U.S. Supreme Court Fixes Ninth Circuit’s Test for Mistakes in Copyright Registrations—Unicolors v. H&M (Guest Blog Post)
By Guest Blogger Tyler Ochoa
On February 24, the U.S. Supreme Court held 6-3 that the Ninth Circuit erred in invalidating a copyright registration for failure to comply with the Copyright Office’s “single unit of publication” regulation, where the copyright owner had knowledge of the facts but arguably misunderstood the legal standard. Instead, the Court held that “[l]ack of knowledge of either fact or law can excuse an inaccuracy in a copyright registration.” Unicolors, Inc. v. H&M Hennes & Mauritz, L.P., No. 20-915, slip op. at 2. Accordingly, the Court vacated the Ninth Circuit’s opinion and remanded the case.
In the interests of full disclosure, readers should note that I wrote and submitted an amicus brief, on behalf of myself and four other intellectual property professors, in support of the copyright owner (Unicolors), in this case. I am therefore pleased that the Court, in an opinion by Justice Breyer, recognized that the real issue was tangential to the issue on which the Court had granted certiorari, and that the majority both addressed the real issue and reached the correct result. (The three dissenting judges would have dismissed the petition as improvidently granted, and two of them questioned the majority’s ultimate conclusion.)
(Readers who are already familiar with the facts of the case and the advantages of registration may skip to “Fraud on the Copyright Office” below.)
Factual and Procedural Background
“Unicolors’s business model is to create artwork, copyright it, print the artwork on fabric, and market the designed fabrics to garment manufacturers.” 959 F.3d 1194, 1196 (9th Cir. 2020). In some quarters, Unicolors has a reputation of being a copyright “troll.” (A quick Westlaw search turned up at least 20 cases that Unicolors has brought against other clothing stores.) In this case, Unicolors alleged that international retailer H&M was selling skirts and jackets bearing a design (Xue Xu) that was substantially similar to one of its fabric designs (EH101), albeit in black-and-white (and shades of gray) instead of in color. (A Google search turns up three different pairs of designs with differing degrees of similarity. The one actually litigated in the case (these images come from the complaint) is here.) A jury agreed, finding that H&M had willfully infringed Unicolors’s fabric design.
After the jury verdict, H&M asserted for the first time that Unicolors’ copyright registration was invalid, because it had improperly registered 31 different fabric designs together as works “included in a single unit of publication.” 37 C.F.R. § 202.3(b)(4)(i)(A) (2011). [The same language is now found, with only minor changes, at 37 C.F.R. § 202.3(b)(4) (2021).] The evidence showed that all of the designs were presented to Unicolors’s salespeople on January 15, 2011 (the date of “first publication” in the registration), and that 22 of them “would [then] have [been] placed … in Unicolors’s showroom, making them ‘available for public viewing’ and purchase”; but that nine of them were “confined” designs that were created and/or reserved for a single customer, and typically would not have been made available to the public at the same time. 959 F.3d at 1196. (Note, however, that EH101 was not one of the confined designs, so that it was made available to the public in January 2011.)
The District Court denied H&M’s post-trial motion for judgment as a matter of law, finding that Unicolors did not intend to defraud the Copyright Office, and that it was possible that all of the works were made available to the public on the same day (i.e., that the confined designs may have been “reserved” at a later time). 959 F.3d at 1198. The Ninth Circuit reversed, holding that intent to defraud was not required, as the statute merely required that inaccurate information be included “with knowledge that it was inaccurate.” 17 U.S.C. § 411(b)(1)(A). The Ninth Circuit also held that the 31 designs were not a “single unit of publication” as a matter of law, because they were not first published together as a “singular, bundled unit.” 959 F.3d at 1199-1200.
But did Unicolors “have knowledge” that its application was inaccurate? The Ninth Circuit acknowledged that “this court has never previously addressed what it means to publish multiple works as a ‘single unit.’” Id. At 1199. Nonetheless, in accordance with its precedent (see the Question Presented, below), the Ninth Circuit held that knowledge of the legal standard (the meaning of “single unit of publication” or even the meaning of the word “published”) was irrelevant. All that mattered was that Unicolors had knowledge of the facts that nine of the 31 designs were (likely) offered to the public at a different time (or in a different manner) from the other 22. That was enough for the Ninth Circuit to conclude that Unicolors “had knowledge that [its application] was inaccurate.” In effect, the Ninth Circuit held that an applicant with knowledge of the facts should have known that that the legal standard of “publication” was not satisfied. This is a negligence standard in all but name.
Because the Ninth Circuit concluded that Unicolors submitted an application for registration “with knowledge that it was inaccurate,” it remanded for the District Court to follow the statutory command, to “request the Register of Copyrights to advise the court whether the inaccurate information, if known, would have caused the Register of Copyrights to refuse registration.” 17 U.S.C. § 411(b)(2). (Note that the plain language of the statute requires referral to the Copyright Office “[i]n any case in which inaccurate information described under paragraph (1) is alleged.” Id. (emphasis added). But most courts have sensibly concluded that automatic referrals would lead to unjustified delays and would overwhelm the resources of the Copyright Office. Accordingly, they have concluded that referral ordinarily should be made only after a prima facie case of knowledge and falsity has been demonstrated. See, e.g., DeliverMed Holdings, LLC v. Schaltenbrand, 734 F.3d 616, 625 (7th Cir. 2013).)
Legal Background: Registration
Before the 1909 Act, the author was required to register the title of the work before publication, as a condition of receiving copyright protection. Under the 1909 Act, an author received a federal statutory copyright merely by publishing the work with proper copyright notice. Nonetheless, the 1909 Act required that the work be registered with the U.S. Copyright Office before an infringement lawsuit could be filed. (For more details, see the section “A Brief History of Copyright Registration” in my previous blog post.)
Under the 1976 Copyright Act (effective January 1, 1978), the author receives a federal statutory copyright as soon as an original work is “fixed in a tangible medium of expression.” 17 U.S.C. § 102(a). Registration was still required before filing an infringement suit, however.
When the U.S. joined the Berne Convention, effective March 1, 1989, it had to modify the registration requirement, because Article 5(2) of the Berne Convention provides that “[t]he enjoyment and the exercise of these rights shall not be subject to any formality.” As a result, Congress waived the registration requirement for foreign works, but it retained the registration requirement for domestic works. As amended, the Act now says: “Except as [otherwise provided], … no civil action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title.” 17 U.S.C. § 411(a) (emphasis added). (A “United States work” is a work first published in the United States, or simultaneously published in the United States and any foreign country; or an unpublished work (or a work first published in a nation with whom the United States does not have a copyright treaty) for which all authors are citizens of or domiciled in the United States. 17 U.S.C. § 101.) In addition, for all works (foreign and domestic), registration is required before the infringement commenced (or within three months after first publication) in order to recover statutory damages and attorneys’ fees. 17 U.S.C. § 412.
In 2019, a unanimous Supreme Court confirmed that the Copyright Office must have either registered the work or rejected the application of registration before an infringement lawsuit may be “instituted.” See Fourth Estate Public Benefit Corp. v. Wall-Street.com, LLC, 139 S. Ct. 881 (2019), and my previous blog post.
Legal Background: Fraud on the Copyright Office and Section 411(b)
The doctrine of fraud on the Copyright Office arose by negative implication from cases upholding copyright registrations where inadvertent or immaterial errors were made. In Advisers, Inc. v. Wiesen-Hart, Inc., 238 F.2d 706 (6th Cir. 1956), for example, the court upheld a registration that listed a publication date of December 9, 1953 (the date of distribution to retail customers), when the book had actually been published in August 1953 (when the books were shipped to distributors). The court said: “an innocent misstatement, or a clerical error, in the affidavit and certificate of registration, unaccompanied by fraud or intent to extend the statutory period of copyright protection, does not invalidate the copyright, nor is it thereby rendered incapable of supporting an infringement action.” Id. at 708 (emphasis added).
The converse proposition, that a registration may be invalidated for fraud on the Copyright Office, arose from the logical inference that an intent to defraud can be inferred from the intentional submission of false and material information on the application for registration. See, e.g., Russ Berrie & Co. v. Jerry Elsner Co., 482 F. Supp. 980, 988 (S.D.N.Y. 1980): “The knowing failure to advise the Copyright Office of facts which might have occasioned a rejection of the application constitute[s] reason for holding the registration invalid and thus incapable of supporting an infringement action.” Id. at 988. Accord, Eckes v. Card Prices Update, 736 F.2d 859, 861-62 (2d Cir. 1984); Masquerade Novelty, Inc. v. Unique Industries, Inc., 912 F.2d 663, 667 (3d Cir. 1990).
But courts didn’t always get it right. In one prominent example, the Second Circuit invalidated copyrights on six animal costumes that had been registered as “soft sculptures” for fraud on the Copyright Office. Whimsicality, Inc. v. Rubie’s Costume Co., 891 F.2d 452 (2d Cir. 1989). On remand, however, the plaintiff submitted an affidavit from a Copyright Office official, explaining that it was the Office’s customary practice to register animal costumes with separable artistic features as “soft sculptures,” and that it had not been misled. Based on this new evidence, the district court granted relief from the judgment under Federal Rule of Civil Procedure 60(b)(2). Whimsicality, Inc. v. Rubie’s Costume Co., 836 F. Supp. 112, 115 (S.D.N.Y. 1993).
In 2008, Congress added 17 U.S.C. § 411(b) to the Copyright Act. It provides:
(b) (1) A certificate of registration satisfies the requirements of this section and section 412, regardless of whether the certificate contains any inaccurate information, unless —
(A) the inaccurate information was included on the application for copyright registration with knowledge that it was inaccurate; and
(B) the inaccuracy of the information, if known, would have caused the Register of Copyrights to refuse registration.
(2) In any case in which inaccurate information described under paragraph (1) is alleged, the court shall request the Register of Copyrights to advise the court whether the inaccurate information, if known, would have caused the Register of Copyrights to refuse registration.
At the time, the Copyright Office stated that this language was intended to codify the doctrine of fraud on the Copyright Office. U.S. Copyright Office, Annual Report of the Register of Copyrights, Fiscal Year Ending September 30, 2008, at 12–13 (2008). The legislative history indicated that 411(b) was one of “a number of changes to copyright and trademark law that will enhance the ability of intellectual property rights holders to enforce their rights.” H.R. Rep. No. 110-617, at 23 (2008) (emphasis added). It also explained that Section 411(b) was intended to deter claims “in litigation that a mistake in the registration documents, such as checking the wrong box on the registration form, renders a registration invalid and thus forecloses the availability of statutory damages.” Id. at 24. To support the change, the House Report cited a case specifically holding that “[a]bsent intent to defraud and prejudice, inaccuracies in copyright registration do not bar actions for infringement.” Id. at 24 n.15.
The Question Presented
After the enactment of section 411(b), courts disagreed on how it should be interpreted. Noting the legislative history described above, the Eleventh Circuit held that § 411(b)(1) “codifies the defense of Fraud on the Copyright Office,” and therefore it requires a showing of “intentional or purposeful concealment of relevant information” to render a registration invalid. Roberts v. Gordy, 877 F.3d 1024, 1029-30 (11th Cir. 2017). Most courts (including several in the Ninth Circuit) agreed, simply citing their prior case law. But in Gold Value Int’l Textile v. Sanctuary Clothing, 925 F.3d 1140, 1147 (9th Cir. 2019), the Ninth Circuit rejected an argument that fraud or intentional concealment was required, saying it was “foreclosed by the plain language of § 411(b), which does not require a showing of fraud, but only that the claimant included inaccurate information on the application ‘with knowledge that it was inaccurate.’” The Ninth Circuit’s opinion in the Unicolors v. H&M case cited Gold Value and reiterated that “we recently clarified that there is no such intent-to-defraud requirement.” 959 F.3d at 1198.
Accordingly, the cert. petition in Unicolors v. H&M stated the first “Question Presented” as: “Did the Ninth Circuit err 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?” (emphasis added). That is the Question on which the Supreme Court granted the writ of certiorari.
Of course, the Ninth Circuit cases overlook the fact that “intent to defraud” is typically proved by circumstantial evidence, namely, submission of inaccurate (i.e., false) information with knowledge that the information was inaccurate. Saying that the “plain language” of the statute only requires falsity and knowledge, rather than an intent to defraud, is a false dichotomy, because submitting false information with knowledge of its falsity is the evidence from which an intent to defraud is inferred. The only room for difference between the Ninth Circuit’s statement and the Eleventh Circuit’s standard is whether an intent to defraud also requires knowledge of the relevance or materiality of the false information. Here, the statutory language is clear that materiality is now to be determined solely by reference to the Copyright Office.
When the Unicolors v. H&M case was briefed and argued, it became clear that the real problem with the Ninth Circuit’s opinions in Gold Value and Unicolors was not the dubious statement that falsity and knowledge is somehow different from intent to defraud. Instead, the real problem was the Ninth Circuit’s interpretation of the word “knowledge.” In Gold Value, the Ninth Circuit explained:
Fiesta argues that it did not know that the sale of samples to its customers constituted publication as a matter of law under the Copyright Act, and therefore, it did not have the requisite knowledge or fraudulent intent. The district court characterized Fiesta’s position as one of “ignorance of the law,” which is “no excuse” …
[We agree that] “the term ‘knowingly’ does not necessarily have any reference to a culpable state of mind or to knowledge of the law. As Justice Jackson correctly observed, ‘the knowledge requisite to knowing violation of a statute is factual knowledge as distinguished from knowledge of the law.’” [citation omitted]
Gold Value, 925 F.3d at 1146, 1147. Thus, because Fiesta was aware of the facts that it had sold 190 yards of fabric bearing the copyrighted design before registration, the Ninth Circuit affirmed the District Court’s finding the Fiesta had “knowledge” that the design had been “published” and that the registration as an “unpublished” work was therefore invalid.
In Unicolors v. H&M, the District Court “found no evidence” that “Unicolors intended to defraud the Copyright Office” when it registered the 31 designs as “included in a single unit of publication.” 959 F.3d at 1199. In accordance with its precedent in Gold Value, the Ninth Circuit held that knowledge of the legal standard (the meaning of “single unit of publication”) was irrelevant. All that mattered was that Unicolors had knowledge of the facts that nine of the 31 designs were not offered to the public at the same time (or in the same manner) as the other 22. That was enough for the Ninth Circuit to conclude that Unicolors “had knowledge that [its application] was inaccurate.” In effect, the Ninth Circuit held that an applicant with knowledge of the facts should have known that that the legal standard of “publication” was not satisfied. This is a negligence standard in all but name.
To its credit, the Supreme Court majority in Unicolors recognized that “[t]he question before us concerns the scope of the phrase ‘with knowledge that it was inaccurate.’” [Slip op. at 2] For that reason, the three dissenters (Thomas, joined by Alito and joined in relevant part by Gorsuch) would have dismissed the petition as improvidently granted:
In its petition for certiorari, Unicolors asked us to decide a question on which the Courts of Appeals were split: whether §411(b)(1)(A)’s “knowledge” element requires “indicia of fraud.” … Yet now, after having “persuaded us to grant certiorari on this issue,” Unicolors has “chosen to rely on a different argument in [its] merits briefing.” [citations omitted]
Dissenting. op., at 1. The majority responded that “[f]raud typically requires ‘[a] knowing misrepresentation . . . of a material fact,” slip op. at 8, so that “the ‘knowledge’ question that the parties have argued, and which we decide, was a ‘subsidiary question fairly included’ in the petition’s question presented.” Slip op. at 9.
The Majority Opinion
Having divined the correct question, the Court then gave the correct answer:
The Court of Appeals for the Ninth Circuit believed that a copyright holder cannot benefit from the safe harbor and save its copyright registration from invalidation if its lack of knowledge stems from a failure to understand the law rather than a failure to understand the facts. In our view, however, §411(b) does not distinguish between a mistake of law and a mistake of fact. Lack of knowledge of either fact or law can excuse an inaccuracy in a copyright registration. [Slip op. at 2]
After reciting the facts, Justice Breyer’s majority opinion began with an analogy: suppose John sees a red bird and says “that is a cardinal.” If the bird is instead a scarlet tanager, John’s statement is inaccurate. If John did not see the black wings, he has made a mistake of fact. If John saw the black wings, but did not know the difference between a cardinal and a scarlet tanager, he has made a mistake of labelling. Justice Breyer analogized a mistake of law (such as the definition of “single unit of publication”) to a mistake of labelling. [Slip op. at 4]
The Court then quoted a dictionary definition of “knowledge” as “the fact or condition of being aware of something.” [Slip op. at 5] Applying this definition, it concluded:
If Unicolors was not aware of the legal requirement that rendered the information in its application inaccurate, it did not include that information in its application “with knowledge that it was inaccurate.” §411(b)(1)(A) (emphasis added [by the Court]). Nothing in the statutory language suggests that this straightforward conclusion should be any different simply because there was a mistake of law as opposed to a mistake of fact. [Slip op. at 5]
The Court reasoned that because “[r]egistration applications call for information that requires both legal and factual knowledge,” such as whether a work is or is not “made for hire,” is or is not “published,” and is or is not a “compilation or derivative work,” [slip op. at 5]
Inaccurate information in a registration is therefore equally (or more) likely to arise from a mistake of law as a mistake of fact. That is especially true because applicants include novelists, poets, painters, designers, and others without legal training. Nothing in the statutory language suggests that Congress wanted to forgive those applicants’ factual but not their (often esoteric) legal mistakes. [Slip op. at 5-6]
The Court also pointed to several recent amendments to Title 17 where Congress specified both “knowledge” and “having reasonable grounds to know,” drawing the negative inference that where Congress used only the former, it presumably meant actual knowledge rather than constructive knowledge. [Slip op. at 6] (By contrast, two of the three dissenters, Justices Thomas and Alito, suggested that “knowledge” ordinarily is satisfied by either actual or constructive knowledge, and it saw the language in other parts of Title 17 as confirming, rather than departing from, that general rule. Dissenting op. at 5-6. Justice Gorsuch did not join this part of Justice Thomas’s dissenting opinion.)
Next, the Court observed that prior case law “overwhelmingly held that inadvertent mistakes on registration certificates did not invalidate a copyright [registration] and thus did not bar infringement actions.” [Slip op. at 6] “When Congress codifies a judicially defined concept, it is presumed, absent an express statement to the contrary, that Congress intended to adopt the interpretation placed on that concept by the courts.” [Slip op. at 7] In a subtle dig at the ardent textualists, Justice Breyer added that “those who consider legislative history will find that history persuasive here” [id.], citing the evidence discussed previously [see Fraud on the Copyright Office, above].
Finally, the Court noted that “the legal maxim that ‘ignorance of the law is no excuse’ … normally applies where a defendant has the requisite mental state in respect to the elements of [a] crime but claims to be unaware of the existence of a statute proscribing his conduct.” [Slip op. at 8] Therefore, “[i]t does not apply in this civil case concerning the scope of a safe harbor that arises from ignorance of collateral legal requirements.” [Slip op. at 8, emphases added]
Impact of the Opinion
At first glance, it would appear the Supreme Court’s opinion makes it harder for copyright defendants to invalidate copyright registrations, and therefore makes it easier to copyright plaintiffs to bring infringement lawsuits and to recover statutory damages and attorneys’ fees. But the opinion only has that effect in the Ninth Circuit, where the Gold Value and Unicolors v. H&M decisions had made it significantly easier for copyright defendants to invalidate copyright registrations than in other circuits. The Supreme Court’s decision therefore simply restores the status quo that existed in the Ninth Circuit before 2017; and it brings the Ninth Circuit back into line with the other circuits, which had sensibly concluded (based on the legislative history) that section 411(b) essentially codified the judicial doctrine of “fraud on the Copyright Office.” For that reason, the Supreme Court’s decision should be praised both for addressing the correct question and for reaching the correct answer.
A different group of IP professors filed an amicus brief in support of H&M, arguing that the Ninth Circuit’s rule stiffening registration requirements would make it harder for copyright “trolls” to bring unjustified lawsuits. Perhaps that is true, but only because it would make it harder for all copyright owners to bring lawsuits (and to recover statutory damages), whether “trolls” or not and whether “unjustified” or not. Does the opinion make it too difficult to invalidate inaccurate registrations? The majority opinion addressed this concern by noting that “willful blindness” could substitute for actual knowledge. [Slip op. at 8] As the Court observed:
Circumstantial evidence, including the significance of the legal error, the complexity of the relevant rule, [and] the applicant’s experience with copyright law, … [may] lead a court to find that an applicant was actually aware of, or willfully blind to, legally inaccurate information. [Slip op. at 8]
“Willful blindness” is a difficult standard to meet; it requires that the applicant subjectively believed that its interpretation of the law was incorrect, but that it deliberately avoided learning the correct answer. See Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. 574 (2011). Nonetheless, permitting “willful blindness” and circumstantial evidence significantly narrows the gap between the majority’s “actual knowledge” standard and the too-lenient “constructive knowledge” (i.e., should have known) standard advocated by the Ninth Circuit and two of the dissenters. It is also a much more appropriate standard in the context of a statute that was designed to codify the doctrine of “fraud on the Copyright Office” and (if anything) to make it harder, not easier, to invalidate copyright registrations.
One can look to the analogous doctrine of fraud on the Patent Office (also known as “inequitable conduct”) for a cautionary tale. Over many years, the Federal Circuit had gradually loosened the requirements for pleading fraud on the Patent Office, and at one point it expressly embraced a standard that the applicant “knew or should have known” of the importance of omitted prior art. Although the Federal Circuit “embraced these reduced standards for intent and materiality” with the best of intentions, “to foster full disclosure to the PTO,” Therasense, Inc. v. Becton-Dickinson & Co., 649 F.3d 1276, 1288, (Fed. Cir. 2011) (en banc), the Therasense opinion vividly described what happened next: “Left unfettered, the inequitable conduct doctrine … plagued not only the courts but also the entire patent system.” Id. at 1289.
Because the doctrine focuses on the moral turpitude of the patentee with ruinous consequences for the reputation of his patent attorney, it discourages settlement and deflects attention from the merits of validity and infringement issues…. Inequitable conduct disputes also increase the complexity, duration and cost of patent infringement litigation that is already notorious for its complexity and high cost. [Id. at 1288.]
Summarizing these and additional negative consequences, the Federal Circuit concluded:
While honesty at the PTO is essential, low standards for intent and materiality have inadvertently led to many unintended consequences, among them, increased adjudication cost and complexity, reduced likelihood of settlement, burdened courts, strained PTO resources, increased PTO backlog, and impaired patent quality. This court now tightens the standards for finding both intent and materiality in order to redirect a doctrine that has been overused to the detriment of the public.
Id. at 1290 (emphasis added). By tightening the standard for finding intent in submitting applications for copyright registration, the Supreme Court’s decision in Unicolors avoided recreating this problem in the analogous context of fraud on the Copyright Office.
Overall, the Unicolors opinion will not significantly change the practice and importance of copyright registration, except in the Ninth Circuit. Nonetheless, it will be welcomed by copyright owners, because it corrects the Ninth Circuit’s error in presuming that applicants for registration (including laypeople) understand the meaning of legal terms of art. And it should be welcomed by the public, because it keeps the focus of copyright litigation where it should be: on the works themselves, rather than (except in rare instances) on the conduct of the copyright owner in registering its works with the Copyright Office.