Courthouse Steps Decision: Unicolors, Inc v. H&M Hennes & Mauritz, LP

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Join us virtually to hear a discussion on the Supreme Court's recent decision in Unicolors, Inc v. H&M Hennes & Mauritz, LP.

Featuring:

Zvi Rosen, Assistant Professor at SIU Law, and was a Visiting Scholar and Professorial Lecturer in Law at George Washington University School of Law. He has previously taught at University of New Hampshire School of Law as an adjunct professor and New York Law School as an adjunct assistant professor. 

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As always, the Federalist Society takes no position on particular legal or public policy issues; all expressions of opinion are those of the speaker.

Event Transcript

 

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Dean Reuter:  Welcome to Teleforum, a podcast of The Federalist Society's practice groups. I’m Dean Reuter, Vice President, General Counsel, and Director of Practice Groups at The Federalist Society. For exclusive access to live recordings of practice group Teleforum calls, become a Federalist Society member today at fedsoc.org.

 

 

Guy DeSanctis:  Welcome to The Federalist Society's webinar call. Today, February 25, we discuss Courthouse Steps Decision in Unicolors, Inc. v. H&M. My name is Guy DeSanctis and I'm Assistant Director of Practice Groups at The Federalist Society. As always, please note that all expressions of opinion are those of the expert on today's call

 

      Today we are fortunate to have with us Professor Zvi Rosen, an Assistant Professor at the Southern Illinois University School of Law and a former Abraham L. Kaminstein Scholar in Residence at the U.S. Copyright Office.

 

      Throughout the panel, if you have any questions, please submit them through the question-and-answer feature or the chat so that our speakers will have access to them for when we get to that portion of the webinar.

 

      With that, thank you for being with us today. Zvi, the floor is yours.

 

Zvi Rosen:  Thank you. So, I have a short slide deck that I figured I would put on -- help with some of this, given that's it's a statutory case. If a host could enable screensharing, that would be great. And I'll put it up.

 

So this is quite an interesting case to talk about. And there's so much else going on in the world today, and even at the Supreme Court. But I think it's kind of helpful to bear in mind most of the Court's work is still cases like this, this sort of fairly unheralded case about the details of copyright involving two players in the fashion industry, one of which you may have heard of, and one of which you probably haven't heard of. And so, let's wait, I'd like to get my screen sharing.

 

Guy DeSanctis:  Yeah. I'll work on turning that on now.

 

Zvi Rosen:  Thank you. Well, while we're waiting for it to start, I can tell you a little bit about how this case started. Unicolors is a company based in California that designs patterns. They design for all sorts of purposes -- fabric patterns, mainly, etc. They sued H&M, a company that you might be familiar with.

 

Okay. We should be good to go now. Great. Let's start the slideshow. Great. Okay. So, yeah, Unicolors v. H&M. So, Unicolors, as I mentioned, is a fabric design company. H&M is a fashion retailer some of you may have heard of. The question presented -- and we're going to come back to this, because it changes. Unicolors wanted -- or, rather, H&M wanted -- no, rather, Unicolors wanted the Supreme Court to consider two questions.

 

First one, did the Ninth Circuit err in breaking with its own prior precedent and the finding of other circuits and the Copyright Office in holding that 17 U.S.C. § 411 requires referral to the Copyright Office when there is no indicia of fraud or material error as to the work at issue in the subject copyright registration?

 

There was a second one they wanted as well. Did the Ninth Circuit misapply the publication standard? The Court did not grant cert on the second question.

 

We're going to talk a little more about what this means. But, generally speaking, section 411 is what's required. So this is section 411(a). The United States retains a requirement of copyright registration to bring a lawsuit. And you'll find this in section 411(a). This says that subject to the provisions of subsection(b), no civil action for infringement of copyright of any United States work shall be instituted until registration of the copyright claim has been made in accordance with this title.

 

So, what this means is, for a United States work -- and now foreign works are excepted from this, so you can comply with the Berne Convention and other international treaties. But, for domestic work in the United States, you can't bring an action re copyright infringement in civil court — in federal court — unless you've registered first.

 

When you register with a copyright office, they -- you basically send in the application, you send in a fee, you send in the deposit material. The Copyright Office then examines it and they choose to either accept or reject it. This is an edited version of 411(a). A rejected application can still be used as a basis for a lawsuit.

 

Congress added section 411(b) in 2008, part of a pro-IP act, designed to really help copyright owners in lawsuits. It's a simplification, but a short version of it.

 

411(b) says, "A certificate of registration satisfies the requirements of this section," section 411(a), so it does provide a basis for a lawsuit, "unless inaccurate information was included in the application with knowledge it was inaccurate." I bolded that, because that's a key question here.

 

And, secondly, "the inaccurate information, if known, would have caused the Register of Copyrights to refuse registration."

 

And then it says, "In any case where inaccurate information is alleged, the court shall request the Register of Copyrights to tell the court whether it would have refused to register.

 

This question, at its core, is what does it mean where an application was submitted with knowledge that it was inaccurate information?

 

So this is the registration itself. I pulled this off the Copyright Office's online catalog. And this is what you would know about EH101, which is the alleged infringing work. It's a so-called ethnic pattern. And the issue here, in essence, is that Unicolors sent this packet of 31 different patterns as artwork unbound sheets. They called it one work.

 

They did this mainly to avoid paying higher fees. And this has been a common practice for a long, long time. Back in the '30s, there was a major dispute over whether or not syndicated comic strips could be submitted in books or had to register individually. And everyone agreed that these syndication companies were trying to dodge their copyright fees by sending in books that collected a lot of them in one.

 

Nonetheless, the D.C. Circuit, in 1940, held that this was a valid publication and the Copyright Office couldn't deny registration. And that practice has remained to this day, sending in group registrations. However, the Copyright Office requires that something be a single unit of publication.

 

The facts in this case regarding single unit of publication are a little murky. Pretty clearly, on the relevant date of publication, Unicolors put all of these in their showroom. Unicolors argued that that constitutes publication. There is some argument that they, in fact -- that's not really publication. They only distributed some of these, and only those that were actually distributed were published.

 

They really should have sent it as two different applications of published and unpublished material. And that's the accusation of making an incorrect statement on the application and making it knowingly. Because if you know that you -- presumably, Unicolors knew what they did. They knew they hadn't sent all of these to dealers and other partners. But they included all thirty-one in one application anyway.

 

And so the question boils down to wherever they made a mistake of law, is that infringement? Now, the question presented says there's no indicia of fraud or material error. And so that's a very high bar, where, a mistake of law, if you grant it, you pretty much decide the question. But that's not quite where it went going down the road.

 

Infringement is a tricky issue. And this is -- I've copied these from the plaintiff's, from both Unicolors and H&M's, filings in this case. This is joint appendix. You can see all of this online under Court docket.

 

It really is a fascinating display of how one of them is -- how Unicolors really means to portray this and says, "Hey look. It’s an exact copy." H&M is saying, "These are nothing alike." And it's the same pattern and the same sweater. But, one way or another, a jury did find this to be infringing. So the factual question of whether or not it's truly infringing is kind of irrelevant here. A jury said it is. We're not going to second guess that.

 

After trial, H&M moved for judgment as a matter of law, saying that there had been a material -- saying that there had been a knowing misrepresentation on the copyright application that we just talked about. And so the question is, is H&M entitled to judgements in matter of law on that basis?

 

There is a lot of questions here about changing the question presented. And petitioners here do something that is definitely, I think, treading on fairly shaky ground. This is from a cert petition above. Did the Ninth Circuit err in breaking with its own prior precedent in holding that other circuits and the Copyright Office in holding that 17 U.S.C. § 411 requires a referral to the Copyright Office where there is no indicia of fraud or material error as to the work at issue in the subject copyright registration?

 

That's the cert petition question presented. Is there -- is the registration valid where there is no indicia of fraud or material error? That's not the issue they put in the brief. This is copied from a question presented at the brief. So, it's not deep in there. But this is how they stated it in the question presented section of their brief: "whether the knowledge element precludes a challenge to registration where an inaccuracy resulted from the applicant's good-faith misunderstanding of the principles of copyright law."

 

And this is what the case was actually argued as. Is a copyright registration invalid, where the applicant made a good faith misunderstanding of the principle of copyright law? In other words, were they included works that were both published and unpublished in one application saying they were all published, but didn't understand publication under copyright law?

 

There is a fascinating colloquy in this case about whether or not publication by -- whether putting stuff in their showroom is publication or copyright law. The Court does not get into that. There's sort of an assumption that there is. But it was a strange argument, because, for starters, you have this fascinating -- it's probably the most memorable part of the argument by Justice Breyer, where he starts talking about, oh, well, what about if you're a bird watcher and you misrepresent what a bird is?

 

One is using the wrong label. One is a mistake of fact. The other is a mistake of law. And Justice Breyer includes this in his majority opinion, although he changes oriole to cardinal in the final opinion. Scarlet Tanagers are in both. It's one -- I don't quite know why. It's one of the interesting little bits of this case.

 

But the case was argued. A lot of people showed up as amici in this case. And, by the way, I did do a separate post-argument podcast for The Federalist Society. So if you'd love to know more detail of the argument, you can hear it there.

 

The big detail of the United States showed up and filed an amicus brief on behalf of Unicolors. And this case has a sort of a strange complexion because not a lot of people actually disagreed with Unicolors. The question was whether a court should dismiss as improvidently granted.

 

Copyright Alliance showed up on behalf of Unicolors. It makes sense. It's a trade group. The IP Law Association and American IP Law Association both filed briefs in favor of Unicolors -- but rather, they didn't -- they actually -- put an asterisk there. They did not file a briefing in favor of Unicolors, per se, but they urged reversal.

 

American Society of Media Photographers urged reversal, joined by the California Society of Entertainment Lawyers. And, also, there was a brief from five IP professors. And I joined that brief. What we argued is that the history and text of the statute is pretty clear that an innocent mistake is not enough to invalidate a registration.

 

On the flip side -- you have to excuse my typo of New York IP Law Association. There were briefs from 12 IP professors and Centers for Democracy and Technology and the Electronic Frontier Foundation. Their briefs were more focused on what they call the "copyright troll" aspect of this case, which is that Unicolors is in the business of making all of these patterns for fabric and then suing people. And they say, "Oh, you're really just copyright trolls. You sue a lot of people and we want the Court to crack down on that."

 

But they weren't really arguing, at least to my reading, per se, that this individual case -- so much as urging the Court to be wary of a broader context of this lawsuit. And I think they wanted a dismissal of improvidently granted, out of concern that this would empower people like Unicolors in what they consider to be bad-faith actions.

 

National Retail Federation filed on behalf of H&M — once again, not a shock, because they're a trade group — California Fashion Association and two individuals, a law professor, and two practicing lawyers. So those are the people who filed amicus briefs in this case.

 

And it sure gives you an idea about the broader issues going in. Justice Breyer, in what might be his last IP opinion on the Court, which is kind of fascinating -- I mean, if Google v. Oracle -- I almost said Google versus Oriole, which kind of summarizes the year of IP for him. But if Google v. Oracle was his big final statement on IP, this is sort of a coda. It's not a big case, but it's -- Justice Breyer's been involved in copyright for going on 50 years now, ever since he wrote his tenure article for Harvard.

 

And, here, somewhat surprisingly, he takes a pro-copyright holder stance. But the decision makes more sense when you look at the broader currents, I believe, in Justice Breyer's judicature. So, what does he say? This is the open of his opinion. The question of what concerns the scope of this phrase "with knowledge that it was inaccurate," in section 411(b). The Court of Appeals believe that a copyright holder cannot benefit from a safe harbor and save its registration if it's a lack of knowledge stems from failure to understand the law, rather than a failure to understand the facts. In order words, where they knew what they were doing, which demonstrates legal significance.

 

In our view, however, 411(b) does not distinguish between a mistake of the law and a mistake of fact. Lack of knowledge of either a fact or a law can excuse an inaccuracy in a copyright registration. We therefore vacate the Court of Appeals contrary holding and we remand. Why?

 

And this is what I said about Justice Breyers' judicature. He looks at the statute. Look at dictionaries. Look at what knowledge is supposed to be. Look at other sections of title 17, which talks about knowledge of both fact and law.

 

A big thing for Justice Breyer -- and this is something -- this is where I said it taps into some prior currents in his judicature, is that his  -- look at legislative history. In this case, legislative history is really clear that Congress amended 411 to add 411(b) in 2008, specifically to make it harder to show fraud in the Copyright Office and to make it more likely that a copyright registration is going to be held valid.

 

And you'll notice that a lot of caselaw before 2008 also held that a mere mistake as to the law does not constitute fraud in the Copyright Office.

 

So part three of the decision is basically Justice Breyer responding to a few comments and questions. I should say, this is a very, very, short opinion. The majority is only -- is, I think, nine or twelve pages. And this is just a page or two of responding. The Court has its caveat that willful blindness is still knowledge. And I saw some people who were supporting H&M saying, "You know what? Okay, at least this does not change status quo all that much.

 

Briefly argues the knowledge question. And basically -- and we'll get to this in a minute with the dissent. But he says, "Listen. This was a subsidiary question fairly included in the petition's question presented, that -- about the meaning of knowledge. Even though we mentioned the question presented had been changed by the petitioners." Very brief. He has like a paragraph on it, maybe two. And it's vacated and remanded.

 

But then there's a short dissent from Justice Alito -- well, from Justice Thomas, joined by Alito and, partially, Gorsuch. Justice Thomas really homes in on the problem of the procedure here. Listen.

 

"Having persuaded us to grant certiorari on this issue, Unicolors has chosen to rely on a different argument in its merits briefing. It no longer argues that 411(b)(1)(A) requires fraudulent intent and instead proposes a novel "actual knowledge" standard. Because I would not reward Unicolors for its legerdemain, and no other court had, before today, ever addressed whether 411(b)(1)(A) requires "actual knowledge," I would dismiss the writ of certiorari as improvidently granted."

 

Justice Alito joins the whole dissent. Justice Gorsuch agrees only on this point. So Justice Gorsuch would have dismissed as improvidently granted but wouldn't go any further.

 

Justice Thomas, in the second part, only joined by Justice Alito, says, "In this case, the Court's misstep comes at considerable cost. A requirement to know the law is ordinarily satisfied by constructive knowledge, because actual knowledge of illegality can be difficult or impossible to prove. Yet, here, the Court imposes an actual-knowledge-of-the-law standard that is virtually unprecedented except in criminal tax enforcement.

 

And then he says that the Court reads 411(b)(1)(A) to be the lone exception is dubious. That the Court does so without permitting any other court in the country to first consider the question is unwise. He dismissed the case as improvidently granted and let the Ninth Circuit's decision stand.

 

Obviously, this is what H&M wanted. Because, if it's dismissed as improvidently granted, then the Ninth Circuit's opinion stands. But, either way, the Court embraces actual knowledge and reverses and remands back to the court to determine whether there was actual knowledge of fraud.

 

So that's my little slide show here. And if people have questions about this case, I'd love to hear them. It's kind of been talked about as perhaps a not as important case, even by people in the copyright world. But, with the Supreme Court stepping in, there is potential precedent here about what happens when a question presented is changed. It definitely clarifies that as long as you, in good faith, submit your registration, it's not going to be invalidated in litigation.

 

It also further strengthens the practice of group registrations, and not worrying quite as much about whether or not something is published. This is one of the major concerns if you file a registration, getting straight if something is truly published or not. Publication can be a very difficult doctrine -- to understand the context of copyright law. And this takes a little bit of pressure off copyright owners.

 

And one of things I said in the amicus brief I signed — I shouldn't say "I signed," I was actually the main drafter — is that there's a real concern about small and medium-sized businesses not understanding publication. You might have one general counsel who does everything from employment to tax and everything in between. And they're also going to be responsible for copyright. They're not going to know this convoluted two hundred years of publication, what it means.

 

And by saying that an honest mistake of law as to publication is not going invalidate for registration, it's potentially a real benefit to small and medium-sized businesses where their innocent mistakes are not going to be penalized.

 

The floor is open. If people have any questions about this case, anything they want to know about, I'll give people a minute to be a little less shy. I will say that it was a fascinating -- the whole issue of group registration has come up some, and the copyright office has been increasingly, I think, allowing the group registration. We've had a couple of recent additions to copyright procedure, like they added a group registration of short online works meant for registration of blogs, etc.

 

We also added a procedure for group registration of an album, where you can register sound recording, musical compositions, and any artwork or textual material in one. And you're allowed to do group registration of other materials in a single unit of publication.

 

And so, I think, if you are a small business -- and a classic example is a wedding photographer -- there's no way you're going to register every photo individually. But you might want to register them as group.

 

I have a question here. "Why is the Supreme Court so forgiving on copyright, but in patent they look for any reason to invalidate a patent. They will never forgive an honest mistake, rather they stick it to a patent owner."

 

It's an interesting question. Those of us in the copyright world are certainly aware that the PTAB has been criticized for being much more aggressive. I think the reason is that in copyright, the office is much more an office of registration. In other words, the Copyright Office is not actually granting the right. They're simply providing a stamp on it.

 

It gives you standing. If you get sued, it gives you additional damages. Whereas, in patent law, there is a feeling that they're actually giving the right. But it's certainly a fair question. And, you could certainly ask, why wasn't this a design patent in the first place? You'd think that a fabric design or a design for whatever it is would potentially fit better as a design. And, in fact, designs have always been in this awkward place between copyright and patent.

 

So that's my best answer. I think that, because there is, it seems, less at stake, because the copyright is going to be good anyway, and, pretty clearly, if Unicolors resubmitted the application, separating out published and unpublished, the main thing they would lose -- in fact, they wouldn't lose much at all. I think they got actual damages, not statutory damages.

 

And so all they'd have to do is refile the action. And so there's already a jury verdict. They'd probably try to argue it's collateral estoppel or a res judicata and try to get the Court to reinforce it based on that. And that, I think, is probably why, if that makes sense. Okay.

 

Guy DeSanctis:  While we see if there are any more questions, is there anything else you'd like to elaborate on, or anything like that?

 

Zvi Rosen:  Well, it's a -- one of the interesting things that the Court took this case -- a lot of us were sort of scratching our heads a little bit, because it's an interesting case. Is it error correction? Is it something else? It's hard to know. I wonder if the Court -- and there has often been speculation the Court likes taking occasional IP cases that are not overly controversial, in comparison to Oracle v. Google, which is -- it's not a key case, but it is controversial.

 

And there's a lot of speculation the Court is kind of considering taking certiorari in Goldsmith v. Warhol, I believe, a case about a photograph of Prince and whether reinterpretation of it by Andy Warhol is infringing. And that's going to be a much bigger case. It goes to what the meaning of fair use is, following Google v. Oracle.

 

I think here the Court sort of saw a technical issue where maybe some error correction was needed and they chose to jump in. I don't really have -- it's not -- it's a short, short opinion. It's sort of a weird little case, where the Court almost certainly shouldn't have taken it. And I think -- I was kind of suspecting the Court would dismiss as improvidently granted, which is what three of the Justices would have done.

 

Maybe they wanted to give Justice Breyer an additional take on copyright law, where he talked about legislative history also. I don't know. I don't really have -- there's not really too -- I mean, I'm happy to answer some more questions. But I don't have a ton else to say about it.

 

Guy DeSanctis:  Then I guess we'll wrap up then. Thank you.

 

Zvi Rosen:  Thank you very much. Really. It's always interesting to discuss copyright before the Court. And we'll see if there's -- and I'm sure there's more coming down the pike.

 

Guy DeSanctis:  On behalf of The Federalist Society, I want to thank our expert for the benefit of his valuable time and expertise today. And I want to thank our audience for joining and participating. We also welcome listener feedback by email at [email protected]

 

      As always, keep an eye on our website and your emails for announcements about upcoming Teleforum calls and virtual events. Thank you all for joining us today. We are adjourned.

 

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Dean Reuter:  Thank you for listening to this episode of Teleforum, a podcast of The Federalist Society’s practice groups. For more information about The Federalist Society, the practice groups, and to become a Federalist Society member, please visit our website at fedsoc.org.