According to the Seventh Circuit in Delivermed Holdings LLC v. Schaltenbrand, plaintiff Mark Swift lied to the Copyright Office, rerouted customer calls to his cell phone in order to sabotage his business partners, exploited the business for personal gain and engaged in questionable litigation tactics. But Swift won his appeal anyway because the District Court skipped a critical step before invalidating his copyright registration. In so ruling, the Seventh Circuit became the first federal appeals court to weigh in on the "curious" copyright invalidation procedure set forth in 17 U.S.C. § 411(b).
Section 411's Curious Procedure
In order to bring most copyright claims, you have to apply for a valid certificate of copyright by registering with the Copyright Office. It goes without saying that you are not supposed to lie on your application. Pursuant to Section 411, providing inaccurate information to the Copyright Office may cause a court to invalidate your registration if (1) you knew the information you provided was inaccurate; and (2) the inaccuracy of the information, if known, would have caused the Register of Copyrights to refuse registration.
So how does a judge know whether the Register of Copyrights would have refused registration? The judge could ask her. In fact, the judge has to ask her.
In 2008, Congress amended Section 411 to require that a court, in the middle of a copyright infringement litigation, must seek the advice of the Register if an issue arises pertaining to fraud during the registration process. Specifically, Section 411(b)(2) provides that:
In any case in which inaccurate information . . . 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.
This new procedure has come up in only a small number of cases. In 2010, the Southern District of Florida, in Olem Shoe Corp. v. Washington, grudgingly followed the procedure, but sharply criticized the amended Section 411 on several grounds, including (1) that the plain language of the statute requires a Court to seek input from the Copyright Office upon an allegation of fraud even if there is no factual basis for the allegation; (2) that the Section 411 procedure might well be abused by parties seeking to delay proceedings; and (3) that the statute doesn't specify whether the Register's opinion is merely advisory or must be followed by the Court. The third point appears to raise serious separation of powers concerns. Federal courts sometimes certify questions of state law to state courts, but in that case both entities are in the judicial branch. Should the Copyright Office, a unit of the legislative branch of government, get to decide whether a party in federal court has met an element of its affirmative defense?
Mark Swift, an Illinois entrepreneur, partnered with the Medicate Pharmacy chain to develop a mail-order pharmacy business. When the relationship went sour in 2009, Swift filed suit in the Southern District of Illinois, asserting a litany of claims against his former partners, including infringement of the business' copyrighted logo. In order to bring the copyright claim, he first registered the logo, stating on the application that its author was an advertising firm he had hired, and that the rights had been transferred to him. According to the trial court, neither of these statements were true, and Swift knew it.
But what Swift didn't know was Section 411(b). And neither did the defendants. And apparently neither did the judge. After a bench trial, and without anyone asking that the Register of Copyrights be consulted, the District Court issued a declaratory judgment that the registration was invalid. In his subsequent appeal to the Seventh Circuit, Swift argued that the District Court erred by failing to ask the Register whether Swift's material misrepresentations would have caused her to refuse registration.
Guidelines for invalidating copyright registrations
The Seventh Circuit, based on the plain statutory directive that a court "shall" consult with the Register of Copyrights, reluctantly sided with Swift and vacated the declaratory judgment, directing the trial court to consult with the Register on remand.
In dicta, the Seventh Circuit set forth guidelines for future application of the statute. Even though the statute appears to mandate that a court "shall" consult the Register whenever inaccuracy is alleged, "courts should tread carefully and employ this mechanism only when necessary." Thus, a party seeking invalidation must first establish that (1) the registration application included inaccurate information and (2) the registrant knowingly included that inaccurate information. Only then, "a court may question the Register as to whether the inaccuracy would have resulted in the application's refusal."
The Copyright Office, for its part, appears to agree with this interpretation of the statute, and in the past has stated that "before asking the Register whether she would have refused to register a copyright ... a court should feel free to determine whether there is in fact a misstatement of fact." Still unanswered is the more difficult and interesting question of whether the court should "feel free" to disagree with the Register once she provides her opinion.
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