985) (certiorari granted to resolve an

important question of copyright law even in the absence of

conflicting circuit decisions).

I. FACTUAL BACKGROUND’

Petitioner Los Angeles News Service (““LANS”) is an

Emmy-winning independent news organization consisting

of the husband-and-wife team Bob and Marika Tur. In

1992, LANS was in the business of videotaping and

photographing newsworthy events and licensing its

‘ The relevant facts are set forth extensively in Los Angeles News

Service v. Reuters Tel. Intl, Ltd., 942 F. Supp. 1275 (C.D. Cal. 1996)

(App. 56-75), and Los Angeles News Service v. Reuters Tel. Int'l, Ltd.,

942 F. Supp. 1265 (C.D. Cal. 1996) (App. 76-100), and are summarized

by the Ninth Circuit in Los Angeles News Service v. Reuters Tel. Int'l, Ltd.,

149 F.3d 987 (9th Cir. 1998) (App. 35-55) and Los Angeles News Service v.

Reuters Tel. Int'l, Ltd., 340 F.3d 926 (9th Cir. 2003). App. 1-16.

footage and images to news broadcasters, print publica-

tions, documentary and feature film makers, and other

consumers of such images. On Thursday, April 29, 1992,

the Turs, anticipating civil disturbance in the wake of the

Rodney King verdicts, were filming from their helicopter

over the intersection of Florence and Normandie in south-

central Los Angeles. Due to their years of experience in

covering Los Angeles, they believed that that intersection

might be a flashpoint if civil unrest were to occur.

While there, at approximately 6:30 p.m. Pacific

Daylight Time, the Turs captured on videotape and in still

photographs the images that became synonymous with the

Los Angeles riots throughout the world: the images of

Larry Tarvin being pulled from his white panel truck and

beaten, and the horrific images of cement truck driver

Reginald Denny being kicked, beaten, smashed in the

head with a brick, and robbed. These images are collec-

tively referred to herein as the “Works.” The Works were

broadcast live in Los Angeles on KCOP-TV (Channel 13).

Before the Turs had landed their helicopter, they were

receiving requests to license the Works for rebroadcast.

With years of journalistic and business experience, the

Turs knew they had captured once-in-a-lifetime videotape,

and they knew how to market it. They would grant the

major networks restricted licenses for domestic, network-

only broadcasts, then license the footage themselves to

local network-owned and affiliated stations, local inde-

pendents and to overseas broadcasters.

Pursuant to that plan, LANS sold NBC a restricted

license to broadcast the Works on The Today Show on the

morning of April 30, 1992. Unbeknownst to LANS, the

broadcast of The Today Show was fed by fiber link- to

eee

Reuters’ predecessor, Visnews International (USA), Ltd., a

joint venture of Reuters Television International, Ltd.,

NBC and the BBC.”

Visnews illegally made a videotape copy of a portion of

the Works and transmitted it to subscribers in Europe and

Africa. It also transmitted copies of the videotape to the

New York office of the European Broadcasting Union (the

“EBU”). The EBU made a second illegal copy of the Works,

which was transmitted via satellite to Reuters’ London

branch, which provided copies to its subscribers through-

out the world. Within twenty-four hours, the initial flood

of requests for the footage ceased and the international

market for LANS’ works was destroyed.

II. LEGAL BACKGROUND

A. Prior Proceedings in the District Court

and the Ninth Circuit

This action for copyright infringement was com-

menced in 1995. In June 1996, Reuters moved for sum-

mary judgment, arguing among other things that it (a)

was shielded from liability by the “fair use” doctrine; and

(b) could not be held liable for extraterritorial damages

under the Copyright Act. The District Court for the Cen-

tral District of Los Angeles, the Honorable Kim McLane

Wardlaw presiding, granted Reuters’ motion in part and

denied it in part, holding that (a) LANS had proved

domestic infringement; (b) the fair use doctrine did not

* Respondents Reuters Television International, Limited; Visnews

International (USA), Limited; Reuters American Holdings, Inc.; and

Reuters America, Inc. are referred to herein collectively as “Reuters.”

shield Reuters from liability; but (c) Reuters could not be

held liable under American law for copyright damages that

arise in foreign territories as a result of a domestic in-

fringement. Los Angeles News Service v. Reuters Tel. Int'l,

Ltd., 942 F.Supp. 1265 (C.D. Cal. 1996) (hereinafter

“Reuters I,” App. 76 to 100.)

The matter proceeded to a bench trial before Judge

Wardlaw on the issue of statutory damages. After issuing

extensive findings of fact, Judge Wardlaw found that

(a) Reuters had infringed LANS’ copyrights by making

unlicenced copies of the Works; (b) Reuters had contrib-

uted to a second infringement of the copyrights by the

EBU, which had made unlicenced copies of the Works from

Reuters’ transmission; and (c) LANS was entitled to an

award of statutory damages for the domestic infringe-

ments in the amount of $60,000. Los Angeles News Service

v. Reuters Tel. Int'l, Ltd., 942 F.Supp. 1275 (C.D. Cal.

1996) (hereinafter “Reuters IJ,” App. 56 to 75).

Both the summary judgment and the trial verdict

were appealed to the Ninth Circuit, which resulted in Los

Angeles News Service v. Reuters Tel. Int'l, Ltd., 149 F.3d

987, 997 (9th Cir. 1998), cert. denied, 525 U.S. 1141 (1999)

(hereinafter “Reuters III,” App. 35-55). The Ninth Court (a)

reversed the summary judgment as to extraterritorial

damages, holding that LANS was “entitled to recover

damages flowing from exploitation abroad of the domestic

acts of infringement committed by defendants” (App. at

43); (b) affirmed the summary judgment on fair use,

holding that Reuters was not shielded from liability (App.

at 54); and (c) remanded the case “for a trial on actual

damages... .” Id. (emphasis added).

B. Proceedings on Remand in the District

Court After Reuters III

On remand, the case was assigned to the Honorable

Consuelo B. Marshall. Reuters again moved for summary

judgment, arguing that Reuters III, by relying on the

equitable rationale set forth by the Second Circuit in

Sheldon v. Metro-Goldwyn Pictures Corp., 106 F.2d 45 (2d

Cir. 1939), limited recovery of extraterritorial “damages”

to those monies actually received by a defendant as profits

and which could therefore be subjected to a constructive

trust in LANS’ favor. Reuters argued that it had no profits

or other income directly allocable to its infringements

because its subscribers pay annual subscription fees

unrelated to their receipt or usage of any particular

footage, including the Works. 'The District Court agreed

and, remarkably, entered summary judgment in favor of

Reuters on or about November 20, 2000 (App. 17-34),

effectively reversing the Ninth Circuit Reuters III remand

“for a trial on actual damages... .” App. at 54.

C. Proceedings in the Court of Appeals

LANS again appealed to the Ninth Circuit, and in a

continuation of remarkable judicature, a two-judge major-

ity of a new panel affirmed the District Court’s ruling and

reversed Reuters III in Los Angeles News Service v. Reuters

Tel. Int'l, Ltd., 340 F.3d 926 (9th Cir. 2003) (hereinafter

Reuters IV, App. 1-16). The Reuters IV majority held that

“the Copyright Act does not provide LANS recovery for

actual damages resulting from [defendants’] infringe-

ment.” App. at 13 (emphasis added).

In his dissent, Judge Silverman notes:

The majority now holds that when we said “ac-

tual damages,” we didn’t mean actual damages,

but only whatever profits the infringer might

have realized.

Neither the Copyright Act, nor our prior decision

in this case, nor any other case, limits the calcu-

lation of actual damages to only the infringer’s

ill-gotten profits.

App. at 14-15 (Silverman, J., dissenting).

This petition for a writ of certiorari follows.

REASONS FOR GRANTING THE WRIT

I. CERTIORARI SHOULD BE GRANTED BE-

CAUSE REUTERS IV ERRONEOUSLY AP-

PLIES THE COPYRIGHT ACT AND CREATES

A CONFLICT BETWEEN THE NINTH AND -

SECOND CIRCUITS BY SHIELDING DOMES.-

TIC INFRINGERS WHO EXPLOIT COPY-

RIGHTED WORKS OVERSEAS FROM AN

AWARD OF ACTUAL DAMAGES.

A. The Copyright Act Provides That Victims

_of Infringement Can Recover Both Their

Actual Damages and the Profits of the In-

fringer Resulting From Any Domestic In-

fringement

The Copyright Act provides copyright holders with a

range of remedies to ensure that they are made whole and

to prevent infringers from profiting from theft:

_—<<&«&«<q<«>«qn—™— - *-

The copyright owner is entitled to recover the ac-

tual damages suffered by him or her as a result

of the infringement, and any profits of the in-

fringer that are attributable to the infringement

and are not taken into account in computing the

actual damages.

17 U.S.C. § 504(b) (emphasis added). The Copyright Act,

therefore, provides the victims of domestic infringement

recovery of their actual damages in addition to the profits

of the infringer, if any, so long as the two do not overlap.°

The Copyright Act does not provide recovery, however, for

infringements that do not occur within the United States.

See Update Art, Inc. v. Modiin Publishing, Ltd., 843 F.2d

67, 73 (2d Cir. 1988).

* While the Act does not define “actual damages,” the courts have

construed it to mean “the extent to which the market value of the

copyrighted work, at the time of infringement, has been injured or

destroyed by such infringement. 4 Melville B. Nimmer & David

Nimmer, Nimmer on Copyright § 14.02[A], at 14-9 (2003). Actual

damages are most “often measured by the profits lost as a result of the

infringement.” Data General Corp. v. Grumman Sys. Support Corp., 36

F.3d 1147, 1170 (1st Cir. 1994) (citations omitted). An additional

measure of actual damages is the “value of use” measure (also known as

a “reasonable royalty” measure) that is meant “to compensate a

plaintiff for the defendant’s failure to pay for the reasonable value of

what the defendant took.” Davis v. The Gap, Inc., 246 F.3d 152, 161 (2d

Cir. 2001); see also Rogers v. Koons, 960 F.2d 301, 313 (2d Cir. 1992) (“a

reasonable license fee for the [infringing] use . . . best approximates the

market injury sustained by” the copyright owner).

B. Prior to Reuters IV, Copyright Law Permitted

the Recovery of Actual Damages Resulting

from the Foreign Exploitation of Domestic In-

fringements

Prior to Reuters IV, there was no question that victims

of copyright infringement were entitled to the Copyright

Act’s full range of remedies — including actual damages —

resulting from the exploitation abroad of domestic acts of

infringement.

For example, in Famous Music Corp. v. Seeco Records,

Inc., 201 F. Supp. 560 (S.D.N.Y. 1961), the owners of

copyrighted musical compositions sought recovery of

compulsory license fees for, among other things, records

embodying their musical compositions that had been

manufactured but not sold, including records manufac-

tured abroad from master tapes produced in the United

States. Famous Music, 201 F. Supp. at 561-564.

The court granted the plaintiffs their requested relief.

Because “the infringement of a copyright is a tort and all

persons concerned therein are jointly and severally liable,”

id. at 568, the defendant’s domestic “act ... in preparing

the [master] tape was a part of the manufacture” of the

records abroad, and accordingly constituted “an infringe-

ment for which [defendant] should respond.” Jd. at 568-69.

The fact that “a copyright has no extra-territorial effect”

did not relieve defendant of liability, “since plaintiffs seek

to hold defendant for what it did here rather than what it

did abroad.” Id. at 569. Furthermore, the defendant was

required to pay damages with respect to records manufac-

tured but not sold, and on which it had therefore earned

no profit. Jd. at 566.

Later, in Update Art, Inc. v. Modiin Publishing, Ltd.,

843 F.2d 67 (2d Cir. 1988), the Second Circuit also con-

firmed the availability of actual damages arising from the

foreign exploitation of domestic infringements. In Update

Art, the defendant was the publisher of the largest circu-

lating daily newspaper in Israel, with an international

weekend edition distributed in Israel and the United

States. Id. at 68. One such weekend edition contained an

unauthorized reproduction of a poster produced by the

plaintiff under an exclusive license agreement. Id. The

Second Circuit held that the availability of actual damages

flowing from the newspapers sold in Israel hinged on the

situs of the infringement:

As the applicability of American copyright laws

over the Israeli newspapers depends on the oc-

currence of a predicate act in the United States,

the geographic location of the illegal reproduction

is crucial. If the illegal reproduction of the poster

occurred in the United States and then was ex-

ported to Israel, the magistrate properly could

include damages accruing from the Israeli news-

papers. If, as appellants assert, this predicate act

occurred in Israel, American copyright laws

would have no application to the Israeli newspa-

pers. Since a large portion of the damage award

accrued from the Israeli newspapers, our deter-

mination on this issue affects substantially the

final judgment.

Id. at 73.

After determining that there was no evidence in the

record to support a finding that the reproduction occurred

outside of the United States, the Second Circuit held that

the reproduction of the poster in the United States permit-

ted the plaintiff to recover all of its actual damages, even

though “a large portion of the damage award accrued from

the Israeli newspapers,” id. at 73:

[T]he magistrate granted summary judgment to,

Update on the issue of damages with respect to

its claim of copyright infringement. She accepted

Update’s calculation of appellants’ gross income

of $475,406 from the infringement based on

documentary evidence. She also accepted Up-

date’s calculation of its lost profits of $380,686.

The magistrate awarded Update damages of

$475,406 plus interest by adding to Update’s lost

profits of $380,686 that portion of appellants’ in-

come from the infringement that was not dupli-

cative of Update’s lost profits ($94,720).

Id. at 70 (emphasis added). In other words, Update Art

awarded the plaintiff actual damages - its lost profits plus

the non-overlapping profits of the infringer — resulting

from the unauthorized inclusion of its copyrighted poster

in newspapers printed and distributed in Israel.

The Ninth Circuit’s first look at this issue was in a

previous decision in this same case which, unsurprisingly,

followed Update Art. The Reuters III panel characterized

the issue before it as “whether, under the Copyright Act, a

plaintiff may recover actual damages accruing from the

unauthorized exploitation abroad of copyrighted work

infringed in the United States.” App. at 36 (emphasis

added). The panel unanimously held that under the facts

of this case, the Second Circuit’s rule should apply:

LANS urges us to adopt the Second Circuit’s rule

because the unauthorized copying of its works in

the United States enabled further exploitation

abroad. While the extraterritorial damages re-

sulted from Reuters’s overseas dissemination of

the works received by satellite transmissions

;

from Visnews and EBU, those transmissions

were made possible by the infringing acts of

copying in New York. The satellite transmissions,

thus, were merely a means of shipping the unli-

censed footage abroad for further dissemination.

App. at 41 (emphasis added).

The Reuters III panel was unequivocal: “We therefore

hold that LANS is entitled to recover damages flowing

from exploitation abroad of the domestic acts of infringe-

ment committed by defendants.” App. at 43. “We RE-

VERSE the ruling barring the claim for extraterritorial

damages and REMAND for a trial on actual damages... .”

App. at 54 (emphasis added).

Commentators recognized that Reuters III affirmed

the longstanding Second Circuit rule. For example, one

commentator wrote:

In a decision last July, Los Angeles News Service

v. Reuters Television International, Ltd., the

[Ninth Circuit] finally affirmed the viability of a

long-established Second Circuit doctrine that al-

lows the victims of international copyright in-

fringement to recover the full scope of their

damages when foreign acts of infringement are

rooted in an infringing domestic act. In doing so,

the Ninth Circuit not only gave copyright owners

a powerful weapon against international pirates

but also implicitly accepted the fluid nature of

today’s global economy and the need for a flexi-

ble, pragmatic approach to address international

Yakub Hazzard & Mark Mayer, Territorial Imperative, 22

Los Angeles Lawyer 45 (1999) (emphasis added); see also

Paul Goldstein, 3 Copyright § 16.2, at 16:6-1 (2001 Supp.)

(“If acts of infringement occurred in the United States, the

United States copyright owner can in certain circum-

stances recover damages or profits arising from subse-

quent uses of the copyrighted work outside the United

States.”) (emphasis added); William Patry, Choice of Law

and International Copyright, 48 Am. J. Comp. L. 383, 462

n.362 (2000) (Reuters III “[plermitt[ed] the plaintiff copy-

right [owner] to collect damages for this unauthorized,

infringing overseas exhibition”) (emphasis added); Paul

Edward Geller, 1 International Copyright Law & Prac-

tice § 3[1][b][i], INT-48 (2003) (“the [Reuters IIT) court held

that, if unauthorized copies are made in the United States,

then compensatory relief may be awarded under U.S. law

for resulting exploitation abroad”) (emphasis added); 5 No.

11 Andrews Intellectual Property Litigation Reporter 5

(January 13, 1999) (“the Ninth Circuit ruled that extrater-

ritorial ‘damages are recoverable from an infringer when

the act of infringement — the ‘predicate act’ — occurs in the

United States.”) (emphasis added).

C. Reuters IV Erroneously Reversed Reuters

III, Upset Established Copyright Law, and

Created a Conflict With the Second Cir-

cuit

As noted in the Statement of Facts, above, after the

Reuters III panel remanded this case for a trial on “actual

damages,” the district court granted summary judgment

for respondents, effectively reversing Reuters III. The

district court ruled that Reuters III only permitted LANS

to recover respondents’ profits, and that there was no proof

of profits directly allocable to the infringements because

respondents’ subscribers pay annual subscription fees

unrelated to their receipt or usage of any particular

footage, including the infringed Works. App. at 28-33.

LANS appealed, and a two-judge majority of a new

panel reversed Reuters III. App. at 1-16.‘ While Reuters III

remanded the case “for a trial on actual damages” (App. at

54), Reuters IV holds “that the Copyright Act does not

provide LANS recovery for actual damages resulting from

Reuters’s and Visnews’s infringement.” App. at 13 (empha-

sis added). ;

As already noted, this holding is entirely at odds with

Update Art and Reuters III, as pointed out in Judge

Silverman’s dissent in Reuters IV:

In our previous decision ... we decided the very

issue the majority now re-decides the other way.

The majority now holds that when we said “ac-

tual damages,” we didn’t mean actual damages,

but only whatever profits the infringer might

have realized. This new holding is not only at

odds with our previous holding, but it fails to

* The effective reversal of Reuters III is extremely prejudicial to

LANS. The Turs believed and relied on the plain language of Reuters

IIT, elected “actual damages” and waived the $60,000 statutory damage

award they had previously obtained. In fact, the Ninth Circuit required

LANS to elect between actual and statutory damages in order to pursue

its appeal. App at 6. Then the Reuters IV court decided that “actual

damages” did not mean “actual damages.” The result is devastating.

LANS has now lost its statutory damage award and anticipates Reuters

will argue that it is the prevailing party entitled to attorneys’ fees. This

blatantly unfair and prejudicial result represents such a departure

“from the accepted and usual course of judicial proceedings . . . as to call

for an exercise of this Court’s power.” Supreme Court Rule 10(a).

take into account of the fact that the Copyright

Act itself specifically uses the terms “actual

damages” and “profits” separately and distinctly.

[A]ctual damages can be recovered when the in-

fringement occurs wholly within the United

States. Reuters III at 992, 997. That’s exactly

what happened here, and why we reversed for a

trial at which LANS would be allowed to prove

its actual damages, if any. This is not a novel

concept. See Update Art, Inc. v. Modiin Publ’g,

Ltd., 843 F.2d 67, 70 n.4 (2d Cir. 1988); Famous

Music Corp. v. Seeco Records, Inc., 201 F. Supp.

560 (S.D.N.Y. 1961).

Neither the Copyright Act, nor our prior decision

in this case, nor any other case, limits the calcu-

lation of actual damages to only the infringer’s

ill-gotten profits.

App. at 14-15 (Silverman, J ., dissenting).

In fact, Reuters IV appears to have completely misap-

prehended Update Art, purporting to distinguish it on the

basis that “the amount of damages awarded by the district

court was based on defendants’ profits.” App. at 10. That is

simply incorrect. In fact, the Update Art court awarded an

' amount calculated by “adding to Update’s lost profits ...

that portion of appellants’ income from the infringement

that was not duplicative of Update’s lost profits.” Update

Art, 843 F.2d at 70. Update Art clearly supports LANS’

position that it is entitled to its actual damages in this

case.

Additionally, with respect to Famous Music, the

Reuters IV majority inexplicably concedes that “the Fa-

mous Music court did award relief equivalent to what the

current Act would term actual damages” (App. at 11), but

declines to follow it.

D. Reuters IV’s Reliance on Sheldon v. Metro-

Goldwyn Pictures Corp. and Subafilms, Ltd.

v. MGM-Pathe Communications Co. Is Erro-

neous

The Reuters IV majority cites to only two cases — one

from the Second Circuit and one from the Ninth — to

support its unprecedented theory that LANS may only

recover Reuter’s profits. However, both Sheldon v. Metro-

Goldwyn Pictures Corp., 106 F.2d 45 (2d Cir. 1939), and

SubaFilms, Ltd. v. MGM-Pathe Communications Co., 24

F.3d 1088 (9th Cir. 1994), are inapposite.

First, Sheldon, which predates Update Art in the

Second Circuit by nearly fifty years, cannot be read to

limit recovery of “extraterritorial” copyright damages to an

infringer’s profits or other unjust enrichment. Sheldon

was an appeal from an accounting. The issue before the

court was whether the plaintiff could recover the profits,

discovered during the accounting, from the defendant’s

overseas exploitation of a motion picture that infringed

plaintiff’s stage play. Sheldon, 106 F.2d at 52. There was

simply no claim in Sheldon that the infringement had

caused the plaintiff damages, such as lost sales or license

fees, and the court does not discuss that issue.

While Sheldon confirms that a defendant’s profits

from the foreign exploitation of a domestically-infringed

work are recoverable, it does not hold or even suggest that

such profits represent a copyright holder’s only remedy in

such a case. As Judge Silverman correctly points out, “[iJn

Sheldon, the question of what constitutes ‘actual damages’

wasn’t an issue or even discussed. Sheldon was an appeal

from an accounting. . . . ‘Actual damages’ had nothing to do

with the case.” App. at 15 (Silverman, J., dissenting).

Second, Subafilms “doesn’t shed light on this problem,

either. It merely holds that there is no recovery under

American copyright law for infringements that do not

occur within the United States.” App. at 15 (Silverman, J.,

dissenting). In this case, Reuter’s infringement of the

Works was completed entirely in the United States, and

“as we previously held in Reuters III, ‘actual damages’ can

be recovered when the infringement occurs wholly within

the United States.” App. at 15 (Silverman, J., dissenting).

There is no question that Reuters IV creates a critical

conflict between the Ninth and Second Circuits on this

exceedingly important issue. This case accordingly merits

this Court’s review.

E. Reuters IV Also Inexplicably Denies LANS

a Reasonable License Fee for Respon-

dents’ Unlawful Infringement of Its Works,

in Conflict With the Law of Other Circuits

In addition to foreclosing the recovery of LANS’ lost

profits, Reuters IV also inexplicably prevents LANS from

even recovering a reasonable royalty for respondents’

unauthorized use of its footage. This result also conflicts

with established law in the Second and Seventh Circuits,

which supports this type of recovery. See Davis v. The Gap,

Inc., 246 F.3d 152, 161 (2d Cir. 2001); Rogers v. Koons, 960

F2d 301, 313 (2d Cir. 1992); Deltak v. Advanced Systems,

Inc., 767 F.2d 357, 360-61 (7th Cir. 1985). At a minimum,

LANS should be entitled to recover what the Second

Circuit describes as “the. reasonable value of what [re-

spondents’] took.” Davis, 246 F.3d at 161. This conflict also

merits review and reversal of Reuters IV by this Court.

II. CERTIORARI SHOULD BE GRANTED BECAUSE

THE CONFLICT REGARDING THE AVAILABILITY

OF EXTRATERRITORIAL DAMAGES ARISING

FROM DOMESTIC INFRINGEMENTS INVOLVES

AN ISSUE OF EXTRAORDINARY IMPORTANCE

It is undeniable that the copyright law of the Ninth

and Second Circuits is extraordinarily important. The

Ninth Circuit of course includes Southern California,

which is the home of a large portion of this country’s film

and music industries. The Second Circuit is colloquially

referred to as the “copyright circuit” due to its unique

position in the world of media and the amount of copyright

litigation decided there. A conflict on an issue as important

as this effectively throws United States copyright law into

a state of turmoil.

In the Second Circuit, consistent with the well-settled

jurisdictional scope of the Copyright Act, copyright holders

are allowed to recover all damages flowing from domestic

acts of infringement, including damages resulting from the

destruction of overseas markets. See Update Art, 843 F.2d

at 70. However, a similarly situated copyright holder in

the Ninth Circuit is now limited to recovering the in-

fringer’s profits. In other words, Reuters IV provides for no

recovery if the infringer disseminates the work abroad for

free, is too inept to profit from the infringement, or, like

respondents, provides the work to subscribers for a subscrip-

tion fee that cannot be traced directly to the infringing

CC OSESSSS

works. Indeed, in the Ninth Circuit, a copyright owner

cannot even recover the reasonable value of the infringer’s

unlawful use.

Consider the following acts that would wreak massive

damage on a copyright holder, while the infringer would

not have to pay any meaningful damages under the

Reuters IV interpretation of Section 504(b) of the Copy-

right Act because such damages are limited to the in-

fringer’s profits:

e Any individuai or business can cripple the com-

mercial prospects of a film studio or record label in foreign

markets by making a single digital copy of a new film or

compact disc and transmitting that digital copy for a

modest fee (e.g., several thousand dollars) from the United

States to individuals or entities abroad who copy and

distribute it.

¢ Any individual or business can make a single

infringing copy of a television program in the United

States for a modest fee and send it over the Internet to

foreign television stations for broadcast.

e Any individual or business can, for a modest fee,

unlawfully copy all variety of print media, including books

and magazine articles in the United States and send them

to publishers abroad for publication.

The Reuters IV decision eviscerates the Copyright

Act’s deterrent effects in these situations. In this age of

rampant piracy, the possibility of these scenarios is unlim-

ited and cannot be tolerated. The Ninth Circuit’s misinter-

pretation of the Copyright Act and its conflict with the

Second Circuit must be addressed as soon as possible. The

Internet already makes this type of activity easy and

devastating to the businesses of United States copyright

holders. The problem can only become more acute as

technology develops.

Moreover, the availability of actual damages in this case

is even more appropriate than the examples given above

because respondents not only destroyed the market for LANS’

Works, but also benefitted directly from the infringement

because its subscribers used the Works throughout the world.

The fact that respondents did not profit from the use in a way

recognized by the law should not shield them from liability for

the actual damage suffered by LANS.

CONCLUSION

In light of Reuters IVs misinterpretation of the Copy-

right Act, the serious conflict between the Ninth and Second

Circuits and the extraordinary importance of this copyright

issue, this petition for a writ of certiorari should be granted.

Respectfully submitted,

STEVEN S. ROSENTHAL

Counsel of Record

KAYE SCHOLER LLP

901 Fifteenth Street, N.W.

Suite 1100

Washington, D.C. 20005-2327

(202) 682-3500

GEORGE T. CAPLAN

J. ANDREW SJOBLOM

KAYE SCHOLER LLP

1999 Avenue of the Stars, Suite 1700

Los Angeles, California 90067

(310) 788-1000

App. 1

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Los Angeles News Service,

Plaintiff-Appellant,

Vv. No. 02-56956

Reuters Television D.C. No.

International Limited; CV-95-01073-CBM

Visnews International

ORDER AND AME

America Holdings, Inc.;

Reuters America Inc.,

Defendants-Appellees.

Appeal from the United States District Court

for the Central District of California

Consuelo B. Marshall, Chief Judge, Presiding

Submitted April 22, 2003*

Pasadena, California

Filed August 21, 2003

Amended October 7, 2003

Before: Diarmuid F’. O’Scannlain, Barry G. Silverman,

Circuit Judges, and Edward C. Reed, Jr.,**

District Judge.

Opinion by Judge O’Scannlain;

Dissent by Judge Silverman

* This panel unanimously finds this case suitable for decision

without oral argument. See Fed. R. App. P. 34(a).

** The Honorable Edward C. Reed, Jr., Senior United States

District Judge for the District of Nevada, sitting by designation.

App. 2

COUNSEL

George T. Caplan, Kaye Scholer LLP, Los Angeles, Califor-

nia, argued the cause and filed briefs for the appellant.

Robert C. Vanderet, O’Melveny & Myers LLP, Los Angeles,

California, argued the cause for the appellees. Paul B.

Salvaty and Vanessa Koury were on the brief.

ORDER

The opinion filed August 21, 2003, is hereby ordered

amended as follows:

Slip Op. at 11878: In the first sentence of the first para-

graph, delete the words “for extraterritorial infringement”.

With this amendment, the panel has voted to deny the

petition for rehearing and the petition for rehearing en

banc. Judge Silverman voted to grant the petition for

rehearing and to deny the petition for rehearing en banc.

Judge Reed voted to deny the petition for rehearing and

suggested that the petition for rehearing en banc be

denied. Judge O’Scannlain voted to deny the petition for

rehearing and to deny the petition for rehearing en banc.

The full court has been advised of the petition for

rehearing en banc and no active judge has requested a

vote on whether to rehear the matter en banc. Fed. R. App.

P. 35.

The petition for rehearing and the petition for rehear-

ing en banc are denied.

a |

App. 3

OPINION

O’SCANNLAIN, Circuit Judge:

We must decide whether a news organization may

recover actual damages under the Copyright Act for acts of

infringement that mostly occurred outside the United

States.

The copyrighted works at issue here (“the works”) are

two video recordings, “The Beating of Reginald Denny”

and “Beating of Man in White Panel Truck,” which depict

the infamous events at Florence Ave. and Normandie Blvd.

during the 1992 Los Angeles riots. Los Angeles News

Service (“LANS”), an independent news organization

which produces video and audio tape recordings of news-

worthy events and licenses them for profit, produced the

works (and two other videotapes not at issue here) while

filming the riots from its helicopter. LANS copyrighted the

works and sold a license to rebroadcast them to, among

others, the National Broadcasting Company (“NBC”)

network, which used them on the Today Show.

Visnews International (USA), Ltd. (“Visnews”) is a

joint venture among NBC, Reuters Television Ltd., and the

British Broadcasting Company (“BBC”). Pursuant to a

news supply agreement between NBC and Visnews, NBC

transmitted the Today Show broadcast by -fiber link to

Visnews in New York; Visnews made a videotape copy of

the works, which it then transmitted via satellite to its

subscribers in Europe and Africa and via fiber link to the

New York office of the European Broadcast Union (“EBU”),

a joint venture of Visnews and Reuters. The EBU subse-

quently made another videotape copy of the works, and

App. 4

transmitted it to Reuters in London, which in turn dis-

tributed the works via video “feed” to its own subscribers.

LANS sued Reuters Television International, Inc.,

Reuters America Holdings, Inc., Reuters America, Inc.

(collectively, “Reuters”), and Visnews for copyright in-

fringement and certain other claims not relevant here. The

district court subsequently granted Reuters and Visnews

partial summary judgment on the issue of extraterritorial

infringement, holding that no liability could arise under

the Copyright Act for acts of infringement that occurred

outside the United States. L.A. News Serv. v. Reuters

Television Int'l, Ltd. (Reuters I), 942 F. Supp. 1265, 1268-

69 (C.D. Cal. 1996). However, the district court held that

Visnews’s act of copying the works in New York was a

domestic act of infringement’ and rejected a claimed

defense of fair use. Jd. at 1269, 1271-74.

The district court further concluded that LANS had

failed to prove any actual damages arising domestically

and that damages arising extraterritorially were unavail-

able under the Act, which meant that LANS was limited to

statutory damages. Id. at 1274-75 & n.7.’ After a bench

trial on the issue of statutory damages, the district court

awarded LANS a total of $60,000. L.A.. News Serv. v.

Reuters Television Int'l, Ltd. (Reuters II), 942 F. Supp.

1275, 1283-84 (C.D. Cal. 1996).

" Visnews’s transmission of the works to the EBU New York office

was not infringement, however. Jd. at 1270-71.

* The Copyright Act provides that the owner of an infringed

receive a fixed sum of statutory damages instead of the usual remedy,

“actual damages and [the infringer’s] profits.” 17 U.S.C. § 504(c)(1).

App. 5

LANS appealed the district court’s ruling on actual

damages, and Reuters and Visnews cross-appealed the fair

use ruling and the statutory damages calculation. We

subsequently reversed the district court’s actual damages

ruling, disagreeing with its interpretation of the Copyright

Act’s extraterritorial application. L.A. News Serv. v.

Reuters Television Int'l, Ltd. (Reuters III), 149 F.3d 987,

992 (9th Cir. 1998). We concluded that although the

district court was correct to hold that the Copyright Act

does not apply extraterritorially, an exception may apply

where an act of infringement is completed entirely within

the United States and that such infringing act enabled

further exploitation abroad. Jd. at 991-92. Relying on

Sheldon v. Metro-Goldwyn Pictures Corp., 106 F.2d 45 (2d

Cir. 1939), aff’d, 309 U.S. 390 (1940), which held that

profits from overseas infringement can be recovered on the

theory that the infringer holds them in a constructive

trust for the copyright owner, we reversed the grant of

summary judgment. Reuters III at 991-92. We held that

“LANS [was] entitled to recover damages flowing from

exploitation abroad of the domestic acts of infringement

committed by defendants.” Id. at 992. ¢

Turning to the other issues, we affirmed the fair use

ruling and the statutory damages calculation. Id. at 994-

96. However, we vacated the award of statutory damages

so that LANS could make a new election on remand. Id. at

995 & n.8. After the Supreme Court denied certiorari,

Reuters Television Int'l, Ltd. v. L.A. News Serv., 525 U.S.

1141 (1999), the case returned to the district court, where

Reuters and Visnews moved for summary adjudication of

the claim for actual damages. They asserted that the

Reuters III decision permitted LANS to recover only Defen-

dants’ profits attributable to extraterritorial infringement

App. 6

— not actual damages for injuries the infringements caused

LANS overseas. Reuters and Visnews further asserted

that no factual dispute remained as to the amount of such

profits.

After a hearing, the district court agreed with Reuters

and Visnews on both points and granted the motion. The

court concluded that Reuters III had held only that LANS

could recover any profits or unjust enrichment from

domestic infringers, on the theory that the infringers held

such profits in a constructive trust for LANS. “To permit

[LANS] to recover damages other than Defendants’ profits

or unjust enrichment,” the court stated, “would ... effec-

tively permit [LANS] to recover damages for extraterrito-

rial acts of infringement.”

Having determined that LANS could recover only

Defendants’ profits, if any, the district court concluded that

Reuters and Visnews had reaped no such profits from their

infringement. The court held that LANS’s “speculative”

testimony about the competitive advantage that exclusive

footage gives a subscription broadcaster was insufficient to

create a factual dispute. It accordingly granted the motion

for summary adjudication. In its order, the district court

stated that LANS could elect to take the $60,000 in statu-

tory damages awarded in Reuters IJ and affirmed in

Reuters III. In its haste, LANS timely appealed to this

court, but failed to make the required election as to statu-

tory damages. Because there was no “final decision,” we

dismissed for lack of jurisdiction. LANS subsequently

cured the jurisdictional defect by making such election,

and re-filed its appeal with this court.

App. 7

LANS claims that the district court erred by disallow-

ing recovery for actual damages. LANS, however, does not

challenge the court’s further conclusion that LANS had

failed to show that Reuters and Visnews had earned any

profits from the overseas infringement. Summary adjudi-

cation was therefore appropriate if the district court

correctly concluded that LANS could not recover actual

damages for overseas effects of Defendants’ infringement.

Both parties engage in detailed exegesis of our opinion

in Reuters III. On LANS’s reading, the Reuters III court’s

use of the term “damages” is dispositive. The statute uses

“actual damages” and “profits” separately and distinctly,

and provides that an infringer may recover both (in the

ordinary case). LANS asserts therefore that the Reuters II

court should be read as having meant what it said: “dam-

ages” means actual damages.

But LANS’s interpretation does not fit with the

context in which the Reuters III court discussed the

recoverability of “damages.” There, we relied on Judge

Learned Hand’s opinion in Sheldon and discussed dam-

ages entirely in the context of that case, which dealt

exclusively with the recovery of the defendants’ profits.

The Sheldon court had previously affirmed the defen-

dants’ liability for infringing the plaintiffs’ copyright by

incorporating their play into a movie. Sheldon v. Metro-

Goldwyn Pictures Corp., 81 F.2d 49, 54-56 (2d Cir. 1936).

After a remand, the defendants appealed the district

court’s decision to award the plaintiffs all the defendants’

profits from exhibiting the motion picture. Sheldon, 106

App. 8

F.2d at 48. The Second Circuit, inter alia, determined that

the profits traceable to overseas exhibition of the infring-

ing movie should be included. Although “[al]t first blush it

[seemed] that [the overseas profits] should be excluded”

because the overseas exhibition of the infringing movie

was not tortious under American copyright law, the court

nonetheless concluded that the plaintiffs could recover the

overseas profits under a different theory, based on one

defendant’s having made the negatives in the U.S. Id. at

52. The court elaborated:

The negatives were “records” from which the

work could be “reproduced,” and it was a tort to

make them in this country. The plaintiffs ac-

quired an equitable interest in them as soon as

they were made, which attached to any profits

from their exploitation, whether in the form of

money remitted to the United States, or of in-

crease in the value of shares of foreign companies

held by the defendants.... [A]s soon as any of

the profits so realized took the form of property

whose situs was in the United States, our law

seized upon them and impressed them with a

constructive trust, whatever their form.

Id. The Sheldon court relied exclusively on this rationale

in holding that the plaintiffs could recover the defendants’

profits from overseas exhibition.”

As Sheldon considered only an award of profits, it is

counterintuitive that a court applying Sheldon’s rationale,

° Before considering what could be included and excluded in the

tally of the defendants’ profits, the Sheldon court specified that the

plaintiffs would take only one-fifth of the net profits. Jd. at 51.

App. 9

but using the word “damages” as the Reuters III court did,

was referring consciously to “actual damages” as opposed

to “profits.” Indeed our prior holding in Reuters III, based

on the Sheldon constructive trust theory, demonstrates

that we did not use the term “damages” in that formal

sense. Rather, we used “damages” as a shorthand either

for both the forms of relief that 17 U.S.C. § 504(b) makes

available, i.e., actual damages and defendants’ profits, or

only the recovery of defendants’ profits. Understanding

which applies requires closer analysis of Sheldon and its

progeny.

Of course, Sheldon did not explicitly deal with the

issue of actual damages. But as LANS points out, there is

some support in the Second Circuit’s post-Sheldon case

law for the recovery of extraterritorial actual damages

once an act of domestic infringement is proven.

The most direct support for such position comes from

Update Art, Inc. v. Modiin Publ’g, Ltd., 843 F.2d 67 (2d

Cir. 1988), in which the Second Circuit considered an

Israeli newspaper’s unauthorized reproduction of a poster

copyrighted in the United States. Id. at 68-69. Update Art

held, albeit without much discussion, that the defendants

had failed to make any showing that the initial copying of

the poster had occurred abroad; thus, in the case’s proce-

dural context,’ the court concluded that the “predicate act”

‘ The defendants had consistently failed to respond adequately to

discovery requests, and the magistrate judge accordingly entered

summary judgment against them on the issue of damages. /d. at 70.

The circuit court affirmed that sanction. Jd. at 72.

iia ea

App. 10

of domestic infringement had occurred and that Update

Art had stated a viable copyright claim. Id. at 73. The

court also affirmed the award of “[d]amages accruing from

the illegal infringement in the Israeli newspapers.” /d.

Update Art, however, is distinguishable from LANS’s

claim in a couple of important respects. First, several

issues of the newspaper in which the infringing reproduc-

tion appeared were circulated in the United States. Id. at

73 & n.6. Second, and more importantly, the amount of

damages awarded by the district court was based on

defendants’ profits. Id. at 70 & n.4. Finally, the panel did

not even discuss the distinction between damages and

profits, much less cite Sheldon.’ Rather, it merely con-

cluded that the damages award could stand despite the

extraterritoriality issue, which the magistrate judge had

not considered in calculating the amount. Jd. at 70.

LANS also relies on a district court case, Famous

Music Corp. v. Seeco Records, Inc., 201 F. Supp. 560

(S.D.N.Y. 1961). There, Famous Music sued Seeco for

making infringing tape recordings of its copyrighted

musical work, which Seeco then exported to foreign

countries, where records were manufactured from the

tapes. Id. at 564. Applying the Copyright Act of 1909,

which was superseded in 1976 by the present Act, the

Famous Music court: held Seeco liable “by reason of its

joint tort in manufacture of the tapes sent abroad,” and

awarded “such royalties as may be found in favor of

plaintiffs by reason thereof.” Id. at 570.

5 The court did however cite to one of Sheldon’s offspring, Robert

Stigwood Group Ltd. v. O'Reilly, 530 F.2d 1096 (2d Cir. 1976).

App. 11

LANS is correct that the Famous Music court did

award relief equivalent to what the current Act would

term actual damages.’ However, Famous Music’s only

analysis of the issue of extraterritoriality came in a brief

statement: “A holding ... that a copyright has no extra-

territorial effect, does not solve this problem of manufac-

ture since plaintiffs seek to hold defendant for what it did

here rather than what it did abroad.” Jd. at 569. Moreover,

it is incorrect to characterize this case as'an application of

the Sheldon rationale, as the court never mentioned

Sheldon.

On the whole, we conclude that Reuters III adhered

very closely to our decision in Subafilms, Lid. v. MGM-

Pathe Communications Co., 24 F.3d 1088 (9th Cir. 1994)

(en banc). Subafilms reaffirmed that the copyright laws

have no application beyond the U.S. border, id. at 1095-98,

and expressly took no position on the merits of the Update

Art court’s apparent willingness to award damages, id. at

1094; see id. at 1099.’ LANS’s appeal thus presents the

with the constructive trust theory because a constructive trust attached

to the infringing master tapes and in turn to any records made overseas

from those tapes, meaning that the remedy the district court awarded

was simply the value of that property held by defendants in construc-

tive trust for plaintiff. This argument, however, stretches the term

“profits” beyond reason in order to include records never sold and still

in the defendants’ possession.

’ Subafilms also suggested that federal question jurisdiction under

the copyright laws may not be coextensive with legislative jurisdiction

under those laws, i.e., the reach Congress has chosen to give to Ameri-

can intellectual property statutes. See id. at 1091 n.5 (analogizing to

(Continued on following page)

App. 12

precise question that Subafilms reserved, Reuters III, 149

F3d at 991, and as the prior panel recognized, such

question should be resolved in light of the principles the

en banc court laid down.

The import of such principles counsel a narrow appli-

cation of the adoption in Reuters III of the Sheldon excep-

tion to the general rule. In particular, the Sheldon

constructive trust rationale includes a territorial connec-

tion, see Sheldon, 106 F.2d at 52, that preserves consis-

tency with Congress’s decision to keep the copyright laws —

presumably including § 504, which prescribes remedies —

territorially confined. Moreover, no rational deterrent

function is served by making an infringer whose domestic

act of infringement — from which he earns no profit — leads

to widespread extraterritorial infringement, liable for the

overseas infringement, particularly if the overseas in-

fringement is legal where it takes place. See Subafilms, 24

F3d at 1097-98 (warning of the disruption to American

foreign policy interests and to the policy of domestic

enforcement expressed in the Berne Convention that

extraterritorial enforcement would cause). Moreover, the

resulting over-deterrence might chill the fair use of copy-

righted works in close cases.

LANS counters that the assessment of damages

based on a domestic act of infringement having had

consequences in foreign territories is legitimate under

Hartford Fire Ins. Co. v. California, 509 U.S. 764, 813 (1993) (Scalia, J.,

dissenting), an opinion that discussed the distinction in the context of

the antitrust laws, which do have some extraterritorial application).

App. 13

“traditional tort principles.” However, it offers no direct

support for the proposition that those principles compel

the extension of relief — legal or equitable — beyond the

boundaries where Congress declared that liability stops.°

Its policy arguments to the contrary seem largely a com-

plaint about the failure of Congress to make the copyright

laws — those creating both rights and remedies — applica-

ble extraterritorially.”

III

Accordingly we read Reuters III to allow only a narrow

exception for the recovery of the infringer’s profits to

Subafilms’s general rule against extraterritorial applica-

tion. We conclude therefore that the Copyright Act does

not provide LANS recovery for actual damages resulting

from Reuters’s and Visnews’s infringement.”

AFFIRMED.

* On this point, LANS cites Famous Music, 201 F. Supp. at 568-69,

but that case applied “traditional tort principles” in adjudicating

liability rather than in imposing damages.

® See, e.g., Jane C. Ginsburg, Extraterritoriality and Multiterritori-

ality in Copyright Infringement, 37 Va. J. Intl L. 587, 598 (1997)

(criticizing Reuters III for creating a parallel arbitrary distinction).

There are also several evidentiary rulings that the parties

dispute on appeal, all of which relate to the extent of damages. Because

we agree with the district court that LANS may not recover actual

damages, and because we reverse an erroneous evidentiary ruling only

if the admission or exclusion of the evidence was prejudicial, see, e.g.,

Maffei v. N. Ins. Co., 12 F.3d 892, 897 (9th Cir. 1993), we need not reach

the evidentiary issues.

App. 14

SILVERMAN, Circuit Judge, dissenting:

In our previous decision, L.A. News Serv. v. Reuters

Television Int'l, Ltd. (Reuters III), 149 F.3d 987 (9th Cir.

1998), we decided the very issue the majority now re-

decides the other way. At that time, we identified the issue

as whether “a plaintiff may recover actual damages

accruing from the unauthorized exploitation abroad of

copyrighted work infringed in the United States.” Id. at

989. We held that it could. Our mandate said, “We RE-

VERSE the ruling barring the claim for extraterritorial

damages and REMAND for a trial on actual damages,

with directions that if LANS elects to recover actual

damages, the award of statutory damages be vacated.” Id.

at 997.

The majority now holds that when we said “actual

damages,” we didn’t mean actual damages, but only

whatever profits the infringer might have realized. This

new holding is not only at odds with our previous holding,

but it fails to take account of the fact that the Copyright

Act itself specifically uses the terms “actual damages” and

“profits” separately and distinctly." The district court

should have allowed LANS tc do what we said it could do —

prove its actual damages. For that reason, I respectfully

dissent.

" 17 U.S.C. § 504(b):

(b) Actual Damages and Profits. — The copyright owner

is entitled to recover the actual damages suffered by him or

her as a result of the infringement, and any profits of the in-

fringer that are attributable to the infringement and are not

taken into account in computing the actual damages.

App. 15

At this stage of the case, the majority’s reliance on

Sheldon v. Metro-Goldwyn Pictures Corp., 106 F.2d 45 (2d

Cir. 1939), is puzzling. In Sheldon, the question of what

constitutes “actual damages” wasn’t an issue or even

discussed. Sheldon was an appeal from an accounting. The

sole question was whether the plaintiff could recover the

profits earned by the defendant from its foreign exploita-

tion of a motion picture that infringed the plaintiff’s stage

play, profits that were discovered during the accounting.

The court held that the plaintiff could, on a constructive

trust theory. “Actual damages” had nothing to do with the

case.

Subafilms Ltd. v. MGM-Pathe Communications Co.,

24 F.3d 1088 (9th Cir. 1994) doesn’t shed light on this

problem, either. It merely holds that there is no recovery

under American copyright law for infringements that do

not occur within the United States. True enough, but as

we previously held in Reuters III, “actual damages” can be

recovered when the infringement occurs wholly within the

United States. Reuters III at 992, 997. That’s exactly what

happened here, and why we reversed for a trial at which

LANS would be allowed to prove its actual damages, if

any. This is not a novel concept. See Update Art, Inc. v.

Modiin Publ’g, Ltd., 843 F.2d 67, 70 n.4 (2d Cir. 1988);

Famous Music Corp. v. Seeco Records, Inc., 201 F. Supp.

560 (S.D.N.Y. 1961).

There are any number of ways to compute actual

damages. Neither the Copyright Act, nor our prior decision

in this case, nor any other case, limits the calculation of

actual damages to only the infringer’s ill-gotten profits.

LANS should have been allowed to put on its proof of its

actual damages, as we previously held it could. I would

remand for a trial on actual damages (just as we did last

App. 16

time) except this time, I would add that we really, really

mean it.

App. 17

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

WESTERN DIVISION

LOS ANGELES NEWS SERVICE, ) No. CV 95-1073 CBM

Plaintiff ) (SHx)

vs ‘ ORDER Granting

Motion for Summary

REUTERS TELEVISION ) Adjudication of

INTERNATIONAL LIMITED; __? Plaintiffs Claim for _

VISNEWS INTERNATIONAL Actual Damages

AMBRICA HOLDINGS, INC; )” Filed Nov. 17, 2000)

REUTERS AMERICA, INC.,

Defendants

—_—“—S/"

The matter before the Court, the Honorable Consuelo

B. Marshall, United States District Judge presiding, is

Defendants’ Motion for Summary Adjudication of Plain-

tiffs Claim for Actual Damages. The parties also filed

motions to strike portions of declarations relating to the

Motion. Counsel appeared before the Court on Monday,

October 16, 2000. Upon consideration of the arguments

presented, the Court grants Defendants’ Motion for Sum-

mary Adjudication of Plaintiffs Claim for Actual Dam-

ages.

BACKGROUND & PROCEDURAL HISTORY

On April 29, 1992, Plaintiff Los Angeles News Service

provided live video coverage from its helicopter of events

at Florence Avenue and Normandie Boulevard, including

App. 18

the attacks and beatings of two truck drivers. The copy-

righted works at issue in this matter are entitled “Beating

of Reginald Denny” and “Beating of Man in White Panel

Truck” (collectively, the “Works”). At the time of the Los

Angeles Riots, Plaintiff was under contract to KCOP

Television, Channel 13 in Los Angeles to provide live video

broadcasts of news events, which KCOP could rebroadcast.

District Court’s Findings of Fact (FOF) { 9.

In February 1995, Plaintiff filed a Complaint in the

United State District Court, Central District, against

Defendants Reuters Television International, Limited;

Visnews International (USA), Limited, Reuters America

Holdings, Inc. and Reuters America, Inc. (collectively,

“Defendants”). The Complaint alleged, among other

things, that Defendants violated the Copyright Act by

copying Plaintiffs Works and distributing such Works

both in the United States and abroad.

The district court made the following Findings of Fact

in the action:

On April 29 1992, the Works were broadcast live on

KCOP, with a narrative report by Robert Tur and camera

work done by Marika Tur. Because of the live broadcast,

the demand for licenses for the Works was immediate.

“Before the Turs had landed their helicopter,” news

agencies were calling to request licenses. The Turs

granted licenses to NBC, CBS and ABC within hours of

the event.

Specifically, Mr. Tur granted to NBC a 48-hour license

to use the Works on its news programs, with certain

restrictions, including that the tape could not be distrib-

uted to overseas broadcasters or affiliates. Plaintiffs

App. 19

Works were shown, as agreed by license, on NBC’s Today

Show on the morning of April 30, 1992.

On the morning of April 30, 1992, the Works were

transmitted by fiber link from NBC’s control room in New

York to Visnews’ New York Office. Visnews made an

unauthorized copy of Plaintiffs Works and transmitted

the copy to the New York office of the European Broadcast

Union (“EBU”). The EBU also made an unauthorized copy

of the Works. Neither Visnews nor EBU was authorized by

Plaintiff to obtain the Works from NBC or to use them in

any form.

Near the time of creation of the Works, Plaintiff

charged ABC and CBS each $3500 for licenses bearing the

same restriction as the NBC license. Later, Plaintiff

granted additional licenses of the Works domestically for

amounts ranging from $5000 to $6500. An unauthorized

airing of one of the Works by an entity otherwise licensed

to use the Works would result in a $10,000 liquidated

damage figure.

In July 1996, the district court granted Defendants’

motion for summary judgment on several grounds, includ-

ing (1) Defendants could not be held liable for extraterrito-

rial copyright infringement, and (2) Plaintiff has no

admissible evidence that any unauthorized uses of its

copyrighted works are attributable to Defendant’s infring-

ing activities. Los Angeles News Suc. v. Reuters Television

Int'l, Ltd., 942 F. Supp. 1265, 1266-67 (C.D. Cal. 1996).

After a bench trial on the remaining issue of domestic

infringement, the district court found that Defendants had

infringed upon Plaintiffs copyright in the Works and

awarded to Plaintiff statutory damages in the amount of

App. 20

$60,000. Los Angeles News Suc. v. Reuters Television Int'l,

Ltd., 942 F. Supp. 1275, 1283-84 (C.D. Cal. 1996).

Both parties appealed the district court’s judgment to

the Ninth Circuit Court of Appeals. On appeal, the Ninth

Circuit held that Plaintiff is entitled to recover extraterri-

torial damages, if any, resulting from Defendants’ domes- .

tic acts of infringement of Plaintiffs Works. Los Angeles

News Service, 149 F.3d at 997. The Ninth Circuit re-

manded the action to this Court for a trial on actual

extraterritorial damages. Id. at 992.

On September 25, 2000, Defendants filed this Motion

for Summary Adjudication of Plaintiffs Claim for Actual

Damages. Defendants argue that, due to the limited reach

of the Copyright Act, Plaintiff is entitled to recover only

those damages, if any, that Defendants hold in construc-

tive trust — namely, any of Defendants’ profits or any

unjust enrichment gained from Defendants’ domestic acts

of infringement.

On October 2, 2000, Plaintiff filed an Opposition to

Defendants’ Motion for Summary Adjudication. Plaintiff

argues that it is entitled to recover the lost market value

of the Works as well as Defendants’ profits.

DISCUSSION

The key disputes which Defendants ask the Court to

adjudicate are: (1) whether Plaintiff's recovery of extrater-

ritorial damages is limited to Defendants’ profits and

unjust enrichments gained from their domestic acts of

infringement, and (2) whether there is a genuine issue of

material fact regarding the amount of Defendants’ profits

and unjust enrichment earned from Defendants’ domestic

App. 21

infringing activities." Before discussing the merits of

Defendants’ motion for summary adjudication, the parties’

evidentiary objections will be addressed.

I. Evidentiary Objections and Motions to Strike

A. Objections to Portions of Robert Tur’s

Declaration

Defendants objected to several portions of Mr. Tur’s

Declaration and moved the Court to strike such portions.

The Court rules upon Defendants’ objections as they are

numbered in Defendants’ Motion to Strike.

1. Sustained.

Sustained.

Overruled.

~~ rns FP FP PP FF FP

Sustained.

* The Court understands from the parties that the purpose of this

Motion is solely to determine the scope of extraterritorial damages that

Plaintiff may recover based on Defendants’ domestic acts of infringe-

ment. The Court does not address the sufficiency of Plaintiffs evidence

to support Plaintiffs lost profits or licensing revenue to the extent such

damages extend beyond Defendants’ profits and unjust enrichment.

App. 22

10. Sustained.

11. Sustained.

12. Sustained.

13. Sustained.

14. Sustained.

15. Sustained.

The Court strikes the portions of Mr. Tur’s Declara-

tion as to which Defendants’ objections were sustained.

B. Objections to Thomas R. Edwards’s Decla-

ration

Defendants objected to the admissibility of Mr. Ed-

wards’s Declaration on the ground that it is not helpful to

the trier of fact and offers unreliable expert testimony.

The admissibility of expert testimony is governed by

Ruie 702 of the Federal Rules of Evidence, which provides:

If scientific, technical or other specialized knowl-

edge will assist the trier of fact to understand the

evidence or to determine a fact in issue, a wit-

ness qualified as an expert by knowledge, skill,

experience, training, or education, may testify

thereto in the form of an opinion or otherwise.

Frep. R. Evip. 702. District courts act as gatekeepers by

“ensuring that an expert’s testimony both rests on a

reliable foundation and is relevant to the task at hand.”

Kumho Tire Co. v. Carmichael, 526 U.S. 137, 141 (1999);

see also General Elec. Co. v. Joiner, 522 U.S. 136, 142

App. 23

(1997). A district court’s decision to exclude expert testi-

mony is reviewed for abuse of discretion. Kumho, 526 U.S.

at 146.

To determine the reliability of expert testimony,

courts may consider the following factors: whether a

theory or technique can be (and has been) tested; whether

it has been subjected to peer review and publication;

whether, in respect to a particular technique, there is a

high known or potential rate of error; whether there are

standards controlling the technique’s operation; and

whether the theory or technique enjoys general acceptance

within a relevant scientific community. Kumho, 526 U.S.

at 149-50 (citing Daubert v. Merrell Dow Pharm., Inc., 509

U.S. 579, 592-94 (1993)). The Ninth Circuit has held that

it is not an abuse of the trial court’s discretion to exclude

expert testimony, which it found to be unreliable and

speculative. Cabrera v. Cordis Corp., 134 F.3d 1418, 1422

(9th Cir. 1998); Diviero v. Uniroyal Goodrich Tire Co., 114

F.3d 851, 853 (9th Cir. 1997).

In his Declaration, Mr. Edwards compares fourteen

copies of various foreign news broadcasts containing

Plaintiffs Works to three video feeds of Plaintiffs Works

by Defendants and to one video feed by World Television

Network (““WTN”). Mr. Edwards notes that Defendants’

video feeds contained 13 images or sequences of images.

Comparing the images of the foreign broadcasts to Defen-

dants’ video feeds, Mr. Edwards concludes that all four-

teen copies of the various foreign news broadcasts

generated from the Defendants’ video feeds. Mr. Edwards

further concludes that none of the broadcasts generated

from the WTN feed.

App. 24

Mr. Edwards’s Declaration fails to lay a sufficient

foundation as-to Mr. Edwards’s qualifications as an expert

witness and as to the reliability of his methods. Mr.

Edwards declares that “[h]e has developed and imple-

mented analytical techniques for digital image processing

and related two-dimensional data analysis for over 20

years in aerospace and medical instrument.” However, Mr.

Edwards does not clarify how this experience qualifies him

to testify on forensic video analysis. Mr. Edwards also

declares that he has testified in a dozen trials in the area

of forensic video analysis. No declarations are made

regarding the reproducibility of Mr. Edwards’s method,

the known or potential error rates, the standards for

applying Mr. Edwards’s technique, the review of Mr.

Edwards’s method by peers or the general acceptance of

Mr. Edwards’s method in the relevant scientific commu-

nity. Plaintiff failed to provide the Court with any basis

upon which the Court could determine the reliability of

Mr. Edwards’s declaration under Daubert and Kumho.

Furthermore, Mr. Edwards’s declaration is limited to

comparing feeds by Visnews and WTN. There are no

comparison to other potential sources, such as feeds by

CBS or ABC.

Based on the foregoing, the Court sustains Defen-

dants’ objections and strikes Mr. Edwards Declaration.

C. Objections to Mr. Ted Kavanau’s Declara-

tion

Defendants objected to Mr. Kavanau’s Declaration on

the ground that it is unreliable and nonhelpful expert

testimony.

App. 25

The admissibility of expert testimony based on experi-

ence is governed by Federal Rule of Evidence 702. The

same standard for scientific testimony applies to expert

testimony based on experience. Kumho Tire Co., Ltd. v.

Carmichael, 526 U.S. 137, 151 (1999).

In his Declaration, Mr. Kavanau offers various vague,

speculative opinions regarding the value of the Works and

the likelihood that foreign news stations would air the

Works without authorization. Mr. Kavanau’s opinions are

not based on any particular facts, except that Plaintiffs

Works capture “compelling” footage. Mr. Kavanau’s vague

statements regarding the value of the Works (e.g., the

Works would have “worldwide appeal” and are worth a

“substantial fee”) are not likely to be helpful to the trier of

fact. Similarly, Mr. Kavanau’s speculative statements that

any news agency would air the Works, even without

authorization, are not based on any facts and are not

likely to be helpful to the trier of fact. Furthermore,

Plaintiffs proffered no evidence upon which the Court

could determine whether Mr. Kavanau’s declaration

satisfies the requirements articulated in Daubert and

Kumho.

The Court sustains Defendants’ objections and strikes

Mr. Kavanau’s Declaration.

D. Objections to Portions of Jeremy Smith’s

Declaration

Plaintiff objected to several portions of Mr. Smith’s

Declaration. The Court rules on Plaintiffs objections as

they are numbered in Plaintiffs motion to strike.

App. 26

Overruled.

Sustained.

Overruled.

5. Sustained.

6. Overruled.

7. Sustained.

8. Sustained.

The Court strikes the portions of Mr. Smith’s Declara-

tion as to which Plaintiff's objections were sustained.

E. Objections to Exhibits to Mr. Salvaty’s

Declaration

Plaintiff objects to portions of exhibits to Mr. Salvaty’s

Declaration filed in support of Defendants’ Reply Brief.

The Court rules on Plaintiffs objections as they are

numbered in plaintiff's motion to strike.

1. Overruled.

Sustained.

4. Sustained.

5. Overruled.

Overruled.

App. 27

The Court strikes the portions of exhibits of Mr.

Salvaty’s declaration as to which Plaintiffs objections

were sustained.

II. Motion for Summary Adjudication on Actual

Damages

The Ninth Circuit held that Plaintiff “is entitled to

recover damages flowing from exploitation abroad of the

domestic acts of infringement committed by defendants.”

Los Angeles News Service, 149 F.3d at 992. The Ninth

Circuit remanded the action for a trial on actual damages.

Id.

Standard for Summary Adjudication.

Federal Rule of Civil Procedure 56 provides for sum-

mary judgment against a party when “the pleadings,

depositions, answers to interrogatories, and admissions on

file, together with the affidavits, if any, show that there is

no genuine issue as to any material fact and that the

moving party is entitled to a judgment as a matter of law.”

FED.R.CIv.P. 56(c). A party seeking summary judgment

bears the initial burden of informing the court of the basis

for its motion and of identifying those portions of the

pleadings and discovery responses which demonstrate the

absence of a genuine issue of material fact. Celotex Corp. v.

Catrett, 477 U.S. 317, § 2, 106 (1986). Where the moving

party will have the burden of proof on an issue at trial, the

movant must affirmatively demonstrate that no reason-

able trier of fact could find other than for the moving

party. However, on an issue for which the nonmoving

party will have the burden of proof at trial, the movant

can prevail merely by pointing out that there is an absence

App. 28

of evidence to support the nonmoving party’s case. Id. If

the moving party meets its initial burden, the nonmoving

party must then set forth, by affidavit or as otherwise

provided in Rule 56, “specific facts showing that there is a

genuine issue for trial.” FED.R.CIv.P. 56(e); Anderson uv.

Liberty Lobby, Inc., 477 U.S. 242, 250 (1986).

In judging evidence at the summary judgment stage,

the Court does not make credibility determinations or

weigh conflicting evidence and draws all inferences in the

light most favorable to the nonmoving party. T.W. Elec.

Suc., Inc. v. Pacific Elec. Contractors Ass’n, 809 F.2d 626,

630-31 (9th Cir. 1987). The evidence presented by the

parties must be admissible. FED.R.CIv.P. 56(e). Conclu-

sory, speculative testimony in affidavits and moving

papers is insufficient to raise genuine issues of fact and

defeat summary judgment. See Thornhill Pub. Co., Ine. v.

GTE Corp., 594 F.2d 730, 738 (9th Cir. 1979). Hearsay

statements found in affidavits are inadmissible. See, e.g.,

Fong v. American Airlines, Inc., 626 F.2d 759, 762-63 (9th

Cir. 1980).

Standard for Extraterritorial Damages.

It is well-settled that the Copyright Act has no effect

outside of the United States. Los Angeles News Service,

149 F.3d at 990. In finding that a plaintiff is entitled to

extraterritorial damages resulting from a domestic act of

infringement, the Ninth Circuit adopted the narrow

exception in Sheldon, wherein the Second Circuit held

that a “plaintiff could recover the profits from exhibiting a

motion picture abroad where the infringing copy had been

made in the United States.” Sheldon v. Metro-Goldwyn

Pictures Corp., 106 F.2d 45, 52 (2d Cir. 1939), aff'd, 309

App. 29

U.S. 390 (1940). The Ninth Circuit quoted the Second

Circuit’s reasoning:

The [copyrighted film] negatives were ‘records’

from which the work could be ‘reproduced, and it

was a tort to make them in this country. The

plaintiffs acquired an equitable interest in them

: as soon as they were made, which attached to

any profits from their exploitation, whether in

the fwsm of money remitted to the United States,

or of increase in the value of shares of foreign

companies held by the defendants. We need not

decide whether the law of those countries where

the negatives were exploited, recognized the

plaintiffs’ equitable interest; we can assume ar-

guendo that it did not, for, as soon as any of the

profits so realized took the form of property

whose situs was in the United States, our law

seized upon them and impressed them with a

constructive trust, whatever their form.

Los Angeles News Service, 149 F.3d at 991 (quotations

omitted).

The Ninth Circuit clearly adopted the Second Circuit’s

logic that, under a constructive trust theory, a plaintiff is

entitled to recover from domestic infringers any profits or

other unjust enrichment, whether such profits or enrich-

ment accrued in the United States or abroad. Although not

expressly stated, the limited nature of the Ninth Circuit’s

rationale implies that Plaintiffs recovery is limited to

damages that a defendant is holding in constructive trust

for the Plaintiff. The limited extraterritorial reach of the

entitled to “any profits” resulting from the domestic

infringement of the copyrighted works. See Sheldon, 106

F.2d at 52. Any broader interpretation of the Sheldon rule

App. 30

may frustrate Congress’ intent that the Copyright Act will

not apply extraterritorially. To permit Plaintiff to recover

damages other than Defendants’ profits or unjust enrich-

ment would expand the Ninth Circuit’s holding beyond the

scope of its rationale and would effectively permit Plaintiff

to recover damages for extraterritorial acts of infringe-

ment.

As a matter of law, with respect to extraterritorial

damages, the Copyright Act entitles a plaintiff to recover

only those profits or other unjust enrichments which a

defendant receives as a result of its domestic acts of

infringement.

Calculation of Infringer’s Profits & Unjust Enrichment.

When establishing the amount of a defendant’s profits

earned from an infringement, the plaintiff is required to

prove the amount of money received from the unauthor-

ized sales of defendants. 17 U.S.C. § 504(b); Frank Music

Corp. v. Metro-Goldwyn-Mayer, Inc., 772 F.2d 505, 514

(9th Cir. 1988) (citations omitted). The burden then shifts

to the defendant to prove the costs to be deducted in

arriving at profit. Frank Music, 772 F.2d at 514. “Any

doubt as to the computation of costs and profits is to be

resolved in favor of the plaintiff.” Id.

When an infringer’s profits or unjust enrichment are

only remotely and speculatively attributable to the copy-

right owner, courts will deny recovery to the copyright

owner. Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc.,

886 F.2d 1545, 1553 (9th Cir. 1989) (denying profits

deemed “too attenuated and too speculative”). Enhanced

goodwill and market recognition may be treated as profit

“so long as the amount of the award is based on a factual

App. 31

basis rather than ‘undue speculation.’” Business Trends

Analysts, Inc. v. Freedonia Group, Inc., 887 F.2d 399, 403

(2d Cir. 1989). A court will deny damages based on en-

hanced good will where the plaintiff “fail[ ] to prove either

any change in [defendant’s] goodwill that may have

occurred during the [infringement] period, or even the

existence of any goodwill.” Computer Assocs. Int'l, Inc. v.

Altai, Inc., 775 F. Supp. 544, 571 (E.D.N.Y. 1991), affd in

part, rev'd on other grounds, 982 F.2d 693 (2d Cir. 1992).

No Genuine Issues Regarding Amount of Defendants’

Profits or Unjust Enrichment.

There is no genuine issue of material facts regarding

the amount of profits earned by Defendants. The undis-

puted facts before the Court are:

e “From 1992 through the present, [Defen-

dants] have provided video services to its

subscribers on an annual basis.” Undisputed

Fact 7 51.

e Except for sales from their archives, Defen-

dants “do not sell feeds independently or on

a story-by-story basis.” Undisputed Fact

q 52.

¢ Defendants’ “employees were prohibited

from selling or licensing the Works from the

[Defendants’] video archive.” Undisputed

Fact { 62. Furthermore, “[a]lthough [Defen-

dants] maintained a copy of plaintiffs foot-

age in its video archive in London, they did

not license of [sic] sell the footage to any-

one.” Undisputed Fact { 56.

e “Subscribers pay an advance fee for their

subscription service.” Undisputed Fact ¥ 53.

App. 32

Defendants’ “subscription fee did not vary

depending on the amount of footage used by

[Defendants’] subscribers.” Undisputed Fact

q 54.

In addition to these facts, Defendants provided evidence to

support the following facts: (1) “There is no evidence that,

as a result of [Defendants] infringement, additional

broadcasters decided to subscribe to [Defendants’] video

services.” Defendants’ Statement of Facts { 63; and (2)

“There is no evidence that [Defendants] were able to

charge higher rates for its subscriptions because of the

infringement at issue in this case.” Id. at 7 64. Plaintiff

attempts to dispute these facts by citing Mr. Tony Dono-

von’s deposition testimony. Explaining the value of unique

footage, Mr. Donovon testified:

[T]here was a major competitive advantage we

would have had over our competition — unique,

unrepeatable video — which is difficult to trans-

late into actual sales or renewals but one expects

to have an impact on your contract renewal rate

and your contract price on those renewals.”

Donovon Depo. 56:2-15. Mr. Donovon’s deposition testi-

mony does not refer specifically to Plaintiffs Works, but

generally to how a unique video of Israeli President

Rabin’s assassination may have hypothetically increased

sales or renewals if it had been purchased by Defendants.

This speculative testimony is not sufficient to create a

genuine issue of material fact when there is no evidence

that either Defendants’ subscription rate or subscribers

list was affected by Defendants’ copying and distribution

of Plaintiffs Works. Furthermore, Plaintiff presents

nothing more than speculative testimony, in the form of

App. 33

Mr. Donovon’s testimony as quoted above, that Defen-

dants’ goodwill may have been enhanced by the infringing

use of Plaintiffs Works.

Plaintiff failed to produce any evidence that Defen-

dants made any sales which infringed upon Plaintiffs

Works. There is no genuine issue of the material fact that

Defendants’ made no profits nor gained any unjust en-

richment as a result of their domestic infringing activities.

In light of the fact that there is no genuine dispute

that Defendant’s made no profits nor gained any unjust

enrichment from their infringing activities, the Court

finds that Defendants are entitled to judgment as a matter

of law.

CONCLUSION

Based on the foregoing, the Court SUSTAINS Defen-

dants’ objections to and STRIKES the Declarations of Mr.

Ted Kavanau and Mr. Thomas R. Edwards. The Court

SUSTAINS in part and OVERRULES in part Defendants’

objections to Mr. Tur’s Declaration and STRIKES those

portions of Mr. Tur’s Declaration to which Defendants’

objections have been sustained. The Court SUSTAINS in

part, OVERRULES in part Plaintiffs objections to Mr.

Smith’s Declaration and STRIKES those portions of Mr.

Smith’s Declaration to which Plaintiffs objections have

been sustained. The Court SUSTAINS in part, OVER-

RULES in part Plaintiffs objections to exhibits to Mr.

Salvaty’s Declaration and STRIKES those portions of such

exhibits to which Plaintiffs objections have been sus-

tained. The Court GRANTS Defendants’ Motion for

Summary Adjudication of Plaintiffs Claim for Actual

Damages.

App. 34

On appeal, the Ninth Circuit held that Plaintiff could

attempt to prove actual extraterritorial damages or elect

statutory damages. Los Angeles News Service, 149 F.3d at

997. If Plaintiff elects to recover statutory damages, the

district court’s previous award of $60,000 will be rein-

stated.

SO ORDERED.

DATE: November 17, 2000

/s/ Consuelo B. Marshall

CONSUELO B. MARSHALL

UNITED STATES DISTRICT

JUDGE

App. 35

149 F.3d 987

United States Court of Appeals,

Ninth Circuit.

LOS ANGELES NEWS SERVICE, Plaintiff-Appellant,

REUTERS TELEVISION INTERNATIONAL,

LIMITED; Visnews International (USA), Limited;

Reuters America Holdings, Inc.; Reuters America,

Inc., Defendants-Appellees.

LA NEWS SERVICE, Plaintiff-Appellee,

Vv.

REUTERS TELEVISION INTERNATIONAL,

LIMITED; Visnews International (USA), Limited;

Reuters America Holdings, Inc.; Reuters America,

Inc., Defendants-Appellants.

Nos. 97-55113, 97-55114.

Argued and Submitted May 4, 1998.

Decided July 13, 1998.

As Amended on Denial of Rehearing and Suggestion

for Rehearing En Banc Aug. 25, 1998.

William A. Bergen, Law Offices of William A. Bergen,

Auburn, CA, for plaintiff/appellant/cross-appellee.

Louis P. Petrich, Leopold, Petrich & Smith, Los

Angeles, CA, for defendants/appellees/cross-appellants.

Appeals from the United States District Court for the

Central District of California; Kim McLane Wardlaw,

District Judge, Presiding. D.C. No. CV-95-01073-KMW.

App. 36

Before: CANBY and KLEINFELD, Circuit Judges,

and SCHWARZER,* Senior District Judge.

SCHWARZER, Senior District Judge:

On this appeal we must decide whether, under the

accruing from the unauthorized exploitation abroad of

copyrighted work infringed in the United States; whether

defendants’ exploitation of the work was protected as fair

use; and whether the district court erred in its award of

statutory damages.

BACKGROUND

Los Angeles News (LANS) is an independent news

organization which produces video and audio tape re-

cordings of newsworthy events and licenses them for

profit. During the April 1992 riots following the Rodney

King verdict, LANS covered the events at Florence Avenue

and Normandie Boulevard in Los Angeles from its helicop-

ter, producing two videotapes: “The Beating of Reginald

Denny” and “Beating of Man in White Panel Truck” (the

works). LANS copyrighted these works and licensed them

to National Broadcasting Company, Inc. (NBC), which

used them on the Today show with the logo of KCOP, a Los

Angeles station not affiliated with NBC, superimposed

(known in the trade as the downstream). Under the

agreement, LANS retained ownership of the works and

the right to license them.

* Honorable William W Schwarzer, Senior United States District

Judge for the Northern District of California, sitting by designation.

App. 37

The Reuters defendants (Reuters Television Interna-

tional, Ltd., Reuters America Holdings, Inc., and Reuters

America, Inc., collectively Reuters) are television news

agencies that gather and provide audiovisual and other

news material to their subscribers for an annual fee.

Visnews International (USA), Ltd. (Visnews), a joint

venture of Reuters Television Limited, NBC and the

British Broadcasting Company, had a news supply agree-

ment with NBC News Overseas. When NBC broadcast the

Today show featuring the LANS footage to its affiliates, it

simultaneously transmitted the show via fiber link to

Visnews in New York. Visnews made a videotape copy of

the works as broadcast and transmitted it to subscribers

in Europe and Africa. It also transmitted copies of the

videotape to the New York office of the European Broad-

casting Union (EBU), which in turn made a videotape copy

and transmitted it via satellite to Reuters’ London branch,

which provided copies to its subscribers.

LANS brought this action for copyright infringement

against the Reuters defendants and Visnews. Defendants

moved for summary judgment on several grounds. So far

as relevant to this appeal, they contended that (1) extra-

territorial infringement does not violate American copy-

right law, (2) the fair use doctrine precludes a finding of

infringement, and (3) LANS had no evidence of actual

damage. The district court granted defendants’ motion

with respect to extraterritorial infringement and the claim

for actual damages.’ It denied the motion with respect to

' The district court considered only LANS’s claims of domestic

damages. See Los Angeles News Serv. v. Reuters Television Int'l, Ltd.,

942 F.Supp. 1265, 1274 n. 7 (C.D.Cal.1996) (“Reuters I”).

App. 38

the fair use defense and entered partial summary judg-

ment for LANS determining that the defense did not

shield defendants’ actions. Following a bench trial on the

remaining issues, the district court found that Visnews

had infringed by making one copy of each videotape and

contributing to the making by EBU of one copy of each

tape, LANS failed to prove the infringement was willful,

and defendants failed to prove that it was innocent. The

court entered judgment for LANS for $60,000 in statutory

damages based on the four domestic infringements by

Visnews. In a subsequent order, the court denied LANS’s

and Reuters’ applications for costs and attorney’s fees.

LANS appeals from the ruling barring extraterritorial

damages and defendants cross-appeal from the ruling

denying the fair use defense and from the damage award.

Both appeal from the order denying attorney’s fees and

costs. We have jurisdiction pursuant to 28 U.S.C. § 1291.

DISCUSSION

I. EXTRATERRITORIAL DAMAGES

It is settled that the Copyright Act does not apply

extraterritorially. Subafilms, Lid. v. MGM-Pathe Commu-

nications Co., 24 F.3d 1088, 1094 (9th Cir.1994) (en banc).

For the Act to apply, “at least one alleged infringement

must be completed entirely within the United States.”

Allarcom Pay Television Ltd. v. General Instrument Corp.,

69 F.3d 381, 387 (9th Cir.1995). The district court found

* The decision is reported at 942 F.Supp. 1275 (C.D.Cal.1996)

(“Reuters IT”).

App. 39

that “any damages arising extraterritorially are the result

of extraterritorial infringement.” Reuters I, 942 F.Supp. at

1269. Relying on Allarcom, the court held that “(t]he

transmissions from Visnews and [EBU] did not violate the

for damages arising extraterritorially.” Id. at 1269. We

review the district court’s grant of partial summary

judgment de novo. Amdahl Corp. v. Profit Freight Sys.,

Inc., 65 F.3d 144, 146 (9th Cir.1995).

The district court’s ruling was premised on the as-

sumption that LANS’s claim was based on the transmis-

sions from Visnews and EBU to Reuters. However, it also

held that Visnews completed acts of infringement in the

United States when it copied the works in New York and

then transmitted them to EBU which also copied them in

New York. Each act of copying constituted a completed act

of infringement. See 17 U.S.C. § 106(1). It was only after

these domestic acts of infringement had been completed

that Visnews and EBU transmitted the works abroad.

This case then presents a situation different from that

in Subafilms and Allarcom. In Subafilms, the allegedly

infringing conduct consisted solely of authorization given

within the United States for foreign distribution of infring-

ing videocassettes. 24 F.3d at 1090 n. 3. Similarly, in

Allarcom, the alleged infringement consisted either of

authorization given in the United States for infringement

in Canada or broadcasts of copyright material from the

United States into Canada, with the infringement not

completed until the signals were received in Canada. 69

F.3d at 387.

The issue before us — which the Subafilms court did

not resolve — is whether LANS “may recover damages for

App. 40

international distribution of the fworks] based on the

theory that an act of direct infringement, in the form of a

reproduction of the ... [works], took place in the United

States.” Subafilms, 24 F.3d at 1099; see also id. at 1094.

While this circuit has not heretofore addressed the issue,

the Second Circuit has done so in a line of cases beginning

with Sheldon v. Metro-Goldwyn Pictures Corp., 106 F.2d

45, 52 (2d Cir.1939), aff’d, 309 U.S. 390, 60 S.Ct. 681, 84

L.Ed. 825 (1940). In Sheldon the court held, in an opinion

by Judge Learned Hand, that plaintiff could recover the

profits from exhibiting a motion picture abroad where the

infringing copy had been made in the United States. As

Judge Hand explained:

The [copyrighted film] negatives were “records”

from which the work could be “reproduced”, and

it was a tort to make them in this country. The

plaintiffs acquired an equitable interest in them

as soon as they were made, which attached to

any profits from their exploitation, whether in

the form of money remitted to the United States,

or of increase in the value of shares of foreign

companies held by the defendants. We need not

decide whether the law of those countries where

the negatives were exploited, recognized the

plaintiffs’ equitable interest; we can assume ar-

guendo that it did not, for, as soon as any of the

profits so realized took the form of property

whose situs was in the United States, our law

seized upon them and impressed them with a

constructive trust, whatever their form.

106 F.2d at 52. See also Update Art, Inc. v. Modiin Publ’g,

Ltd., 843 F.2d 67, 73 (2d Cir.1988) (permitting recovery

of copyright damages accruing abroad from illegal copying

in the United States); Famous Music Corp. v. Seeco Re-

cords, Inc., 201 F.Supp. 560, 568-69 (S.D.N.Y.1961)

App. 41

(same). See also 4 Melville B. Nimmer & David Nimmer,

Nimmer on Copyright § 14.05, at 14-96 (1996) (stating

that copyright holders acquire an equitable interest in

infringing works produced in the United States as soon as

they come into being). Subafilms described these cases as

being “based ... on the theory that the infringing use

would have been actionable even if the subsequent foreign

distribution that stemmed from that use never took place.”

24 F.3d at 1094. Recovery of damages arising from over-

seas infringing uses was allowed because the predicate act

of infringement occurring within the United States en-

abled further reproduction abroad.°

LANS urges us to adopt the Second Circuit’s rule

because the unauthorized copying of its works in the

United States enabled further exploitation abroad. While

the extraterritorial damages resulted from Reuters’s

overseas dissemination of the works received by satellite

transmissions from Visnews and EBU, those transmis-

sions were made possible by the infringing acts of copying

in New York. The satellite transmissions, thus, were

merely a means of shipping the unlicensed footage abroad

for further dissemination.

The Subafilms court’s concerns are inapplicable to the

present case. The Second Circuit rule would not permit

application of American law to “acts of infringement that

take place entirely abroad.” Subafilms, 24 F.3d at 1098.

Nor would a copyright holder be entitled to recover extra-

territorial damages unless the damages flowed from

extraterritorial exploitation of an infringing act that

* No other circuits appear to have addressed this issue.

App. 42

occurred in the United States. In Subafilms, the court

reasoned that liability based solely on the authorization of

infringing acts “would produce the untenable anomaly,

inconsistent with the general principles of third party

liability, that a party could be held liable as an infringer

for violating the ‘authorization’ right when the party that

it authorized could not be considered an infringer under

the Copyright Act.” 24 F.3d at 1094; see also 3 Nimmer,

supra, § 12.04[A][3][b], at 12-88 to 12-93 (“It is perverse to

construe Congress’ intention as holding liable a person

who authorizes an activity that is perfectly legal abroad.”).

Under the Second Circuit’s rule, by contrast, a party

becomes liable for extraterritorial damages only when an

act of infringement occurs within the United States,

subjecting it to liability as an infringer (or a contiibutory

infringer) under the Copyright Act. Cf. Robert Stigwood

Group Ltd. v. O’Reilly, 5380 F.2d 1096, 1100-01 (2d

Cir.1976) (copyright holders cannot recover for unauthor-

ized performances of copyrighted work in Canada merely

because the performers may have assembled and arranged

all necessary elements in the United States); De Bardossy

v. Puski, 763 F.Supp. 1239 (S.D.N.Y.1991); Gaste v.

Kaiserman, 683 F.Supp. 63, 65 (S.D.N.Y.1988), aff’d, 863

F.2d 1061 (2d Cir.1988); Ahbez v. Edwin H. Morris & Co.

Inc., 548 F.Supp. 664, 667 (S.D.N.Y.1982).

Defendants’ argument that adoption of the Second

Circuit rule would permit plaintiffs to circumvent the

statute of limitation by recovering damages for distribu-

tion abroad occurring many years after the infringing act

in the United States is without merit. An action must be

“commenced within three years after the claim accrued.”

17 U.S.C. § 507(b). A claim accrues when an act of infringe-

ment occurs, not when consequent damage is suffered. See

App. 43

Roley v. New World Pictures, Ltd., 19 F.3d 479, 481 (9th

Cir.1994). A plaintiff’s right to damages is limited to those

suffered during the statutory period for bringing claims,

regardless of where they may have been incurred.

We therefore hold that LANS is entitled to recover

damages flowing from exploitation abroad of the domestic

acts of infringement committed by defendants.

II. FAIR USE

A. Summary Judgment

Defendants moved for summary judgment on the

basis of collateral estoppel, relying on the ruling of a

district court in another case involving the same works but

a different defendant.‘ Inasmuch as that ruling was

reversed on appeal, that issue is moot. In its response to

defendants’ motion, LANS contended that fair use was

inapplicable as a defense to the action. Defendants’ reply

memorandum did not address the fair use issue, nor did

defendants object to the district court’s treatment of LANS’

response as a motion for partial summary judgment.’ On

* Defendants’ collateral estoppel argument rested on the summary

judgment granted by another district court to the defendant in Los

Angeles News Service v. KCAL-TV Channel 9, later reversed by this

court. 108 F.3d 1119 (9th Cir.1997), cert. denied, 522 U.S. 823, 118 S.Ct.

81, 139 L.Ed.2d 39 (1997). Unlike the defendants in this case, KCAL

was one of several Los Angeles television stations that broadcast the

Reginald Denny tape after LANS had refused to grant a license. See id.

at 1120.

* The procedure followed by the trial court was proper, see Ports-

mouth Square, Inc. v. Shareholders Protective Comm., 770 F.2d 866, 869

(9th Cir.1985), but does not bar defendants from arguing on appeal that

triable issues precluded entry of partial summary judgment for LANS.

App. 44

appeal, defendants for the first time argue that triable

issues existed precluding entry of partial summary judg-

ment. Defendants cite our decision in Los Angeles News

Service v. KCAL-TV Channel 9, 108 F.3d 1119 (9th

Cir.1997), cert. denied, 522 U.S. 823, 118 S.Ct. 81, 139

L.Ed.2d 39 (1997), reversing summary judgment for

defendant based on fair use. Defendants identify no triable

issues, however, arising under the facts of this case. While

KCAL involved the same works, it arose in a different

context. Unlike the district court in KCAL, the court here

made a thorough analysis of the evidence bearing on the

relevant factors under § 107. Because there are no genuine

issues of material fact and “the district court has found

facts sufficient to evaluate each of the statutory factors, an

appellate court need not remand for further fact finding

but may conclude as a matter of law that the challenged

use does not qualify as a fair use of the copyright work.”

Harper & Row Publishers, Inc. v. Nation Enter, 471 U.S.

539, 560, 105 S.Ct. 2218, 85 L.Ed.2d 588 (1985) (quoting

Pacific & Southern Co. v. Duncan, 744 F.2d 1490, 1495

(11th Cir.1984)) (internal quotations and notations omit-

ted); see also Los Angeles News Serv. v. Tullo, 973 F.2d 791,

796 (9th Cir.1992) (“Where the district court has found

facts sufficient to evaluate each of the statutory factors

considered in determining fair use, ... we may determine

as a matter of law whether the challenged use is a fair

one.”); Fisher v. Dees, 794 F.2d 432, 436 (9th Cir.1986)

(rejecting argument that fair use is appropriate for deter-

mination by summary judgment only when no reasonable

jury could have decided the question differently).

App. 45

B. Merits

The district court rejected the fair use defense after

finding that three of the § 107 factors favored LANS.° In

substance, the court found the uses were commercial

rather than nonprofit and not very transformative, that

they took the “heart” of the work, and that allowing such

uses “would result in a substantially adverse impact on

the potential market for the original works.” Reuters I, 942

F.Supp. at 1274.

We review a grant of summary judgment de novo.

Ledo Fin. Corp. v. Summers, 122 F3d 825, 827 (9th

Cir.1997). “Fair use is a mixed question of law and fact,”

which we also review de novo. Harper & Row, 471 U.S. at

560, 105 S.Ct. 2218; Tullo, 973 F.2d at 796. In doing so, we

must balance the nonexclusive factors set out in 17 U.S.C.

§ 107. Harper & Row, 471 U.S. at 549, 105 S.Ct. 2218.

* § 107, provides in relevant part:

Notwithstanding the provisions of sections 106 and 106A,

the fair use of a copyrighted work ... for purposes such as

..- news reporting, ... is not an infringement of copyright.

In determining whether the use made of a work in any par-

ticular case is a fair use the factors to be considered shall

include —

(1) the purpose and character of the use, including

whether such use is of a commercial nature or is for non-

profit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in

relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or

value of the copyrighted work.

App. 46

1. Purpose and Character of Use

Although defendants’ service does have a news report-

ing purpose, its use of the works was not very transforma-

tive. Reuters copies footage and transmits it to news

reporting organizations; Reuters does not explain the

footage, edit the content of the footage, or include editorial

comment. “Although such transformative use is not

absolutely necessary for a finding of fair use, ... the more

transformative the new work, the less will be the signifi-

cance of other factors, like commercialism, that may weigh

against a finding of fair use.” Campbell v. Acuff-Rose

Music, Inc., 510 U.S. 569, 579, 114 S.Ct. 1164, 127 L.Ed.2d

500 (1994) (citations omitted).

Reuters used the works for a commercial purpose,

providing the works to other news reporting organizations

in exchange for an annual fee. While a commercial use

does not by itself preclude a defense of fair use, “every

commercial use of copyrighted material is presumptively

an unfair exploitation of the monopoly privilege that

belongs to the owner of the copyright.” Sony Corp. of Am.

v. Universal City Studios, Inc., 464 U.S. 417, 451, 104

S.Ct. 774, 78 L.Ed.2d 574 (1984). Further, “(t]he crux of

the profit/non-profit distinction is ... whether the user

stands to profit from exploitation of the copyrighted

material without paying the customary price.” Harper &

Row, 471 U.S. at 562, 105 S.Ct. 2218. LANS normally

charges customers for the privilege of copying portions of

its works. The district court did not err in finding that this

factor weighed in favor of LANS.

Defendants argue that if a broadcaster’s use of the

works for news reporting may constitute fair use, then “it is

obvious that the transmission of such Works to a broadcaster

App. 47

for such purpose cannot ... be deemed an infringement.”

The argument misses the point for it is not the transmis-

sion that is the infringement but the unauthorized copying

of the works. Moreover, in Tullo, the court held that the

defendant news clipping service — an organization that

monitored news programs, recorded them on videotape,

and sold copies to interested individuals — was not pro-

tected by the fair use defense. 973 F.2d at 799. The defen-

dant, AVRS, argued that the first factor should weigh in

its favor because its clients used the tapes for “research,

scholarship and private study.”’ Id. at 797. The court held

that “the ultimate use to which the customer puts the tape

is irrelevant, as is the use AVRS’s customers make of the

tapes AVRS sells.” Jd. Thus, the question of whether

defendants’ copying and transmission of the works consti-

tutes fair use is distinct from whether their subscribers’

broadcasts of the works are fair use.

2. Nature of Copyrighted Work

The works were factual and informational, see Hustler

Magazine, Inc. v. Moral Majority, Inc., 796 F.2d 1148,

1153-54 (9th Cir.1986), and had been published by LANS

before their use by Reuters. See Harper & Row, 471 US.

at 564, 105 S.Ct. 2218. The district court did not err in

finding that this factor weighed in favor of defendants.

"17 U.S.C. § 107 enumerates scholarship and research as fair

uses.

App. 48

3. Amount and Substantiality of What Was

Used

The district court found that this factor weighed in

favor of LANS because even though Reuters used only a

small portion of the works, it was taken from the “heart” of

the works. See id. at 565-66, 105 S.Ct. 2218. The court

noted that Visnews had copied footage from NBC’s news-

cast, which had edited the LANS footage and selected the

“heart” of it, and that Reuters presumably used footage

from newscasts. Defendants do not contest this factor.

4. Effect on Market

The district court correctly found that this factor

weighed in favor of LANS. The court reasoned that al-

though LANS could not prove loss of subsequent sales of

the works, and hence actual adverse effect on the market

for videotape footage, defendants’ actions should not go

unpunished. Such actions if permitted would result in a

substantially adverse impact on the potential market for

the original works. Reuters and LANS are in the business

of providing audiovisual news material to reporting

organizations. When such an organization buys footage

from Reuters, it does not need to purchase it from LANS,

thus lessening the market for LANS’s footage. Defendants

do not contest this factor.

In sum, the district court, having found that only one

of the four statutory factors weighed in favor of defen-

dants, correctly concluded that the fair use defense did not

apply. See Tullo, 973 F.2d at 799 (holding fair use did not

shield a defendant from liability when only one of the four

statutory factors weighed in its favor).

aa ene

App. 49

Ill. STATUTORY DAMAGES

Because we reverse the district court’s ruling on

extraterritorial damages and affirm its ruling on the fair

use defense, we must remand for a new trial on actual

damages. Accordingly, we conditionally vacate the award

of statutory damages. LANS retains the right, however, to

make an election before final judgment to recover statu-

tory damages instead of actual damages and profits.® 17

U.S.C. § 504(c)(1). Should LANS elect statutory damages,

the district court should reinstate its prior award. Against

that eventuality, we will address defendants’ cross-appeal

challenging the statutory damages award.

* The district court, having ruled against LANS’s claim for

extraterritorial damages, also ruled that LANS failed “to meet its

burden of proving actual [domestic] damages, so, at most it is entitled

to statutory damages.” Reuters I, 942 F.Supp. at 1275. Because LANS

was foreclosed by these rulings from seeking actual damages, it had no

opportunity to make the statutory election on damages. It is therefore

not precluded from appealing the district court’s ruling regarding actual

damages. Compare Oboler v. Goldin, 714 F.2d 211, 212-13 (2d Cir.1983)

(per curiam) (damages appealable where copyright holder failed to elect

between statutory and actual damages prior to directed verdict), with

Twin Peaks Prods., Inc. v. Publications Int'l, Ltd., 996 F.2d 1366, 1380

(2d Cir.1993) (“Once a plaintiff has elected statutory damages, it has

given up the right to seek actual damages and may not renew that right

on appeal by cross-appealing to seek an increase in actual damages.”);

see also Jordan v. Time, Inc., 111 F.3d 102, 104 (11th Cir.1997) (per

curiam) (same).

App. 50

A. Innocent Infringement °

The district court found that defendants did not

sustain their burden of proving that they were not aware

and had no reason to believe that their acts constituted an

infringement of copyright, and thus were not entitled to

the reduction in statutory damages under § 504(c)(2).

Whether the defendants’ infringement was innocent is a

factual determination which we review for clear error. See

Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 772 F.2d

505, 515 (9th Cir.1985).

1. LANS’s works were embedded in a licensed

work :

Defendants contend first that they had “no practicable

alternative but to copy those portions of [LANS’s] works

which were embedded in a licensed work.” But practicabil-

ity is not a proxy for innocence. The argument does not

sustain the burden of proving that Visnews “was not

aware and had no reason to believe that [its] acts consti-

tuted an infringement.” § 504(c)(2).

* Section 504(c)(2) provides in relevant part:

(2) ...Ina case where the infringer sustains the burden

of proving, and the court finds, that such infringer was not

aware and had no reason to believe that his or her acts con-

stituted an infringement of copyright, the court in its discre-

tion may reduce the award of statutory damages to a sum of

not less than $200... .

App. 51

2. Defendants’ awareness of limitations on use

Defendants contend that there was no evidence that

Visnews accessed the NBC desk log to discover restrictions

on the material, and that knowledge of the desk log entry

would not have alerted Visnews that the Today show

contained the works. Their arguments, however, do not

address the ground on which the district court based its

ruling.

The court agreed that there was no evidence that

anyone at Visnews saw the log entry or that knowledge of

the entry would have alerted Visnews that copying the

NBC feed would violate LANS’s copyrights. And it found

that there was no direct evidence in the record as to the

state of mind of the Visnews or EBU employees who made

the infringing copies from the NBC and Visnews feeds.

The court also found, however, that it can be inferred

that whoever at Visnews and EBU made the copies of the

Today show knew that the feed contained “a downstream

that credited KCOP for the production.” Reuters II, 942

F.Supp. at 1280. The downstream indicates that the

portion of tape belongs to someone other than NBC and

“could indicate that there were in fact restrictions on any

further use of the copyrighted works, and lead a reason-

able person to inquire whether copying the feed would

infringe a copyright held by KCOP or by another.” Id.

Defendants have the burden of proving that the

infringement was innocent. See 17 U.S.C. § 504(c)(2). The

App. 52

district court’s finding that they failed to meet their

burden is not clearly erroneous.

B. Even Assuming No Innocent Infringement, the

Award Was Excessive

Defendants argue, in the alternative, that the award

was excessive because LANS licensed the works to the

networks and others for lesser amounts and had even

established a liquidated damage figure of $10,000 for un

authorized use of the works.

The district court has “wide discretion in determining

the amount of statutory damages to be awarded, con-

strained only by the specified maxima and minima.”

Harris v. Emus Records Corp., 734 F.2d 1329, 1335 (9th

Cir.1984) (citing L.A. Westermann Co. v. Dispatch Printing

Co., 249 U.S. 100, 39 S.Ct. 194, 63 L.Ed. 499 (1919)). The

court is guided by “what is just in the particular case,

considering the nature of the copyright, the circumstances

of the infringement and the like.” Peer Int’l Corp. v. Pausa

Records, Inc., 909 F.2d 1332, 1336 (9th Cir.1990) (quoting

FW. Woolworth Co. v. Contemporary Arts, Inc., 344 U.S.

228, 232, 73 S.Ct. 222, 97 L.Ed. 276 (1952)). Because

awards of statutory damages serve both compensatory and

punitive purposes, a plaintiff may recover statutory

damages “whether or not there is adequate evidence of the

actual damages suffered by plaintiff or of the profits

reaped by defendant,” Harris, 734 F.2d at 1335, in order

“‘to sanction and vindicate the statutory policy’ of discour-

aging infringement.” Peer Int’l Corp., 909 F.2d at 1337

(quoting Woolworth Co., 344 U.S. at 233, 73 S.Ct. 222).

The court found that although LANS charged the

networks only $3,500 for the licenses, these licenses

App. 53

carried numerous restrictions and were of limited dura-

tion. Later licenses with various restrictions and durations

brought from $5,000 to $6,500. LANS secured a total of

$250,000 to $300,000 in license fees for the Reginald

Denny tape and less for the other tape. LANS would have

charged $250,000 for an unlimited domestic license for the

works. The court also took into account the public benefit

from such works and the need to encourage their creation.

To this end, LANS “must be allowed to profit from them,

without concern that expediency, exigent circumstances or

the very nature of the fast-breaking news-gathering

business will deprive [it] of potential profits from those

works.” Reuters IT, 942 F.Supp. at 1283.

The district court “is in a better position than are we

to determine appropriate damages.” Harris, 734 F.2d at

1335; Peer Intl Corp., 909 F.2d at 1337. Its determination

of the amount of statutory damages was not clearly erro-

neous.

C. Visnews’s Contributory Infringement by Pro-

viding EBU a Copy of the Works

Defendants also argue that the statutory penalties

must be reduced by one-half because the district court

erred in ruling that Visnews is liable for contributory

infringement with respect to the copies made by EBU of

the works Visnews transmitted to it. The district court did

not abuse its discretion in ruling that defendants waived

this issue, not having raised it until closing argument.

Moreover, each side submitted proposed findings of fact and

conclusions of law that calculated statutory damages on the

basis of all four infringements. We will not take up an

issue not properly raised below unless necessary to prevent

App. 54

Allied Craftsman Local Union No. 20 v. Martin Jaska,

Inc., 752 F.2d 1401, 1404 (9th Cir.1985). Because defen-

dants have failed to show exceptional circumstances

explaining their default, see id., we need not address the

issue.

IV. DENIAL OF ATTORNEY FEES

The district court denied the applications for attor-

ney’ fees, concluding that “both parties prevailed on

significant issues in the case and thus neither can be

viewed to be the prevailing party.” (Emphasis in the

original.) Because we reverse the district court’s ruling on

extraterritorial damages and remand for a trial on actual

damages, we must vacate the attorney’s fees order without

prejudice, of course, to further proceedings following trial.

LANS requests attorney’s fees on appeal pursuant to

17 U.S.C. § 505. We conclude that fees are warranted

inasmuch as it served the purposes of the Copyright Act

for LANS to establish its right to extraterritorial damages

and to defend its favorable ruling below on fair use.

Fantasy, Inc. v. Fogerty, 94 F.3d 553, 561 (9th Cir.1996).

We award LANS its costs and attorney’s fees on appeal,

the amount to be determined by the district court on

remand.

CONCLUSION

The district court’s judgment is affirmed in part and

reversed in part. We AFFIRM the court’s ruling barring

the fair use defense. We REVERSE the ruling barring the

claim for extraterritorial damages and REMAND for a

trial on actual damages, with directions that if LANS

elects to recover actual damages, the award of statutory

App. 55

damages be vacated. If LANS elects to recover statutory

damages, the present award shall stand. The ruling

denying attorney’s fees and costs is VACATED without

prejudice to further proceedings upon entry of judgment.

We award LANS its attorney's fees and costs on appeal,

the amount of attorney’s fees to be determined by the

district court on remand.

App. 56

942 F.Supp. 1275

United States District Court, C.D. California.

LOS ANGELES NEWS SERVICE, Plaintiff, v.

REUTERS TELEVISION INTERNATIONAL, LIM-

ITED; Visnews International (USA), Limited;

Reuters America Holdings, Inc.; Reuters America,

Inc., Defendants.

No. CV-95-1073-KMW (SHx).

Oct. 4, 1996.

William A. Bergen, Law Offices of William A. Bergen,

Auburn, CA, for Plaintiff.

Louis P. Petrich, Robert S. Gutierrez, Leopold, Petrich

& Smith, A Professional Corporation, Los Angeles, CA,

Patricia Duncan, Burbank, CA, for Defendants.

FINDINGS OF FACT AND

CONCLUSIONS OF LAW

WARDLAW, District Judge.

This matter came on regularly for trial of the question

of statutory damages for the infringements of two copy-

righted works owned by Plaintiff on September 24, 1996,

in the courtroom of the Honorable Kim McLane Wardlaw,

United States District Judge. Plaintiff appeared by and

through its attorney, William A. Bergen. Defendants

Reuters Television International, Ltd., Visnews Interna-

tional (USA), Ltd., Reuters America Holdings, Inc. and

Reuters America, Inc. appeared by and through their

attorneys Louis P. Petrich and Robert S. Gutierrez of

Leopold, Petrich & Smith and Patricia Duncan. Evidence

by way of affidavits, written discovery, documents, photo-

graphs, videotapes and other exhibits was introduced.

App. 57

This Court previously granted in part and denied in part

Defendants’ Motion for Summary Judgment by Order

entered July 23, 1996, and addresses the remaining issues

at this time. The matter having been argued by the par-

ties, taken under submission for decision, and the Court

being fully apprised in the premises, and GOOD CAUSE

APPEARING THEREFOR, the Court does now hereby

make the following:

FINDINGS OF FACT

1. Plaintiff Los Angeles News Service (“LANS”) is a

fictitious business name of Robert and Marika Tur, who

together comprise an independent news organization

engaged in the business of independent news gathering

and production, and the sale of news video, videotapes,

photographs and other products. On April 29, 1992, LANS

provided live video coverage from its helicopter of events

at Florence Avenue and Normandie Boulevard, including

the attacks and beatings of two truck drivers. Plaintiff’s

copyrighted videotape known as “Beating of Reginald

Denny” is registered with the United States Copyright

Office, bearing Registration No. PA576704, which had its

first publication on April 29, 1992 and had an effective

date of registration of May 19, 1992. Plaintiff’s copy-

righted videotape known as “Beating of Man in White

Panel Truck” is registered with the United States Copy-

right Office, bearing Registration No. PA576703, which

had its first publication on April 29, 1992 and had an

effective date of registration of May 19, 1992.

2. While LANS is an independent news operation, it

operates under contract to other news organizations and

licenses videotapes of news events to be used by other

App. 58

news operations for television and print media. LANS

specializes in utilizing its helicopter for news coverage.

3. The Defendants are Visnews International (USA),

Ltd., (“Visnews”); Reuters Television International, Ltd.;

Reuters America Holdings, Inc.; and Reuters America, Inc.

4. At all relevant times, Visnews was a television

news agency that gathered and provided footage of audio-

visual material to its subscribers who paid an annual fee

for his service.

5. Reuters Television is, among other things, a

television news agency that gathers and provides audio-

visual news material to its subscribers who pay an annual

fee for this service.

6. Reuters America, Inc. is, among other things, a

news and information supplier to subscribers who pay an

annual fee for this service.

7. Reuters Television International, Ltd. is the

successor in interest to Defendant Visnews. Kogan Decla-

ration, Ex. 35.

8. On April 29, 1992, rioting broke out in Los Ange-

les, including the area of Florence Avenue and Normandie

Boulevard, after the announcement of the acquittals of

four police officers accused of beating motorist Rodney

King.

9. At the time of the Los Angeles Riots, LANS was

under contract to KCOP Television, Channel 13 in Los

Angeles to provide live video broadcasts of news events,

which KCOP could rebroadcast, and also under contract to

KNX News Radio for audio broadcasts. See Ex. 109. As a

part of these contracts, however, LANS would retain

App. 59

ownership of the copyright on all the videotape it shot.

LANS never sells the copyright for videotape; it only

licenses aspects of its copyrights for broadcasts.

10. Upon arrival at the intersection of Florence and

Normandie, Mr. and Mrs. Tur noticed that there were no

police present and that looting had begun. Mr. and Mrs.

Tur began video and audio coverage, which was broadcast

live over KCOP Television. Not only did they document the

rioting and looting at that intersection, but they captured

the events of certain attacks in particular on video, which

are now the copyrighted videotapes at issue: “Beating of

Man in White Panel Truck,” Ex. 26, and “Beating of

Reginald Denny,” Ex. 25 (the “Video Works”). These were

broadcast live on KCOP, with the narrative report sup-

plied by Robert Tur, and the camera work done by Marika

Tur.

11. Because the Video Works were broadcast live

over KCOP Television, the demand for them from other

news organizations seeking to license the tapes was

immediate. Before the Turs hed landed their helicopter,

the news director at KCOP, Jeff Wald, was fielding calls

from other news organizations who sought to obtain

licenses to use the tapes. Mr. Wald was in contact with Mr.

Tur in the helicopter to field inquiries. Mr. Wald informed

all who inquired that LANS owned the copyright to the

tapes, and that all licensing agreements would have to be

through LANS. Bob Tur, for LANS, granted limited li-

censes to the National Broadcasting Company (“NBC”)

and the American Broadcasting Company (“ABC”) to

broadcast the Video Works in their news programming

within hours after the incident.

App. 60

12. Bob Tur wanted the Video Works to be seen

widely for two reasons. As a reporter, he believed this was

an important story that the public needed to know. As a

businessman, he believed that if the Video Works were

seen over national television, it could create a market for

licenses throughout the country to television stations,

independent news organizations and news magazines. He

decided to license the videotape in a manner so he would

not be in breach of the KCOP contract (which prohibited

licenses to certain Los Angeles news stations without the

explicit permission of KCOP) and still satisfy both goals.

13. LANS, on April 29, 1992, gave a restricted

license, the terms of which are disputed, for the Video

Works to NBC through an associate producer for NBC

named Mike Austin.

14. Mr. Austin knew that KNBC had a helicopter

shooting aerials of the developing L.A. Riots. He saw

KNBC’s footage from the NBC News L.A. Bureau monitor

room and believed it to be inferior to that being shown live

on KCOP. Watching the live video by the Turs on a monitor

side-by-side with a monitor showing KNBC’s coverage of

the same incidents, he concluded that the Turs’ tape was

better because it began earlier, had better angles and

greater pictures of Reginald Denny.

15. Mr. Tur testified, that, through Mr. Wald, he

informed Mike Austin that NBC could license the Video

Works for use on its news programs, including the Todey

Show, with certain restrictions. According to Mr. Tur, Mr.

Austin was informed that the license was of 48 hours

duration only, KCOP had to be credited, and the tape was

for network use only and could not be distributed to

overseas broadcasters or affiliates. Mr. Tur told Mr. Wald

App. 61

that a reasonable price for NBC’s oral license would be

worked out later. This conversation with Mr. Wald took

place while Mr. Tur was still on board the helicopter,

filming and narrating live coverage of the L.A. Riots.

16. Mr. Austin, at the time a temporary production

assistant for NBC News, testified that he heard the terms

differently. He stated that no conditions or restrictions of

any kind were communicated to him and that he was told

only that he would later negotiate a reasonable price.

17. The Court finds that Mr. Austin’s testimony on

the subject of the terms and conditions of the license lacks

credibility. His testimony was inherently implausible in

some instances and internally contradictory in others. For

example, upon examination by Plaintiff’s counsel he

testified that although he saw the live coverage by the

Turs unfolding, he did not believe “time was of the es-

sence” in obtaining the tape from KCOP. Yet, upon exami-

nation by Defendants’ counsel, in an attempt to explain

why he hurriedly wrote the inscription on the Video Works

cassette label “See Mike Austin re conditions of use,” Ex.

142, testified that timeliness was important because it was

a breaking story. Also, with respect to his notation on the

label “L.A. Rioting Aerials/From Bob Tur (KCOP-TV) L.A.

News Service,” Mr. Austin first testified it was made to

distinguish the works “from other videos,” but later

testified that he used the word “aerials” because those

were the only aerials he was aware of. Still later, he

testified that he had been aware that NBC had shot other

aerials at the same time as LANS, but they were inferior

to LANS aerials. Finally, Mr. Austin’s use of the term

“conditions of use” on the label immediately upon receipt of

the cassette belies his testimony at trial that there were no

conditions of use for the tape. His subsequent explanation

App. 62

that he thought that the requirement of later negotiating a

price was a condition or conditions of use is not credible.

18. On the other hand, Mr. Tur’s version of the

“credit” issue is not supported by the other evidence

adduced at trial. Judy Tur’s contemporaneous log of

communications concerning the licensing arrangements

omits any reference to “credits” or “courtesies.” Ex. 7.

Furthermore, according to Heather Allan, Judy Tur did

not mention credit to KCOP or LANS when she called at

11:30 p.m. the night of April 29. Ms. Allan’s log supports

her testimony. Ex. 143.

19. Given the circumstances surrounding the

negotiation of this oral license, through a third party from

a helicopter, in the rush and the heat of the L.A. Riots, for

video depicting their violent beginnings, an inference could

be drawn either way as to the issue of credit to KCOP as a

condition of the license. It is not necessary to the Court’s

decision to make a finding on that issue, however, because

the Court concludes, as both sides argued to prove

diametrically opposed contentions, that the Visnews

videotape of the copyrighted works bears the downstream

in the form of the KCOP logo, Ex. 145, as does the version

broadcast on the NBC Today Show, Ex. 101. Because Mr.

Austin testified that he received a “clean feed” of the video

works from KCOP, a fact undisputed in the record, and

hand-delivered it to Ms. Allan, his supervisor, it is plain,

as Mr. Tur testified, that someone at NBC for some reason

placed the KCOP logo on the tape before it was broadcast

as part of the NBC Today Show segment. The Court

further finds that, even if credit was not explicitly

discussed on the occasion of the negotiations for the Video

Works, the restrictions Mr. Tur-sought from Mr. Austin

App. 63

were standard with NBC, except as to the 48-hour

limitation, as Mr. Tur testified.

20. At approximately 11:30 the night of April 29,

Judy Tur contacted Ms. Allan to inform her of certain

restrictions on the use of the works. At 2:15 a.m. Pacific

Standard Time Ms. Allan logged those restrictions on the

L.A. Bureau monitor. Contrary to normal custom, neither

the L.A. Bureau nor the N.Y. Bureau distributed a telex to

inform all affiliates and subscribers of these restrictions.

Ms. Allan did, however, go to the NBC Newsroom in L.A.

to inform everyone there of the restrictions.

21. Plaintiff’s Video Works were fed by satellite from

NBC’s L.A. Bureau to NBC’s N.Y. Bureau at 2:20 a.m.

Pacific Standard Time on April 30, 1992. This is reflected

in Ms. Allan’s log entry, Ex. 144. The Video Works were

shown, as agreed by license, on NBC’s Today Show the

morning of April 30, 1992. The Today Show was fed by

satellite from NBC in New York to its stations and net-

work affiliates across the United States.

22. A news “feed” is a term in the communications

industry which refers to any transmission, whether

through satellite, microwave or hard wire, of video, audio,

still image and text material for incorporation in a sub-

scriber’s newscasts or publications, at the subscriber’s

discretion. “Subscribers” are other news and information

companies which incorporate news feeds into their broad-

casts at their discretion. Subscribers do not include mem-

bers of the general public. Visnews/Reuters made

transmissions of the Video Works to the European Broad-

casting Union News Exchange, Visnews Early Evening

Feed to Europe, Reuters Television Japan Feed, Reuters

App. 64

Television Latin America/North America Feed, and

Reuters Television Asia Pacific Feed.

23. As of April 30, 1992, Visnews and NBC News

Overseas, Inc. were parties to an existing television news

supply agreement pursuant to which NBC News Overseas

agreed to supply to Visnews and license Visnews to use

news materials which appeared on the NBC News pro-

grams, including the Today Show.

24. On the morning of April 30, 1992, the Video

Works were transmitted by fiber link from NBC’s control

room in New York to Visnews’ New York Office. Visnews

made a videotape copy of the Video Works as broadcast on

the Today Show. The segment that Visnews copied in-

cluded the selections from Plaintiff’s two Video Works

which Mr. Austin had previously copied at KCOP. Visnews

transmitted Plaintiff’s Video Works, via fiber link, to the

New York office of the European Broadcast Union (“EBU”),

a joint venture with Visnews and Reuters, which then

made a videotape copy of the Video Works.

25. The Visnews/Reuters Defendants were not

authorized by LANS to obtain the Video Works from NBC

or to use them in any form. LANS did not license its Video

Works to Visnews or any Reuters Defendant.

26. There is no direct evidence in the record as to the

state of mind of the unidentified Visnews employee(s) who

made the infringing copy of Plaintiff’s work from the NBC

feed. Nor is there any direct evidence in the record as to

the state of mind of the EBU individual who made the

infringing copy from the Visnews feed.

27. Given the absence of direct evidence, Plaintiff

urges that the Court infer willfulness from (1) a prior

App. 65

conversation between Marika Tur and Richard Wortman,

Visnews’ “top dog in L.A.,” in which Wortman refused to

pay several thousand dollars to LANS for a videotape of

news events, saying that he would obtain it from NBC; (2)

the prior course of conduct between Mr. Wortman on

behalf of Visnews in which he regularly sought licenses or

permission from LANS to use its videotaped news events

that had appeared on KCOP Channel 13; (3) the fact that

Visnews employees, including Wortman, could have

viewed the restrictions on the broadcast of Plaintiff’s work

on the NBC monitors; and (4) the fact that the NBC Today

Show as broadcast bore the downstream “KCOP.”

28. Mr. Wortman’s conversation with Ms. Tur, his

acknowledgment that he had to seek permission from

LANS on several occasions to rebroadcast its live video-

tape coverage of events, and his further acknowledgement

to Mr. Tur that it “would be wrong” to use their tape

without permission, in the absence of any evidence that he

copied the Video Works or knew of or contributed in any

way to their unlawful copying, is not evidence of Visnews’

willfulness. To the contrary: the Court could easily infer

that these statements and conduct reflect a desire to avoid

infringing Plaintiff’s copyright.

29. There is no evidence in the record that anyone

from Visnews actually saw Ms. Allan’s log notation, Ex.

143, on the monitor before the NBC Today Show news feed

was sent at approximately 7:15 a.m. Eastern Standard

Time on April 30, 1992. The Court cannot conclude that

even if any Visnews employee had seen the log on the

bureau monitor that it would have alerted him or her that

copying the feed onto a video cassette would be an in-

fringement of copyright.

App. 66

30. With respect to Plaintiff’s last argument, it can

be inferred that whoever at Visnews and EBU made the

copies of the NBC Today Show segment that included

Plaintiff’s works did know that the feed contained a

downstream that credited KCOP for the production. Mr.

Tur testified that the downstream conveys that that

portion of the tape belongs to an entity other than NBC;

and that it would or should alert others who wanted a copy

of the tape as to its true ownership. However, Ms. Allan

testified that the downstream would not necessarily mean

that there were restrictions on the use of the tape. In this

case, there existed a news supply agreement between NBC

News Overseas and Visnews which could reasonably lead

a Visnews employee who saw the downstream to believe

that while the tape was owned by KCOP or that KCOP

was the appropriate party to contact for a license to use

the tape, his or her copying of the tape would not be an

infringement of copyright.

31. Further, although both Messrs. Austin and

Wortman knew that broadcasting the Video Works re-

quired LANS’ approval in order to avoid a violation of

that either Visnews or EBU believed it did not have that

approval when the infringing copies were made, or acted

recklessly under the circumstances.

32. Thus, this Court finds that Plaintiff has not met

its burden of proving that Visnews copied Plaintiff’s works

with knowledge that its conduct constituted copyright

infringement or that Defendants acted in reckless disre-

gard of Plaintiff’s copyrights.

33. Nor have Defendants met their burden of prov-

ing that Visnews acted with a good faith and reasonable

LK... 12°"

App. 67

belief in the innocence of its conduct. It may equally be

inferred from Ms. Allan’s testimony that the presence of

the downstream, if viewed by Visnews, could indicate that

there were in fact restrictions on any further use of the

copyrighted works, and lead a reasonable person to in-

quire whether copying the feed would infringe a —

held by KCOP or by another.

34. There is no evidence in the record as to what

became of the videocassettes, although copies of them were

introduced as Ex. 145, the PAL version (for European

broadcast), and Ex. 117, the NTSC (for American broad-

cast).

35. Ex. 145, the PAL or European version, is the

authentic version of the Video Works and bears a down-

stream in the form of the KCOP logo.

36. The “slate” on Ex. 143 indicates that it was used

either to further transmit the Video Works or as the index

for storage and retrieval of the copy of the infringing

videotape within the Reuters library. In neither case is the

slate relevant to the Court’s decision.

37. In 1992 LANS earned between 50-60% of its

income from sales of licenses of live videotape material

and stock videos thereof.

38. LANS incurs significant expenses in conducting

its business, not all of which are directly related to the

expenses incurred, and thereby saved by Defendants, in

producing the Video Works. These expenses include the

approximate $1 million cost of the helicopter, the costs of

operating the helicopter, which during the L.A. Riots was

greater than $588 per hour, investment in the tape and

the videocamera equipment and employee costs.

App. 68

39. The LANS helicopter was damaged in the ap-

proximate amount of $134,000 during filming of the Riots.

40. Near the time LANS created the Video Works, it

charged ABC and CBS $3500 for licenses bearing the same

restrictions as the NBC license. Later it licensed the works

domestically with various restrictions and durations for

amounts ranging from $5000 to $6500, Ex. 30.

41. Ms. Tur testified that she would charge $250,000

for an unlimited domestic license of the works. She also

testified that she would not actually license the works

under such conditions because it would substantially

affect their market.

42 An unauthorized airing of one of the Video Works

by an entity otherwise licensed to use the work would

result in a $10,000 liquidated damage figure. Ex. 30.

43. With respect to the Video Work “Beating of

Reginald Denny,” LANS secured between $250,000-

300,000 in license fees. The demand for “Beating of Man in

White Panel Truck” was less. This is also evidenced by the

first three license agreements in Ex. 30, which each

concerns the licensing of the Denny tape specifically. Two

of these agreements charge a fee of $5000; the third

charges $6500.

CONCLUSIONS OF LAW

1. This is an action for copyright infringement

arising under the Copyright Act, 17 U.S.C. § 101 et seq.

Plaintiff alleges that Defendants infringed its copyright by

_ copying the Video Works and by distributing the Video

Works in the United States and abroad.

App. 69

2. Federal jurisdiction and venue are invoked upon

the grounds that this is a copyright action under 17 U.S.C.

§ 101 et seg. of which the Federal Court has exclusive

jurisdiction under 28 U.S.C. §§ 1331 and 1338(a). Venue is

based upon residence within the Central District of Cali-

fornia under 28 U.S.C. § 1400(a).

3. On July 22, 1996, this Court granted Defendants’

Motion for partial summary judgment and determined the

following legal issues: .

(a) Defendants are not liable under Ameri-

can copyright law for any damages that may

have arisen as a result of alleged extraterritorial

infringements as the result of a domestic in-

fringement of the Video Works. This is a clarifi-

cation of language contained at page 2 of the

Court’s Order which is more fully explained at

page 6 of that Order. The transmissions of the

Video Works from Visnews and EBU to Europe

did not violate the 1976 Copyright Act because

the transmissions were not completed until they

were received abroad. Thus they do not consti-

tute domestic infringements within the reach of

the United States copyright laws. Subafilms,

Ltd. v. MGM-Pathe Communications, 24 F.3d

1088, 1091 (9th Cir.1994).

(b) Visnews made a videotape copy of the

Video Works; this is the only act that is sup-

ported by admissible evidence that demonstrates

a violation of LANS’ United States copyright by

Visnews. ’

the infringement of the United States copyright

law that EBU committed when EBU made a

videotape copy of the Video Works in New York

App. 70

City, New York, after receiving it via fiber link

from Visnews.

(d) The Reuters Defendants are not liable

as contributory infringers for the infringement

by Visnews when Visnews made a videotape copy

of the Video Works in New York City.

(e) There is no evidence that Visnews’ fiber

link transmission to EBU was a public perform-

ance or a distribution so as to be in violation of

section 106 of the Copyright Act.

(f) Although the fair use doctrine does not

preclude Defendants’ liability for domestic in-

fringement, LANS may not recover actual dam-

ages because it did not submit admissible evidence

that any unauthorized uses of the Video Works are

attributable to any of Defendants’ activities that in-

fringe United States copyright law.

4. Plaintiff’s copyrighted videos are protected under

17 U.S.C. § 106. The use of Plaintiff’s works — the Visnews

and EBU reproduction of the copyrighted works into

videotape copies — is a violation of Plaintiff’s copyright.

Plaintiff may elect either statutory damages or actual

damages under. 17 U.S.C. § 504. Plaintiff has selected

statutory damages.

5. Plaintiff has not sustained its burden of proving

that the infringement was committed willfully, and thus is

not entitled to increased statutory damages pursuant to 17

U.S.C. § 504(c)(2).

6. Defendants have not sustained their burden of

proving that Visnews and/or EBU were not aware and had

App. 71

no reason to believe that their acts constituted an in-

fringement of copyright, and thus are not entitled to the

reduction in statutory damages specified in 17 U.S.C.

§ 504(c)(2).

7. Plaintiff is entitled to “an award of statutory

damages for all infringements involved in the action, with

respect to any one work, for which any one infringer is

liable individually, or for which any two or more infringers

are liable jointly and severally, in a sum of not less than

$500 or more than $20,000 as the court considers just.” 17

U.S.C. § 504(c)(1).

8. In determining the award of statutory damages

“the court’s conception of what is just in the particular

case, considering the nature of the copyright, the circum-

stances of the infringement and the like, is made the

measure of the damages to be paid . . . [T]he court’s discre-

tion and sense of justice are controlling ... [within the

prescribed statutory limitations ...]. The statutory rule,

formulated after long experience, not merely compels

restitution of profit and reparation for injury but also is

designed to discourage wrongful conduct....'Even for

uninjurious and unprofitable invasions of copyright the

court may, if it deems it just, impose a liability within

statutory limits to sanction and vindicate the statutory

policy.” FW. Woolworth Co. v. Contemporary Arts, 344 U.S.

228, 232, 73 S.Ct. 222, 225, 97 L.Ed. 276 (1952) (citations

omitted); see Peer Int'l Corp. v. Pausa Records, Inc., 909

F.2d 1332, 1336-37 (9th Cir.1990); 3 Melville B. Nimmer &

David Nimmer, Nimmer on Copyright § 14.04[B][1][a] at

14-50 (1995) (hereinafter “Nimmer’”) (“the determination of

statutory damages within the applicable limits may turn

upon such factors as ‘the expenses saved and profits

App. 72

reaped by the defendants in connection with the infringe-

ments, the revenues lost by the plaintiffs as a result of the

defendant’s conduct, and the infringer’s state of

mind... .”).

9, Examining the nature of the copyrighted works at

issue, the Court rejects Defendants’ argument that the

Video Works are more akin to a product of the “sweat of

the brow” and therefore undeserving of full copyright

protection under Feist Publications v. Rural Tel. Serv. Co.,

Inc., 499 U.S. 340, 353-54, 111 S.Ct. 1282, 1291-92, 113

L.Ed.2d 358 (1991). The Ninth Circuit laid that suggestion

to rest when it held that similar raw videotapes involved

sufficient creativity and intellectual input to merit copy- |

right protection as “original works of authorship.” Los

Angeles News Service v. Tullo, 973 F.2d 791, 793 (9th

Cir.1992).

10. The Court has previously found in weighing the

factors that determine whether the infringements were a

“fair use” that the works were factual in nature and

published before the infringements. Indeed, the evidence

in this case indicates that the works were so widely

published that every person in America could have seen

them on one of the three networks that obtained licenses

from Plaintiff in the 48 hours following their creation — a

fact that minimizes their ensuing value.

11. The nature and value of the copyrighted works

must be considered separately with respect to each of the

works. “Beating of Reginald Denny” plainly enjoyed a

greater and more enduring demand than “Beating of Man

in White Panel Truck.” Because of the creative input by the

Turs, the latter was sought after by NBC, even when NBC

App. 73

had its own live videotape of the same incident. See

Findings of Fact No. 14.

12. The Turs’ creation of such works is of great

public benefit and should be encouraged. To encourage the

creation of such original works, the Turs must be allowed

to profit from them, without the concern that expediency,

exigent circumstances or the very nature of the fast-

breaking news-gathering business will deprive them of

potential profits from those works. Statutory damages are

designed to fulfill this goal of the Copyright Act, and are

particularly necessary to deter what may be at most

careless infringement by major news-disseminating

organizations whose business it is to supply audiovisual

news material worldwide for a fee.

13. Therefore, the Court concludes that with respect

to “Beating of Reginald Denny,” LANS is entitled to an

award of statutory damages for each infringement of

$20,000.

14. With respect to “Beating of Man in White Panel

Truck,” LANS is entitled to an award of statutory damages

for each infringement of $10,000.

15. At the outset of the trial, the parties stipulated

that there were two copyrighted works at issue, and that

each was infringed once. Each side submitted proposed

Findings of Fact and Conclusions of Law that calculated

statutory damages on the basis of four infringements. See

also Trial Brief by Defendants dated September 23, 1996

at 20/1-5.

16. It was not until closing argument, in an attempt

to minimize the total award of statutory damages, that

Defendants suggested that statutory damages should be

App. 74

calculated with respect to one work, because the two

works were taken from one continuous tape, or that

Visnews and EBU were liable jointly and severally for

each of the infringements, and thus the number of in-

fringements subject to an award of statutory damages

should be one. The Court finds that Defendants waived

these arguments by failing to raise them before the time of

closing argument.

—_

17. In any event, with respect to the “continuous

tape” argument, the United States Copyright Office issued

Certificates of Registration with respect to each separate

work at issue. Exs. 2 and 3. This creates a prima facie

presumption both as to the validity and copyrightability of

each of the works. See Nimmer § 12.11 [3] at 12-163, 171-

74. Defendants have not rebutted that presumption.

18. Moreover, even if the issue of joint and several

liability had not been waived, it does not appear that the

argument, if successful, would have absolved Visnews of

liability for two infringements. While it may be that

Visnews and EBU are jointly and severally liable for the

second videotape, Visnews is individually liable for the

making of the first videotape. Therefore, Visnews would

appear to be liable for two separate acts of infringement:

first, its own; and, second, the act by EBU to which it

contributed. EBU, however, would not be jointly and

severally liable for the Visnews independent act of in-

fringement. It would therefore appear that the plain

language of Section 505 would not limit the number of

infringements subject to the statutory damages award to

one.

19. Therefore, Plaintiffs are entitled to a statutory

damage award pursuant to 17 U.S.C. § 504(c)(1) in the

App. 75

amounts of $40,000.00 for the two infringements of the

“Beating of Reginald Denny” and $20,000.00 for the two

infringements of “Beating of Man in White Panel Truck”; a

total award of $60,000.00.

20. The Court reserves ruling on the question of

which party, if any, is the prevailing party under 17 U.S.C.

§ 505 and thus does not award attorney's fees and costs at

this time. Each party is to file an initial brief on that issue,

together with a proposed judgment in this matter, on or

before October 14, 1996. Responsive briefs are to be filed

on or before October 21, 1996. The Court will deem the

matter submitted without the necessity for oral argument,

unless it notifies the parties otherwise.

IT IS SO ORDERED.

App. 76

942 F.Supp. 1265

United States District Court,

C.D. California.

LOS ANGELES NEWS SERVICE, Plaintiff,

Vv.

REUTERS TELEVISION INTERNATIONAL,

LIMITED; Visnews International (USA),

Limited; Reuters America Holdings, Inc.;

Reuters America, Inc., Defendants.

No. CV-95-1073-KMW (Ex).

July 22, 1996.

William A. Bergen, Law Offices of William A. Bergen,

Auburn, CA, for Plaintiff Los Angeles News Service.

Louis P. Petrich, Robert S. Gutierrez, Leopold, Petrich

& Smith, A Professional Corporation, Los Angeles, CA,

Patricia Duncan, Burbank, CA, for Defendants Reuters

Television International, Limited; Visnews International

(USA), Limited; Reuters America Holdings, Inc.; Reuters

America, Inc.

ORDER GRANTING DEFENDANTS MOTION

FOR SUMMARY JUDGMENT IN PART

AND DENYING IT IN PART

WARDLAW, District Judge.

Plaintiff Los Angeles News Service (“LA News”) has

sued Defendants Visnews International (USA), Limited

(“Visnews”), Reuters Television International, Limited,

Reuters America Holdings, Inc., and Reuters America, Inc.

App. 77

(“Reuters” or “the Reuters defendants”).' It alleges that

they violated the Copyright Act and the Federal Commu-

nications Act by copying its video footage of the Los Ange-

les riots that occurred after the acquittal of the police

officers accused of beating Rodney King and by distribut-

ing it in the United States and abroad.

Visnews and Reuters (collectively, “Defendants”) have

filed a motion for summary judgment, arguing that they

cannot be liable for extraterritorial copyright infringement

and that the fair use doctrine precludes a finding of

domestic copyright infringement. They also argue that

they did not violate the Federal Communications Act

because they did not intercept a satellite or radio signal.

The Court GRANTS this motion in part and DENIES it

in part. It holds that Defendants are not liable under

American copyright law for damages that arise extraterri-

torially as the result of a domestic infringement. However,

it finds that the fair use doctrine does not preclude their

liability for the domestic infringement. Although LA News

has proven domestic liability, it may not recover actual

damages because it has not submitted admissible evidence

that any unauthorized uses of its works are attributable to

Defendants’ infringing activities. Finally, the Court holds

that Defendants did not intercept a satellite signal, so they

did not violate the Federal Communications Act.

* Despite the Court’s request at oral argument that the parties

distinguish among the Reuters defendants, they did not do so. Thus, the

Court does not distinguish among them here.

App. 78

I. BACKGROUND

A. Facts and Contentions

1. Filming of Riots

Robert and Marika Tur are freelance reporters who

own LA News. Compl. 7 8. LA News produces video and

audio tape recordings of newsworthy events and licenses

them for profit. Id.

During the Los Angeles riots in April 1992, the Turs

filmed four persons being beaten. They have entitled the

videotape footage of the beatings: “Beating of Reginald

Denny,” “Beating of Man in White Panel Truc

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.