IP Law Daily, COPYRIGHT—C.D. Cal.: Disney gets a partial reprieve on CGI technology lawsuit, (Jun 9, 2022)

By Matthew Hersh, J.D.

Deadpool and Guardians of the Galaxy are released from the suit, but claims over Beauty and the Beast remain.

Several Hollywood giants can breathe a little easier now that a federal judge in Oakland, California has reconsidered his earlier decision to expose them to copyright liability for their use of a particular CGI technology in two blockbuster movies. But the court’s decision, finding that the visual technology developer had failed to show a causal nexus between the alleged infringement and cognizable damages for the two movies, still leaves the studios on the hook for potentially considerable damages arising from the use of the technology in Beauty and the Beast (Rearden LLC v. Walt Disney Company, June 8, 2022, Tigar, J.).

The lawsuit arose when Bay Area graphics and visual effects company Rearden sued the studios for alleged purloining a technology, known as MOVA Contour Reality Capture, in roughly half a dozen Hollywood blockbusters. MOVA, first used to depict the reverse-aging of Brad Pitt in The Curious Case of Benjamin Button, uses several computers running copyrighted software that "retargets" the performer’s face onto a 3D model and then tracks the movement, stretching, wrinkling, and other movements of the face while adding enhancing effects. The complaint alleged that a former employee of the company stole the system and transferred it to a Chinese company which then licensed it, through intermediaries, to the studios. Although the allegations in the complaint were narrowed somewhat in two subsequent decisions (here and here) the copyright claims remained.

In August 2021, the trial court declined to dismiss the copyright claims as to three of the movies, finding that the visual graphics company had put forward adequate evidence to suggest that the alleged infringement led to an increase in studio profits. The studios moved to reconsider, leading to this opinion.

Nexus to profits. The court granted the motion to reconsider, finding that with respect to Deadpool and Guardians of the Galaxy, the visuals graphics company had failed to show an adequate nexus to profits.

Some background on the 2021 opinion is helpful to understand the more recent one. The CGI company did not allege that the studios profited from its technology directly, such as by selling or licensing it. Instead, the company claimed that the studios profited indirectly, in the sense that they sold more tickets, and therefore gained more revenue, from the enhancements made to the movies by the technology. Under Ninth Circuit caselaw, a plaintiff seeking such indirect profits must satisfy two tests First, as the court explained, “the copyright claimant must first show a causal nexus between the infringement and the gross revenue,” and second, “once the causal nexus is shown, the infringer bears the burden of apportioning the profits that were not the result of infringement.” Did the CGI developer meet this standard here? The court said “no” as to four of the movies: Terminator: Genisys, Avengers: Age of Ultron, Night at the Museum: Secret of the Tomb, and Fantastic Four. But as to the three others, the answer was “yes.”

In finding the nexus requirement satisfied, the court’s 2021 analysis focused almost exclusively on Beauty and the Beast. Here, the court noted, the CGI company had put forward several categories of evidence to support its claim. For one thing, the court observed, internal emails, talking points, and draft press releases unearthed in discovery showed that the studios intended to highlight the technology as part of their promotional efforts. (A draft release by Marvel, for example, proposed to highlight the “relatively new, hi-fidelity facial capture system called Mova.”) Moreover, the court noted, the evidence showed that the use of MOVA-based clips in the Beauty and the Beast trailer helped that trailer achieve a record-breaking number of views on YouTube, which in turn resulted in larger box office profits. For these and other reasons, the court held, the claims could remain as to those three movies.

But while the court’s decision remains in place for the classic Disney romantic fantasy, the court has now reconsidered its decision with respect to Deadpool and Guardians of the Galaxy, the two movies that received less attention in the 2021 decision. In granting the studios’ motion for reconsideration over these two movies, the court acknowledged, “the evidence regarding these two films stands in stark contrast to the evidence regarding Beauty and the Beast.” Crucially, the court noted, there was no evidence about the use of the technology in promotional clips—and thus no evidence about how those clips could have motivated viewers to watch the films. Nor did the company come up with persuasive evidence, the court held, that the studios’ use of the technology allowed them to reduce their costs during the making of the movie. Thus, summary judgment was granted as to these two movies.

Side note. As it happens, this case continues even as the most recent Hollywood blockbuster, the sequel to Top Gun, famously eschewed CGI technology in many scenes in favor of real-life aerial acrobatics. Ironically, the makers of the sequel were reportedly concerned that fans have become so accustomed to CGI effects that they would consider the real-life action—especially the close-up facial contortions during high-speed air maneuvers—to be less, not more, realistic. As one account in The New York Times put it: “From the safety of theater seats, the audience faces its own challenge: unlearning the computer-generated complacency that’s turned modern blockbusters into bedazzled bores.”

The Case is Nos. 17-cv-04006-JST and 17-cv-04191.

Attorneys: Mark S. Carlson (Hagens Berman Sobol Shapiro LLP) for Rearden LLC. Kelly Max Klaus (Munger Tolles & Olson LLP) for Walt Disney Co.

Companies: Rearden LLC; Walt Disney Co.; Twentieth Century Fox Film Corp.

Cases: Copyright TechnologyInternet CaliforniaNews GCNNews