Unicolors, Inc. v. H&M Hennes & Mauritz, L.P.

Issues

Must copyright registration applications containing inaccuracies be referred to the Copyright Office when those inaccuracies show no indicia of fraud or material error related to the work at issue under the Copyright Act?

Oral argument:

November 8, 2021

Court below:

United States Court of Appeals for the Ninth Circuit

This case asks the Supreme Court to determine the precise meaning of the “knowledge” standard in the Copyright Act. Section 411 of the Copyright Act provides that a copyright registration is inadequate when it includes information that was included with “knowledge that it was inaccurate.” Petitioner Unicolors, Inc. (“Unicolors”) argues that Section 411’s “knowledge” requirement excludes mistakes that are made in good faith and without fraudulent intent. Respondent H&M (“H&M”) counters that the plain meaning of the word “knowledge” indicates that so long as a copyright registrant is aware of the inaccuracy of the information, it is immaterial whether they intended to defraud. This case has significant implications for principles of statutory interpretation, copyright law, and the direction of future copyright infringement litigation.

Questions as Framed for the Court by the Parties

Whether the U.S. Court of Appeals for the Ninth Circuit erred in breaking with its own prior precedent and the findings of other circuits and the Copyright Office in holding that 17 U.S.C. § 411 requires 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.

Facts

Unicolors creates and copyrights artwork that it eventually prints and markets to garment manufacturers. Unicolors, Inc. v. H&M Hennes & Mauritz, L.P. at 1196. Unicolors markets some of its designs to the general public by placing them in a public showroom. Id. Occasionally, Unicolors “confines,” or creates designs for specific customers, by holding those designs in private for an “exclusivity period.” Id. In February 2011, Unicolors filed an application with the U.S. Copyright Office seeking copyright registrations for thirty-one graphic designs, including a specific design called “EH101.” Id. The Copyright Office approved the application and issued a copyright registration. Id. Thereafter, Unicolors marketed some of the thirty-one designs, such as EH101, to the public, and confined others for specific customers. Id.

In 2015, retail clothing company H&M began selling a jacket and skirt with a pattern design virtually identical to that of Unicolor’s registered EH101. Id. When Unicolors learned of H&M’s similar product, Unicolors filed a lawsuit in the United States District Court for the Central District of California alleging copyright infringement against H&M. Id. At trial, a jury found that H&M willfully infringed the EH101 copyright and consequently awarded damages to Unicolors for lost profits and profit disgorgement. Id. at 1197.

Following the unfavorable verdict, H&M filed a renewed motion for judgement as a matter of law, arguing that Unicolors did not hold a valid copyright because it impermissibly obtained its registration for EH101 by including known inaccuracies in its application in violation of 17 U.S.C. § 411. Id. Specifically, H&M contested that Unicolors improperly registered thirty-one individual, separately marketed designs under one copyright registration. Id. at 1197–98. The district court rejected the motion and H&M appealed to the United States Court of Appeals for the Ninth Circuit. Id. at 1198.

On appeal, the Ninth Circuit disagreed with the district court’s reasons for denying H&M’s motion on two main grounds. Id. First, the Ninth Circuit cited its previous opinion in Gold Value Int’l Textile, Inc. v. Sanctuary Clothing, LLC and held that there is no intent-to-defraud requirement to invalidate a copyright registration for inaccuracy. Id. Second, the Ninth Circuit determined that Unicolors’s February 2011 application for copyright registration contained inaccuracies. Id. The Ninth Circuit reasoned that the statutory language of the Copyright Act requires that an applicant who registers multiple works under one copyright application must also first publish those works as a single, bundled collection. Id. at 1199–2000. Since Unicolors knowingly “confined” some of the thirty-one works in question, the Ninth Circuit held the copyright application to be inaccurate. Id. at 2000.

Despite the inaccuracy, the Ninth Circuit also determined that to invalidate the copyright, H&M must show that the inaccuracy would have caused the Copyright Office to reject Unicolors’s application. Id. Consequently, the Ninth Circuit remanded to the district court to review the question of whether the copyright would still be registered but for the inaccuracy. 17 U.S.C. § 411(b)(2).

Unicolors appealed, and on June 1, 2021, the United States Supreme Court granted certiorari to hear this case.

Analysis

DOES SECTION 411 OF THE COPYRIGHT ACT INCLUDE AN INTENT-TO-DEFRAUD REQUIREMENT?

Unicolors argues that Section 411 of the Copyright Act includes an intent-to-defraud requirement because a copyright registrant cannot have knowledge that information is inaccurate unless the registrant intends to convey false information. Brief for Petitioner at 31. Specifically, Unicolors contends that Section 411 codified the “fraud-on-the-Copyright-Office doctrine.” Id. at 32. The common law doctrine stipulates that a good-faith error on factual or legal information cannot on its own serve as the basis for invalidating a copyright registration. Id. Unicolors maintains that reading the doctrine into Section 411 comports with Congress’s longstanding goal to eliminate formalities which hinder copyright enforcement. Id. Further, Unicolors notes the doctrine was statutorily retained because Congress has not expressly rejected it. Id. at 31-32. Moreover, Unicolors maintains that lower courts consistently recognize that inadvertent mistakes alone cannot void a copyright registration. Id. at 33-35. Hence, the Ninth Circuit’s contrary holding is unique. Id. Accordingly, Unicolors urges that because it did not intend to defraud the Copyright Office by listing its thirty-one designs under one copyright registration, it did not have knowledge that the included information was inaccurate. Id. at 23.

H&M counters that Section 411 explicitly requires only “knowledge” that information included in a copyright registration is inaccurate. Brief for Respondent at 24. Thus, courts that read an intent-to-defraud requirement into the statute ignore the statute’s plain text. Id. H&M asserts that because Section 411 does not include terms like “fraudulent” or “deceptive,” Congress expressly chose not to include an intent-to-defraud requirement in the section. Id. at 25. Further, H&M argues that “knowledge” is a mental state of alertness and does not implicate intent. Id. at 24-25. Moreover, H&M notes that Unicolors errs in reading an intent-to-defraud requirement into Section 411 because Unicolors cites cases decided before the adoption of Section 411. Id. at 25. Consequently, H&M argues that the Supreme Court should only look at the plain meaning of the statute in order to reject Unicolors’s intent-to-defraud argument. Id. at 25-26.

MISTAKE OF LAW AS A DEFENSE TO A STATUTORY “KNOWLEDGE” REQUIREMENT

Unicolors contends that because copyright registrations require applicants to have knowledge of both the relevant facts and law, a reasonable mistake about the law cannot invalidate the registration. Brief for Petitioner at 40. To support its position, Unicolors analogizes between Section 411 of the Copyright Act and several civil and criminal statutes which require knowledge of both facts and law. Id. at 40–41. Unicolors asserts that, like these other statutes, Section 411 acknowledges that a reasonable mistake of law cannot support a claim for actual knowledge of an inaccurate copyright registration. Id. For example, Unicolors notes that under the Fair Credit Reporting Act, an objectively reasonable legal error does not constitute a statutory violation. Id. at 40. Accordingly, Unicolors argues that the Ninth Circuit erred in citing Gold Value Int’l Textile, Inc., which held that only a mistake of fact can serve as a defense to Section 411’s “knowledge” requirement. Id. at 41. Unicolors posits that the Ninth Circuit mistakenly conflated a reasonable mistake of law with ignorance of the law. Id. at 41-42. Hence, Unicolors submits that its ignorance of copyright law does not shield it from Section 411. Id. But Unicolors insists that in listing thirty-one designs under a single copyright registration, it relied on a reasonable understanding of current copyright law. Id.

H&M counters by first claiming that Unciolors’s mistake of law argument is not properly before the Court because its petition for certiorari focused solely on whether Section 411 includes an intent-to-defraud requirement. Brief for Respondent at 26. H&M maintains that, in focusing on a different question in its petition for certiorari, the Court precluded Unicolors from raising the mistake of law of law issue. Id. at 26-27. Further, H&M asserts that Unicolors similarly did not make a mistake of law argument before the Ninth Circuit. Id. at 28. H&M contends that there was no precedent dealing with the mistake of law question. Id. at 29. Accordingly, H&M insists that the Court should allow lower courts time to flesh out this issue. Id. Still, H&M counters that if the Court chooses to reach the mistake of law question, Section 411’s “knowledge” standard encapsulates both actual and constructive knowledge. Id. at 33. Hence, H&M contends, Section 411 itself undermines Unicolors’s mistake of law interpretation. Id. H&M posits that Section 411 necessarily incorporates both actual and constructive, or presumed, knowledge because it fails to explicitly distinguish the two. Id. at 34. Consequently, H&M argues that the relevant question goes to the reasonableness of a copyright registrant’s belief, and not on their subjective knowledge. Id. at 33. Regardless, H&M argues that Section 411 renders mistakes of law considerations irrelevant because courts have traditionally construed that “knowledge” only means knowledge of the facts, not law. Id. at 41.

CONGRESSIONAL INTENT

Unicolors argues that the Court should reject the Ninth Circuit’s reading of Section 411 because, contrary to Congressional intent, it endangers the rights of legitimate copyright holders and empowers willful copyright infringers. Brief for Petitioner at 44. Unicolors points to several particularly complicated portions of the copyright registration application that commonly lead to inadvertent mistakes since most copyright registrants are not lawyers. Id. at 45–47. Unicolors contends that punishing copyright registrants for these mistakes disincentivizes copyright registration. Id. at 48. Further, Unicolors asserts that, by invalidating copyright registrations on the basis of good-faith mistakes, courts subject registrants to a significantly harsh penalty—dismissal of their infringement claim. Id. Unicolors likewise pinpoints the three-year statute of limitations on copyright claims, established in Petrella v. Metro-Goldwyn-Mayer. Id. at 48-49. Unicolors argues that even if the copyright registrant attempts to correct the good-faith mistake, it may be too late to bring a new suit against the infringer. Id. Hence, since Congress did not intend to undermine the entire copyright system, Unicolors concludes that copyright registration with good-faith mistakes is not by itself actionable. Id. at 52.

H&M responds that Congressional intent necessarily supports its reading of Section 411 because Congress used “knowledge,” a legal term of art, to convey an explicit idea. Brief for Respondent at 25. H&M argues that Congress acknowledged that restricting Section 411’s “knowledge” standard to actual knowledge only would discourage copyright registrants from knowing the most basic information needed to fill out a registration application. Id. at 37. H&M contends that through Section 411, Congress intended to maintain a rigorous copyright registration application system, given the valuable benefits that copyright holders enjoy. Id. H&M maintains that Unicolors’s proposal incentivizes irresponsible copyright applicants to seek registration without first checking the accuracy of their included information. Id. at 38. Further, H&M asserts that a scrupulous registration system benefits the public interest. Id. Thus, H&M concludes that it is improbable that Congress acted contrary to the public interest. Id.

Discussion

RISKS FOR LESS SOPHISTICATED PARTIES IN COPYRIGHT LAW

The Copyright Alliance, in support of Unicolors, emphasizes that eliminating the fraud requirement for referral will punish parties who make incorrect legal conclusions about their registrations, even though ambiguities inundate the law. Brief of Amicus Curiae Copyright Alliance in support of Petitioner at 12–13. Moreover, Copyright Alliance suggests that the parties most at risk of having copyrights invalidated would be individual copyright owners and their small businesses employers. Id. at 15. The American Society of Media Photographers (“ASMP”), in support of Unicolors, similarly argues that invalidating copyright registrations based on inadvertent errors poses significant risks to unsophisticated artists and content creators. Brief of Amici Curiae American Society of Media Photographers et al. in support of Petitioner at 13. Specifically, ASMP urges that most creators do not have the knowledge or expertise to make the legal conclusions required to submit accurate applications. Id. ASMP warns that allowing good-faith errors to invalidate copyright registrations will prevent creators from protecting their property rights and recouping statutory damage awards or attorney fees. Id. at 20–21.

The Center for Democracy & Technology (“CDT”), in support of H&M, counters that enforcing proper registrations protects parties with limited resources from being exposed to copyright infringement litigation. Brief of Amici Curiae Center for Democracy & Technology (“CDT”) et al. in support of Respondent, at 7. CDT argues that because typical copyright infringement penalties are statutory damages and attorney fees, financially constrained parties might choose to pay overpriced licensing fees for copyrights rather than risk losing an infringement lawsuit. Id. Moreover, CDT contends that content creators exaggerate concerns about losing copyright protections because those creators who improperly obtain registrations can apply for new, expedited registrations if sued. Id. at 9. CDT concludes that even if a copyright registrant loses its ability to obtain statutory damages and attorney fees, the registrant can still seek the ordinary remedies available in an infringement lawsuit. Id. at 10.

MAINTAINING THE UNDERLYING GOALS OF COPYRIGHT REGISTRATION AND PROTECTING AGAINST “COPYRIGHT TROLLS”

The Copyright Alliance, in support of Unicolors, urges that excessive formality will burden the copyright registration process, which courts should not task with assessing the validity of the underlying property right in question. Brief of Amicus Curiae Copyright Alliance in support of Petitioner at 15. Because the registration process is intentionally streamlined, the Copyright Alliance suggests that invalidating copyrights based on frequent unintentional errors will prompt frivolous litigation over technicalities. Id. Intellectual Property Law Professors (“IP Professors”), also in support of Unicolors, argue that watering down the fraud and materiality standards burdens courts and strains the Copyright Office. Brief of Amici Curiae Intellectual Property Law Professors in support of Petitioner at 23. Similarly, IP Professors note that the patent system experienced frivolous litigation when courts lowered the standard for invalidating patents in cases like Therasene, Inc. v. Becton-Dickinson & Co. Id. IP Professors assert that H&M’s interpretation of § 411(b) risks misuse by copyright infringers. Id. at 27. IP Professors argue that copyright infringers will thus be able to delay legitimate infringement proceedings filed against them by asserting technical defects with the copyright registration. Id.

Professors of Copyright Law (“Copyright Law Professors”), in support of H&M, counter that invalidating registrations only in cases of fraud will damage the copyright registration system through increased litigation. Brief of Amici Curiae Professors of Copyright Law in support of Respondent at 8. Consequently, Copyright Law Professors argue that invalidating all inaccurately registered copyrights will help protect the public from “copyright trolls,” who register large numbers of copyrights and then bring frivolous infringement lawsuits. Id. Copyright Law Professors assert that a proper registration procedure deters trolling by providing the Copyright Office a chance to assess the legitimacy of a potential copyright and by giving the public notice of a filing. Id. Moreover, Copyright Law Professors contend that merely imposing a strict fraud provision for referrals to the Copyright Office will do little to deter copyright trolls because trolls do not always use fraud to obtain copyrights. Id. at 10. Finally, Copyright Law Professors emphasize that fully enforcing copyright registration requirements allows parties to better defend themselves against frivolous lawsuits, thereby protecting the copyright registration system’s aims of fairness and efficiency. Id. at 12–13.