by Rex A. Donnelly
Fall is in the air, and that means the October 2021 opening session of the Supreme Court is right around the corner. Once again, the Court has an Intellectual Property case on its docket — specifically, a copyright matter. Unicolors, Inc. v. H&M Hennes & Mauritz, LP (Supreme Court Docket #20-915) poses a procedural question of whether a district court must refer a copyright registration to the Copyright Office for a determination of validity under 17 U.S.C. § 411, absent a finding of fraud or a material error in the registration. This case highlights that while the U.S. copyright registration process seems facially inexpensive and easy to navigate, the reality is full of pitfalls for the unwary.
Some Background on Copyright Law and Registration
The creator (“author” in copyright parlance) of a copyright-protectable creation (e.g. a literary, dramatic, musical, or artistic “work”) owns the rights in the work from the moment the work is fixed in a tangible medium of expression (i.e. a sufficiently permanent or stable embodiment that permits it to be perceived, reproduced, or otherwise communicated for more than a transitory duration of time). A work created by an employee of a company within the scope of employment is a “work made for hire,” and the company is considered the author. Specially commissioned works (e.g. created under contract) within certain statutory categories may be designated “works made for hire” by express written agreement. Authors can also assign rights to a third party.
Copyright registration is not mandatory to obtain rights in the United States (consistent with the rest of the world, under the Berne Convention). The owner of a work is entitled to mark the work “© [owner] [date]” to provide notice of ownership, regardless of registration status. A federal copyright registration is only required to enforce rights in the United States courts. So, why register early? U.S. law contains some valuable incentives to encourage copyright registration. An owner who timely registers is eligible to recover statutory damages (if desired) and attorneys’ fees, in addition to obtaining an injunction. A copyright owner who registers more than three months after publication, and after infringement commences, can still seek an injunction, but monetary recovery is limited to actual damages.
Many infringement cases involve zero or only de minimis actual damages. With potential statutory damages of up to $30,000 per infringement (up to $150,000 for willful infringement), and in view of the steep cost of litigation, the prospect of being awarded statutory damages and attorneys’ fees can mean the difference between the owner of a registered work confidently asserting and fully litigating its rights, or not being able to litigate at all. A government fee of $45 for electronically filing a copyright application for a single work, and a provision that allows for registration of multiple works together in a single application in certain circumstances (more on that below), make registration a bargain, compared to other types of IP protection. Accordingly, for content creators, copyright registration is arguably a “no brainer.” But, despite the low cost and minimal information required in a copyright registration, filing a registration application still requires thoughtful and experienced consideration. This is where the Unicolors v. H&M story begins.
Registration of multiple works together is permissible only under limited circumstances. To be eligible for registration together, multiple published works must have been bundled or packaged and first published as an integrated unit. Likewise, multiple unpublished works must meet specific requirements for group registration, including all the works being unpublished and created by the same author(s). Registration of multiple works together in a manner not permitted by the Office creates a technical defect, which an infringer may leverage to invalidate the registration. Therefore, a copyright owner who impermissibly registers multiple works together enjoys the short term benefit of paying less in government fees, but risks dismissal of its enforcement case if the infringer successfully invalidates the registration. While the copyright owner can file another application for registration and sue again (if the statute of limitation permits), a new registration granted on an application filed after infringement commenced will not qualify the registrant for recovery of statutory damages and attorneys’ fees.
With this backdrop, Congress passed the Prioritizing Resources and Organization for Intellectual Property Act of 2008 (“PRO-IP Act”), with the stated intent to strengthen the enforcement ability of intellectual property rights holders. 17 U.S.C. § 411(b)(1), created under the PRO-IP Act, provides that a certificate of copyright registration is considered valid regardless of whether it contains inaccurate information, unless the inaccurate information was included in the underlying application with “knowledge that it was inaccurate;” and “the inaccuracy of the information, if known, would have caused the Register of Copyrights to refuse registration.” 17 U.S.C. § 411(b)(2) requires that “[i]n any case in which inaccurate information [under Section 411(b)(1)] is alleged, the court shall request the Register of Copyrights to advise the court whether the inaccurate information, if known, would have caused the Register of Copyrights to refuse registration.”
The Application of § 411(b)(1) in Unicolors
Fast forward to February 2011, when Unicolors filed a single Copyright application to register 31 new textile pattern designs that it contends were published together on January 15, 2011. In 2015, Unicolors brought suit alleging that H&M copied one of those registered designs, and a jury ultimately found H&M had willfully infringed. H&M filed a Motion for Judgment as a Matter of Law, or in the Alternative, for New Trial, asking the district court to find the asserted registration invalid (or refer the registration to the Copyright Office for such a determination). The district court found no evidence Unicolors knowingly supplied inaccurate information to the Copyright Office, and declined to find the registration invalid or to make the referral. After the District Court awarded Unicolors attorneys’ fees, H&M appealed.
The alleged source of the inaccuracy in Unicolors application arises from the undisputed fact that when Unicolors applied for registration, nine of the designs were “confined” — exclusively licensed to a single customer for a limited period of time. H&M contends (and the 9th Circuit agreed) that evidence elicited during trial showed that Unicolors was aware that, per its standard practices, only non-confined designs were typically displayed in its public showroom together. H&M alleges Unicolors’ representation to the Copyright Office that all of the designs were published as a single unit was knowingly inaccurate, and was made for the purpose of avoiding the fees required to register each confined design separately. Unicolors contends H&M failed to prove the designs were not published together, the Copyright Office did not issue guidance clarifying the meaning of publishing “as a single unit” until after its application was filed, and that, even if legally incorrect, its application was submitted in good faith based on a reasonable interpretation of the law. The 9th Circuit found error in the district court’s conclusion that Unicolors’ application for copyright registration did not contain knowing inaccuracies, because even if the confined and non-confined designs were published on the same day, they were not placed in the public showroom as a single published unit. Furthermore, the 9th Circuit characterized the knowledge inquiry as a question of whether Unicolors knew the confined designs were published differently than the confined designs, not whether it knew grouping the confined and unconfined designs together for registration rendered the information “inaccurate” under the law. Accordingly, the 9th Circuit remanded to the District Court with an order to refer the registration to the Copyright Office for a determination of validity. Unicolors appealed to the Supreme Court, which accepted certiorari on the limited question of whether the 9th Circuit erred in holding that 17 U.S.C. §411 required referral to the Copyright Office absent a proven indication of fraud or material error in the copyright registration.
Forgiving Earnest Mistakes Does Not Resolve All Risks
Every amicus brief filed with the Court, including the brief filed by the United States (authored by a team that includes U.S. Copyright Office solicitors) sides with Unicolors and urges the Court to adopt a reading of 411(b) that would excuse an applicant’s “innocent” misunderstanding of the law from meeting the knowledge requirement to invalidate a registration due to inaccurate information in the application. Many point to the intent of the PRO-IP act to prevent technical defects in registrations from allowing admitted infringers to escape liability or delay enforcement, and urge a reading that gives the district courts discretion to determine intent and materiality, rather than flooding the Copyright Office with allegations of technical invalidating defects.
But, even if the Court rules in favor of Unicolors, thus minimizing the risks of making innocent mistakes of fact or law when filing a copyright application, can future copyright applicants truly breathe a sigh of relief? Nothing is likely to stop infringers from raising invalidity defenses. Why take the risk of filing a defective application? The cost of registration may be relatively inexpensive compared to the other costs of launching a new creative product. Even had Unicolors registered each of the nine confined designs separately, it would have incurred only $405 more in government fees. The Copyright Office electronic filing system allows users to save partially-completed forms that facilitate filing of multiple applications with nearly identical information (e.g. differing only in the title of the work, author, and/or publication date). Unicolors contends it sincerely believed the information it supplied was accurate, under the law. Could another sophisticated applicant make the same argument the next time on the same set of facts? Several of the amicus briefs point out that copyright registrants frequently file without the guidance of counsel, and thus copyright applications are generally more prone to inadvertent mistakes than other types of IP protection. Will applications filed by counsel or sophisticated companies be given the same benefit of the doubt as those filed by individuals pro se?
This case highlights the value of copyright registration, not only for creators who rely on the exclusivity of their content for making a living, but also for anyone with copyright-eligible works in their IP portfolio (e.g. bespoke software, artwork — including the graphics used in logos, and marketing materials). This case also highlights the reality that filing a copyright application may require nuanced legal determinations to ensure that the information supplied to the office is accurate. The question of whether a work is published or unpublished raises a whole host of legal determinations. Additional questions may arise relating to whether a work is a “derivative work” (i.e. some of the content was created and/or published previously by the author or by someone else), and if so, what portion of the work is covered by the new registration application. Ownership also involves legal analysis. As IP counsel, we frequently find copyright rights not clearly assigned to the intended beneficiary, even when both the author and the user share the same understanding and intent as to ownership.
Copyright owners who are not currently obtaining registrations should consider developing a copyright registration program, especially for works prone to infringement or that provide a competitive advantage or differentiation in the marketplace. Ideally, best practices include robust processes for carefully vetting copyright applications. Copyright owners who decide to register should strive to file applications for registration before or within three months after publication, to ensure maximum recovery and deterrence against infringement. Registration of works in groups can save filing fees in the short term, but when in doubt, filing separate applications may be more prudent. Save documentation showing proof of publication as a unit, and tailor publication practices for cost-effective filings, if possible. Finally, when developing a registration program, consider consulting with experienced copyright counsel to ensure the best chance of obtaining registrations that will withstand a potential validity challenge in the future, regardless of how the Court rules in Unicolors.