The U.S. Court of Appeals for the Third Circuit, in upholding a preliminary injunction in a suit brought to prevent display of two-minute movie clip previews, declined to find that the copyright holder had misused its copyrights by licensing them only if licensee web sites were not "derogatory to or critical of" the copyright owner (Disney), but did extend the patent misuse doctrine to copyright. Video Pipeline, Inc. v. Buena Vista Home Entertainment, Inc., Case No. 02-2497 (3rd Cir., Aug. 26, 2003).
Video Pipeline compiles movie trailers. To obtain the right to distribute the trailers, Video Pipeline enters into agreements with various entertainment companies. It entered into such an agreement with Disney. In 1997, Video Pipeline took its business to the web, where it maintained a database which contained movie trailers. Site visitors access trailers by clicking on a button labeled "preview" for a particular motion picture. The requested trailer is then "streamed" for the visitor to view.
Video Pipeline included in its online database the trailers it received under the license agreement from Disney. Because the license agreement did not permit this use, Disney requested that Video Pipeline remove the trailers from the database. Video Pipeline complied with that request, but filed a complaint seeking a declaratory judgment that its online use of the trailers did not violate federal copyright law. In response, Disney terminated the license agreement.
Video Pipeline then decided to replace some of the trailers it had removed from its database at Disney’s request with its own trailers of Disney movies (called "clip previews") and amended its complaint to seek a declaratory judgment allowing it to use the clip previews. Disney filed a counterclaim alleging copyright infringement. The district court entered a preliminary injunction, prohibiting Video Pipeline from displaying clip previews of Disney films on the internet. Video Pipeline appealed.
The Third Circuit rejected Video Pipeline’s fair use defense, noting that the clips were being used commercially and found that the clips were not transformative of the Disney work (thus, distinguishing the clips from the thumbnail size pictures in the database at issue in the recent Ninth Circuit case of Kelly v. Arviba Soft Corp.).
Video Pipeline further contended that Disney has misused its copyright in connection with its licensing agreements, which use copyright law to suppress criticism of Disney, alleging that such agreements trigger the copyright misuse doctrine.
The Third Circuit noted that "[n]either the Supreme Court nor this court has affirmatively recognized the copyright misuse doctrine," but acknowledged that other courts of appeals have extended the patent misuse doctrine to the copyright context.
The Third Circuit held that while the "licensing agreements in this case do seek to restrict expression by licensing the Disney trailers for use on the internet only so long as the websites on which the trailers will appear do not derogate Disney, the entertainment industry, etc….we nonetheless cannot conclude on this record that the agreements are likely to interfere with creative expression to such a degree that they affect in any significant way the policy interest in increasing the public store of creative activity."
However, the Third Circuit took the opportunity to "extend the patent misuse doctrine to copyright, and recognize that it might operate beyond its traditional anti-competition context," thereby joining the Fourth and Ninth Circuits.
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