19 March 2004

A couple of opinions of note—

In re Sunterra Corp. (4th Cir. Mar. 18, 2004) is a bankruptcy case with some interesting implications for authors—especially because it creates a clear circuit split with the First Circuit. A software company had retained its copyright in programs and granted Sunterra a nonexclusive license to use the software. Sunterra declared bankruptcy under Chapter 11 (reorganization of a business). The software company claimed that the software license was an executory contract, which could not be assumed (that is, continued) by the reorganized company with the consent of the other party. Of course, the software company had no intention of consenting (or there would be no dispute!). The Fourth Circuit held that 11 U.S.C. § 365(c), in combination with provisions of the Copyright Act, gave the software company the right to consent (or not) to assumption of the license agreement. Contra Institut Pasteur v. Cambridge Biotech Corp., 104 F.3d 489, 493 (1st Cir. 1997). In this day and age of publishers going bankrupt—remember Carol Publishing and Dove Audio?—this creates some interesting questions and possibilities for manipulating the bankruptcy proceedings, especially since the bankruptcy court in Delaware appears to have sided with the First Circuit.

Murray Hill Publ'ns, Inc. v. 20th Century Fox Film Corp. (6th Cir. Mar. 19, 2004) is a copyright infringement action that clarifies the distinction between "prior conception" and the final work, when prior conception constitutes only part of the final work. Murray Hill accused Fox of infringing on its script "Could This Be Christmas" with the (truly wretched) film Jingle All the Way. As the facts played out, though, Fox demonstrated that substantial parts of the film as actually produced were conceived and scripted before it received the script from Murray Hill. The Sixth Circuit held that these circumstances require a two-step analysis. First, the previously-conceived elements (and the corresponding elements in the allegedly infringed work) must be filtered out, just as would be nonprotectable elements. Second, the remaining potentially-infringed elements are analyzed for substantial similarity. In this case, the court found that "no reasonable jury could have found substantial similarity solely on the basis of the six minor elements not so filtered."