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October Term, 2011

January 18, 2012

Today the Supreme Court issued two decisions, described below, of interest to the business community.

Uruguay Round Agreements Act—Copyright Protection of Foreign Works

Golan v. Holder, No. 10-545 (previously discussed in the March 7, 2011 Docket Report).

Section 514 of the Uruguay Round Agreements Act, 17 U.S.C. §§ 104A, 109(a), implements Article 18 of the Berne Convention for the Protection of Literary and Artistic Works, which requires member states to provide a minimum level of copyright protection to foreign works published in a member state. One effect of Section 514 was to grant copyright protection to certain works that were in the public domain. Today, in a 6-2 decision, the Supreme Court upheld the constitutionality of Section 514 under the Copyright Clause and the First Amendment. The case resolves a matter of importance to both businesses whose works receive protection under Section 514 and businesses that wish to make use of such works.

Throughout much of the 20th century, the U.S. extended copyright protection only to authors whose countries granted reciprocal rights to U.S. authors and whose works were printed in the U.S. In 1989, the U.S. became a signatory to the Berne Convention. Article 18 of the Convention provides that a member country must grant copyright protection for a work published in another member country unless the work’s copyright term has expired in either the country where protection is claimed or the country of origin. At that time, the U.S. did not extend protection to works already in the public domain. That changed in 1994, when Congress enacted Section 514, which extended U.S. copyright protection to works that were protected in their countries of origin but had been unprotected in the U.S. for any of three enumerated reasons.

Petitioners challenged the constitutionality of Section 514 in federal court. The district court held that Section 514 did not violate the Copyright Clause but did violate the First Amendment. The Tenth Circuit affirmed the Copyright Clause holding but reversed the First Amendment holding. In today’s majority opinion, which was authored by Justice Ginsburg, the Supreme Court affirmed the Tenth Circuit and upheld Section 514.

The Court first rejected the Copyright Clause challenge to Section 514. Relying on its decision in Eldred v. Ashcroft, 537 U.S. 186 (2003), which upheld the constitutionality of an Act extending existing copyright terms by 20 years, the Court held that Section 514’s extension of protection to works previously in the public domain did not infringe on the language in the Copyright Clause granting exclusivity to authors “for limited [t]imes.” The Court explained that the phrase “limited [t]ime” means “restrain[ed]” or “circumscribed” rather than “fixed” or “inalterable.” Slip op. 14. The Court then observed that Congress had previously extended copyright and patent protection to works and inventions that were in the public domain. Finally, the Court rejected the argument that Section 514 failed to “promote the Progress of Science,” concluding that the “permissible ends” of the Copyright Clause “extend[] beyond the creation of new works.” Id. at 21. Congress had reason to believe, the Court said, that Section 514 “would expand the foreign markets available to U.S. authors and invigorate protection against piracy of U.S. works abroad.” Id. at 22.

The Court next rejected the First Amendment challenge to Section 514. Again citing Eldred, the Court found that Section 514 “leaves undisturbed the ‘idea/expression’ distinction and the ‘fair use’ defense” that embody First Amendment limitations on the Copyright Act. Slip op. 25. The Court rejected the argument that the petitioners had “vested rights” in materials that had fallen into the public domain. Id. at 26. The Court found nothing in the Constitution that “renders the public domain largely untouchable” and noted several instances in which Congress had adjusted copyright law to protect new categories of works. Id. The Court stressed that Section 514 did not prohibit access to those works, but only required users to “pay for their desired use of the author’s expression, or else limit their exploitation to ‘fair use’ of that work.” Id. at 29.

Justice Breyer, joined by Justice Alito, dissented. Tracing the history of copyright law, he stated that “[t]he possibility of eliciting new production is, and always has been, an essential precondition for American copyright protection.” Slip op. 2 (dissenting opinion). Justice Breyer concluded that Section 514 does not promote the creation of new works. Id. He also interpreted the Copyright Clause “in the light of the First Amendment,” and found that Section 514 results in a number of “speech-related harms.” Id. at 16. In particular, he found that Section 514 restricts the use of previously available material; requires would-be users to incur administrative costs in determining whether a work is protected and tracking down the copyright holder; and rewards current copyright holders at the expense of “badly organized unknown users,” id. at 15.

Justice Kagan did not participate in the consideration or decision of the case.

Telephone Consumer Protection Act—Federal Jurisdiction

Mims v. Arrow Financial Services, LLC, No. 10-1195 (previously discussed in the June 27, 2011 Docket Report).

The Telephone Consumer Protection Act of 1991 (“TCPA” or “Act”) and its implementing regulations restrict the use of prerecorded messages in telephone solicitations as well as the ability to make solicitation calls to consumers who have made “do not call” requests. The Act creates a private right of action to enforce these restrictions. Such actions “may” be brought, “if otherwise permitted by the laws or rules of court of a State, . . . in an appropriate court of that State.” 47 U.S.C. § 227(b)(3). Today, in Mims v. Arrow Financial Services, LLC, No. 10-1195, the Supreme Court unanimously held that this explicit grant of state-court jurisdiction over private TCPA claims does not deprive the federal courts of concurrent jurisdiction, and that plaintiffs may therefore pursue such claims in either state or federal court. 

The Court’s decision overrules precedent from the United States Court of Appeals for the Second, Third, Fourth, Fifth, Ninth, and Eleventh Circuits, each of which had concluded that Congress’s explicit grant of state-court jurisdiction over private TCPA claims evidenced an intent to preclude federal courts from hearing such claims under 28 U.S.C. § 1331, which grants federal courts jurisdiction over “all civil actions arising under” federal law. In today’s opinion, which was authored by Justice Ginsburg, the Court held that “[n]othing in the permissive language of § 227(b)(3) makes state-court jurisdiction exclusive, or otherwise purports to oust federal courts of their 28 U.S.C. § 1331 jurisdiction over federal claims.” Slip. op. 11. In contrast with section 227(g)(2) of the TCPA, which vests federal courts with “exclusive jurisdiction” over actions to enforce the TCPA brought by state attorneys general, the Court noted that section 227(b)(3) “does not state that a private plaintiff may bring an action under the TCPA ‘only’ in state court, or ‘exclusively’ in state court.” Id. The contrast between sections 227(b)(3) and 227(g)(2) “reinforce[d]” the Court’s conclusion that state-court jurisdiction over private TCPA claims is non-exclusive, for it “reveals that, while drafting the TCPA, Congress knew full well how to grant exclusive jurisdiction with mandatory language.” Id. at 11, 12. Thus, nothing in the construction of the TCPA or its legislative history could overcome the “deeply rooted presumption” that federal and state courts possess concurrent jurisdiction over federal claims brought by private litigants. Id. at 9.  

In light of the Court’s decision in Mims, private plaintiffs may bring TCPA claims in federal court if they so choose. By the same measure, any TCPA claim initially brought in state court is now subject to removal on the basis that it presents a federal question. Under either set of circumstances, federal litigation of private TCPA claims is likely to increase, particularly within those circuits that had until now regarded such claims as exclusively subject to state-court jurisdiction unless the amount in controversy for diversity jurisdiction had been met. This shift will be of particular interest to any business engaged in making telephone solicitations on its own behalf or on the behalf of others. The decision may also be of interest to businesses that send text-messaging solicitations, as courts have held that text messages are covered under the TCPA.

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