In a decision last week, the Eleventh Circuit affirmed in part and vacated in part a district court decision granting summary judgment in a copyright infringement action. The central disagreement between the parties was over the scope of copyright protection in a book about sales techniques. The district court granted the defendant's motion for summary judgment, finding fair use and laches precluded recovery.
The Eleventh Circuit affirmed in the district court's decision as to whether instructional courses constituted derivative works. However, the court vacated and remanded in part the district court's application of the fair use doctrine and laches. Regarding laches, the court held, as a matter of first impression in the circuit, that laches may be raised as a defense in a copyright infringement action, even when the statute of limitations has not yet run. However the court stated there is a "strong presumption" against laches when a claim is filed within the limitations period, only applying in "the most extraordinary circumstances."
Regarding fair use, the court criticized the district court's use of a so-called fifth fair use factor, specifically the consent of the copyright owner. The court stated analyzing consent in the context of fair use was "incorrect, both in terms of logic and precedent," because "the existence of actual consent negates the necessity of conducting a fair use analysis in the first place." Ultimately, there were sufficient questions of fact for one of the plaintiff's four claims to survive summary judgment, and the court remanded that claim for further consideration.
More on Peter Letterese & Assocs., Inc. v. World Institute of Scientology Enters. after the jump.
In 1971, Leslie Achilles "Les" Dane wrote a book on sales strategies entitled Big League Sales Closing Techniques. L. Ron Hubbard, the founder of the Church of Scientology, "took a shine" to the book and bought some copies. Mr. Hubbard began incorporating the closing techniques into instructional course materials and even had Dane give seminars on the book. Three different entities affiliated with the Church made use of the Big League Sales book: World Institue of Scientology Enterprises ("WISE"), Church of Scientology International ("CSI"), and Church of Spiritual Technology ("CST"). The various entities made "check sheets" and "drill sheets"
After Dane's death, Peter Letterese and Associates ("PL&A") bought Dane's copyright interest in the book. Interestingly, PL&A is named after and operated by a former Scientologist, Peter Letterese, who was kicked out of the Church for violating certain Church policies. PL&A withdrew Big League Sales form the market with the intention of "making its own use" of the book. PL&A sued the Church in 2004 after negotiations between the parties for non-exclusive rights in Big League Sales fell through.
Eventually the district court granted summary judgment to the defendants on all counts. The district court assumed for purposes of the motion that the copyrights were infringed, but held the use was a protected fair use of the work. The district court stated the Church had "hit a grand slam on the fair use playing field." In addition, the district court applied a fifth fair use factor in addition to the four explicitly mentioned in the statue, namely the copyright owner's consent to use the work. The court also held PL&A's claims were barred by laches, even though the alleged infringement took place within the three-year statute of limitations. PL&A appealed.
Before addressing fair use, the Eleventh Circuit first addressed whether there had been infringement. Specifically, two of the claims asserted that some of the course materials constituted infringing derivative works. PL&A contended that the course materials (checksheets and drill sheets that incorporated aspects of the book) were akin to the derivative works found in the oft-maligned Ninth Circuit case Mirage Editions v. Albuquerque A.R.T. Co. , where the court held removing art prints from a book and remounting them onto ceramic tiles created an infringing derivative work. The court declined to adopt this position, and held the allegedly infringing works did not "recast, transform, or adapt" the book so as to make them derivative works. The court affirmed the grant of summary judgment on this basis for two of the four counts.
After finding a sufficient question of fact to defeat summary judgment on the question of infringement on the other two counts, the court then addressed the question of fair use. The court rejected the district court's reliance on the copyright owner's consent as a fifth factor in the analysis, noting that if the copyright owner consents, there no need to prove the use was fair. The court then conducted a straightforward fair use analysis, looking to each of the four factors found in the statute: (1) the purpose and character of the use, (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 on the potential market for or value of the copyrighted work.
In analyzing the factors, the court held the first factor and, to a lesser extent, the third factor favored PL&A. The defendants stood to profit from the exploitation of Big League Sales without paying the customary price; WISE sold the course packets for $75 each and CSI obtained a promissory note from users for the fixed "donation amount of the course." The court held the second factor was neutral. As a result, the summary judgment hinged on the fourth factor.
According to the court, the fourth factor with respect to the WISE Sales Course slightly favored PL&A. The WISE course "may be regarded as appropriating 'the heart' of" the copyrighted work, and no evidence disproved the likelihood that widespread dissemination of the course would supplant PL&A's market for derivative works. As a result, the court reversed the district court's grant of summary judgment with respect to the fair use defense regarding the WISE Sales Course. The CSI courses, on the other hand, were found to be fair use. These courses centered around various writings by Mr. Hubbard, and as such, would not affect the market for derivative works of the book. Thus, the fourth factor strongly favored the Church, and when considering the remaining factors entitled the Church to summary judgment with regard to the CSI courses.
Finally, the court addressed the Church's laches defense. As a matter of first impression, the court concluded the defense is generally not available for causes of action brought within the statute of limitations period, but declined to agree with the Fourth Circuit that the answer to the availability of this defense is always "no." Rather, the answer is
a presumptive "no"; there is a strong presumption that a plaintiff's suit is timely filed if it is filed before the statute of limitations has run. Only in the most extraordinary circumstances will laches be recognized as a defense … Even where such extraordinary circumstances exist, however, laches serves as a bar only to the recovery of retrospective damages, not to prospective damages.Based on this analysis, one of PL&A's four claims should have survived summary judgment, and was remanded to the district court.
To read the full decision in Peter Letterese & Assocs., Inc. v. World Institute of Scientology Enters., click here.