Video Pipeline v. Buena Vista Home Entertainment

• Decision Date: 26 August 2003
• Docket Number: No. 02-2497.,02-2497.
• Citation: 342 F.3d 191
• Parties: VIDEO PIPELINE, INC. v. BUENA VISTA HOME ENTERTAINMENT, INC. Buena Vista Home Entertainment, Inc.; Miramax Film Corp., Counterclaim-Plaintiffs v. Video Pipeline, Inc., Counterclaim-Defendant Video Pipeline, Inc., Appellant.
• Court: U.S. Court of Appeals — Third Circuit

342 F.3d 191

VIDEO PIPELINE, INC. v. BUENA VISTA HOME ENTERTAINMENT, INC.

Buena Vista Home Entertainment, Inc.; Miramax Film Corp., Counterclaim-Plaintiffs v. Video Pipeline, Inc., Counterclaim-Defendant

Video Pipeline, Inc., Appellant.

No. 02-2497.

United States Court of Appeals, Third Circuit.

Argued January 21, 2003.

Opinion filed August 26, 2003.

As Amended September 19, 2003.

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Paul R. Fitzmaurice (Argued), Lisa A. Sabatino, Pelino & Lentz, Philadelphia, PA, for Appellant.

Gary A. Rosen (Argued), Law Offices of Gary A. Rosen, P.C., Patrick Madamba, Jr., Esquire, Akins, Grump, Strauss, Hauer & Feld, Philadelphia, PA, for Appellee.

Jon A. Baumgarten, William M. Hart, Proskauer Rose LLP, New York, NY, for Amicus Curiae Motion Picture Association of America, Inc.

Before: BECKER,^* NYGAARD, and AMBRO, Circuit Judges.

OPINION OF THE COURT

AMBRO, Circuit Judge.

In this copyright case we review the District Court's entry of a preliminary injunction against Video Pipeline, Inc.'s on-line display of "clip previews." A "clip preview," as we use the term, is an approximately two-minute segment of a movie, copied without authorization from the film's copyright holder, and used in the same way as an authorized movie "trailer." We reserve the term "trailer" for previews created by the copyright holder of a particular movie (or under the copyright holder's authority).

Video Pipeline challenges the injunction on the ground that its internet use of the clip previews is protected by the fair use doctrine and, alternatively, that appellees Buena Vista Home Entertainment, Inc. and Miramax Film Corp.¹ may not receive the benefits of copyright protection because they have engaged in copyright misuse. We reject both arguments, and affirm.

BACKGROUND

Video Pipeline compiles movie trailers onto videotape for home video retailers to display in their stores. To obtain the right to distribute the trailers used in the compilations, Video Pipeline enters into agreements with various entertainment companies. It entered into such an agreement, the Master Clip License Agreement ("License Agreement"), with Disney in 1988, and Disney thereafter provided Video Pipeline with over 500 trailers for its movies.

In 1997, Video Pipeline took its business to the web, where it operates VideoPipeline.net and VideoDetective.com. The company maintains a database accessible from VideoPipeline.net, which contains movie trailers Video Pipeline has received throughout the years. Video Pipeline's internet clients — retail web sites selling home videos — use VideoPipeline.net to display trailers to site visitors. The 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 (because it is streamed the trailer cannot be downloaded to or stored on the visitor's computer). The operators of the web sites from which the trailers are accessed — Video Pipeline's internet clients — pay a fee to have the trailers streamed based on the number of megabytes shown to site visitors. Video Pipeline has agreements to stream trailers with approximately 25 online retailers, including Yahoo!, Amazon, and Best Buy.

As noted, Video Pipeline also operates VideoDetective.com. On this web site, visitors can search for movies by title, actor, scene, genre, etc. When a search is entered, the site returns a list of movies and information about them, and allows the user to stream trailers from VideoPipeline.net. In addition to displaying trailers, VideoDetective.com includes a "Shop Now" button to link the user to a web site selling the requested video. Visitors to VideoDetective.com can also win prizes by playing "Can You Name that Movie?" after viewing a trailer on the site.

Video Pipeline included in its online database 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. It complied with that request.

On October 24, 2000, however, Video Pipeline filed a complaint in the District Court for the District of New Jersey seeking a declaratory judgment that its online use of the trailers did not violate federal copyright law. Disney shortly thereafter terminated the License Agreement.

Video Pipeline decided to replace some of the trailers it had removed at Disney's request from its database. In order to do so, it copied approximately two minutes from each of at least 62 Disney movies to create its own clip previews of the movies. (Again, to distinguish between the previews created under the copyright holder's authority and those created by Video Pipeline, we call the former "trailers" and the latter "clip previews" or "clips." We use the term "previews" generically.)

Video Pipeline stores the clip previews in its database and displays them on the internet in the same way it had displayed the Disney trailers. In content, however, the clip previews differ from the trailers. Each clip preview opens with a display of the Miramax or Disney trademark and the title of the movie, then shows one or two scenes from the first half of the movie, and closes with the title again. Disney's trailers, in contrast, are designed to entice sales from a target market by using techniques such as voice-over, narration, editing, and additional music. Video Pipeline's clip previews use none of these marketing techniques.²

Disney also makes its trailers available online. It displays them on its own web sites in order to attract and to keep users there (a concept called "stickiness") and then takes advantage of the users' presence to advertise and sell other products. Disney has also entered into agreements to link its trailers with other businesses, and, for example, has such a link with the Apple Computer home page.

Video Pipeline 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, later revised, prohibiting Video Pipeline from displaying clip previews of Disney films on the internet. See Video Pipeline, Inc. v. Buena Vista Home Entertainment, Inc., 192 F.Supp.2d 321 (D.N.J.2002). Video Pipeline appeals.³

DISCUSSION

We review for an abuse of discretion the District Court's decision to grant Disney's request for a preliminary injunction. Adams v. Freedom Forge Corp., 204 F.3d 475, 484 (3d Cir.2000). Under this standard, questions of law receive de novo review, and questions of fact are reviewed for clear error. Id.

To obtain a preliminary injunction, a party must show (1) that it is "reasonably likely to succeed on the merits" of its copyright infringement claim and (2) a likelihood that it will suffer irreparable harm if the injunction is denied. Id. Other issues to consider if relevant are (3) the likelihood of irreparable harm to the non-moving party and (4) the public interest. Id. Video Pipeline presents no arguments for issues (3) and (4), so we shall not discuss them, assuming instead that the District Court correctly held that these factors favored issuing the injunction. We therefore address the first two issues.

I. Likelihood of Success on the Merits

Subject to the fair use exception discussed below (and other exceptions not relevant here), copyright owners have the exclusive right (1) to reproduce the copyrighted work, (2) to prepare derivative works, (3) to distribute copies, (4) to perform publicly a copyrighted motion picture, and (5) to display publicly the individual images of a copyrighted motion picture. 17 U.S.C. § 106. To make out a prima facie case of copyright infringement for preliminary injunction purposes, Disney needed to show that the display of the clip previews likely violates any provision of § 106. See 17 U.S.C. §§ 501(a), (b).⁴ The District Court held that Video Pipeline's clip previews likely infringe Disney's exclusive rights under three of § 106's provisions: subsection (2), concerning derivative works; subsection (4), dealing with public performance of motion pictures; and subsection (5), relating to public display of individual images of a motion picture.

On appeal, Video Pipeline challenges the District Court's holding that the clip previews likely violate § 106(2), asserting that the clips cannot properly be classified as derivative works. It does not contest the Court's determination as to subsections (4) and (5). Because proof of a violation of any one subsection of § 106 states a case of illegal infringement, the District Court's decision that Disney made a prima facie showing of infringement on the basis of subsections (4) and (5) would not be affected by any conclusion we might make as to whether the clip previews are derivative in nature. As Video Pipeline's display of excerpts taken from the copyrighted movies clearly comes within the prohibition on public display of motion pictures, and images from a motion picture, we turn to whether Video Pipeline's use should nonetheless be countenanced on the ground that it falls within the "fair use" doctrine.

A. Fair Use

Congress's constitutional power to provide for copyright protection "is intended to motivate the creative activity of authors... by the provision of a special reward, and to allow the public access to the products of their genius after the limited period of exclusive control has expired." Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 429, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984). At times, however, "rigid application of the copyright statute... would stifle the very creativity which that law is designed to foster." Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 577, 114 S.Ct. 1164, 127 L.Ed.2d 500 (1994). When that is the case, the fair use doctrine may be implicated.

Congress codified the judicially created "fair...