Not Wolfgang’s Fault?—SCOTUS Cert. Denial Leaves Confusing Application of Direct Liability Untouched in Second Circuit
On October 2, 2023, the Supreme Court denied certiorari on an appeal by music publishers seeking to find Bill Sagan, the owner of a website that published unauthorized performances of songs by famous musicians, including the Rolling Stones and the Who, directly liable for copyright infringement.[1]
In 2002, Bill Sagan, acting as “the president, CEO, and sole shareholder of Norton LLC,” purchased concert promoter Bill Graham’s “audio and audiovisual recordings” archives.[2] The seller explicitly told Sagan that “he would need to get record company and artist approval to exploit the recordings.”[3] However, Sagan and his company “continued to acquire recordings of live concerts” with questionable intellectual property rights before beginning to make them all available to the public in 2006 for a fee on Norton LLC’s website, Wolfgang’s Vault.[4]
The publishers won a jury verdict in the district court, finding Norton LLC liable for infringement and Sagan himself directly liable by making the recordings of the performances available online for a fee before acquiring licenses.[5] The publishers appealed to seek an increase in damages up to $30 million, a far cry from the $189,000 awarded to them by the district court.[6] The Second Circuit left the jury award untouched but reversed the district court’s finding that Bill Sagan was directly liable for copyright infringement.[7] Specifically, the Court found that (1) the district court improperly applied the standard for vicarious liability instead of direct liability to the facts and (2) found Sagan liable based on conduct insufficient even to establish direct liability.[8]
In the Second Circuit, direct liability for copyright infringement requires “volitional conduct” that “causes” the allegedly infringing distribution to be made.[9] The Second Circuit, in reversing the district court’s finding of direct liability for Sagan, concluded that his conduct “could not give rise to direct liability” because Sagan was not “the person who actually presse[d] the button.”[10] To demonstrate conduct sufficient for a finding of direct liability, the Second Circuit pointed to a case where two corporate managers personally uploaded copyrighted sound recordings to their website.[11] Thus, even testimony that Sagan “instructed [the Chief Technology Officer] as to ‘which concerts to make available for download or not’,” and that he was planning “to start digitizing tape recordings with an eye toward making them available on a public website” was deemed insufficient to show that Sagan was the one who “actually presse[d] the button.”[12]
However, while the actions in Umg Recording constituted “pressing the button” because the two directors personally uploaded the infringing media, should the button-pressing doctrine established in Cartoon Network be interpreted so literally? The “volitional conduct” standard that “causes” the allegedly infringing distribution has been applied without referencing actual button pressing in other infringement cases.[13]
In Morningstar Films, three individuals created a joint venture to develop, produce, and distribute a film.[14] The three members agreed “that no contract or agreement purporting to bind Morningstar would be valid unless it was executed by all [co-adventurers].”[15] One of the individual co-adventurers was found liable for direct infringement when he independently negotiated and entered distribution contracts without the consent of the remaining co-adventurers.[16] This seems like volitional conduct that caused the infringing distribution, but he did not actually distribute the movie––the company he executed the agreements with did.[17] This would seem to fall short of “actually pressing the button.”[18]
Further, Cartoon Network was concerned about a suit against a “virtual DVR” company that allowed users to record and replay television programming via Cablevision’s service instead of a conventional DVR.[19] While in a direct copying case like Cartoon Network, it goes to the heart of the matter who “actually presses the button”––the users or the recording company––should direct liability only be limited to the employee who “actually pressed the button” to upload media in a company running a media website? Should direct liability vary per upload such that individual employees can be directly liable for each individual upload? Should the employee who uploaded one allegedly infringing audiovisual recording on behalf of their employer be held directly liable over a president, CEO, and sole shareholder like Bill Sagan, who purchased the catalog with the intent to publish them before even attempting to obtain licenses?[20] As the publishers said in their petition for certiorari, “[i]t would be absurd if a corporate executive who orders her staff to print a million infringing copies of a copyrighted work with full knowledge of their infringing nature could escape liability instead of the low-level employee who follows those instructions.”[21] Seemingly, literally applying the “actually presses the button” standard in a media upload case would lead to confusing and unfair results like this.
In terms of pure fairness, the corporation’s de facto owner/operator should still be directly liable even if they merely instruct employees to select and upload allegedly infringing media.[22] It seems clear that, on the facts of this case, Sagan’s purchasing and directing to distribute the recordings on his company’s website constituted volitional conduct that caused the infringing distribution.[23] The Supreme Court missed an opportunity to clarify whether the Second Circuit’s volitional conduct standard should always require a literal application of the “actually presses the button” standard.[24] Perhaps the Second Circuit will have an opportunity soon to delineate what “volitional conduct” means in media upload cases.
Footnotes
