IP Law Daily, COPYRIGHT NEWS: Is knowledge of legal and factual inaccuracies in a copyright registration the same as an intent to defraud?, (Apr 24, 2023)

By Matthew Hersh, J.D.

A new petition asks the Supreme Court to weigh in.

The Supreme Court should clear up once and for all the question of whether a court may refer to the Register of Copyrights the validity of a copyright registration even without an allegation that the registrant intended to defraud the Register, a new petition for certiorari asserts. The petition, asking the Court to take another bite at a case it decided just two years ago, aims to address what it contends to be a question left open in the earlier decision (H&M Hennes & Mauritz, L.P. v. Unicolors, Inc., April 17, 2023, Dkt. No. 22-1020).

Background. The lawsuit, which has an extensive history already, turns on what may be the fine distinction between knowledge of a factual error, knowledge of a legal error, and an intent to defraud. Prior to 2008, a defendant could ask a court to invalidate a copyright registration on which the plaintiff’s claim was based. But most courts declined to do so merely because a registrant had made an innocent mistake in the registration process. To the contrary, the courts developed over time a doctrine that became known as “fraud on the Copyright Office.” Under that doctrine, only an intentional defrauding of the Office, and not an inadvertent mistake, could invalidate a registration.

Congress stepped into the issue in 2008, when it enacted Section 411(b) of the Copyright Act. Under the Act as amended, courts no longer had the responsibility to decide whether to invalidate copyright registrations based on inaccuracies. Instead, the law required courts, when faced with an allegation of a known inaccuracy, to refer the matter to the Register of Copyright so that she could decide whether “the inaccuracy of the information, if known, would have caused [her] to refuse registration.”

But that language raised more questions than answers. For one thing, was this legislation intended merely to codify the old fraud on the Copyright Office doctrine, or did it intend to set out a different test? Moreover, just what kind of inaccuracy did a defendant have to allege in order to obtain referral? The referral was triggered by an allegation (though in reality, most courts require some threshold of showing beyond a mere allegation) that “the inaccurate information was included on the application for copyright registration with knowledge that it was inaccurate.” But did that mean the registrant merely had to know of a factual accuracy in the registration? Or did she have to know that the inaccuracy caused the registration to be legally ineligible as well?

The Supreme Court answered the second question definitively in Unicolors, Inc. v. H&M Hennes & Mauritz, L.P.,handed down in 2021. In that case, clothing retailer H&M alleged that a fabric designer, Unicolors, knowingly put inaccurate factual information on its registration. (The alleged inaccuracy was that the designer combined multiple designs within a single registration even though, contrary to Copyright Office regulations, the works were not published at the same time.) The Ninth Circuit found that referral to the Register was warranted, but the Supreme Court reversed. The court of appeals had wrongly found that a referral was appropriate, the Supreme Court found, based solely on its conclusion that the fabric designer knew that the fabrics had not been published simultaneously. But that was not enough, the Court found. Rather, the Court reasoned, Section 411(b) require not only knowledge that the designer knew of the factual inaccuracy, but also knew of the legal significance of that inaccuracy as well.

That did not end the matter—by a longshot. The Ninth Circuit, on remand, was tasked now of deciding whether the fabric designer was aware of its legal error as well. But could it decide this itself or did it have to remand to the district court? The court could do the former, it found. The district court, the court of appeals noted, had already expressly concluded that H&M failed to make “any showing that Unicolors intended to defraud the Copyright Office.” And the standard handed down by the Supreme Court—requiring knowledge of a factual as well as a legal error—was tantamount to the old common law “fraud on the Copyright Office doctrine.” Thus, the district court’s determination would stand, and no referral was required.

Petition of certiorari. H&M’s petition asks the Supreme Court to step into the fray once again. The question raised in the petition, put simply, is whether knowledge of legal and factual errors is tantamount to fraud. The Ninth Circuit got this wrong, H&M argues in the petition. “Fraud does not just require a knowing misrepresentation,” the clothing retailer argues, but “a knowing misrepresentation . . . made to induce another to act to his or her detriment. Thus, in adopting a fraud on the Office doctrine, the retailer argued in its petition, the court of appeals “invoked an erroneous three-part test of its own making, and with no grounding in this Court’s decision.”

The Ninth Circuit further got it wrong, the petition argues, because it read into the Supreme Court’s decision a rule that the Court did not decide. When the case was before the Court the first time, the retailer noted, the fabric designer had originally asked the Court to decide whether Section 411(b) imposed a “fraud on the Office” doctrine. But it then drew back from this argument and, instead, simply asked the Court to decide the narrower issue of whether knowledge of a legal error—in addition to a factual error—was required. So if the Court did not have the question in front of it, the retailer argued, it still remained an open one even after the 2021 decision. “This Court’s intervention is thus needed to establish once and for all that intent to defraud the Copyright Office is not the proper level of scienter to apply to the §411(b)(1) safe harbor, the petition argues. “This case is the ideal vehicle for the Court to make this clarification.”

The Case is Dkt. No. 22-1020.

Attorneys: Peter K. Stris (Stris and Maher, LLP) for H&M Hennes & Mauritz, LP.

Companies: H&M Hennes & Mauritz, LP; Unicolors, Inc.

News: Copyright GCNNews