Judge Allows Copyright Claims Over Technology Used on Disney's 'Avengers'

Disney, Paramount and Fox must contend with a lawsuit over "stolen" technology. The judge looks at past piracy cases and finds this situation more comparable to Napster than Google.

Is it possible that some of the entertainment industry's biggest blockbusters from the past decade — Guardians of the Galaxy, Avengers: Age of Ultron and Deadpool, among others — could be wiped from this Earth? That might sound an outlandish and alarmist prospect, but one VFX firm is alleging that Hollywood has used "stolen" facial motion-capture technology and is demanding that these motion pictures literally be impounded and destroyed. On Monday, a federal judge gave this plaintiff a green light to go after Disney, Paramount and Fox for vicarious and contributory copyright infringement.

Rearden, founded by Silicon Valley entrepreneur Steve Perlman, was previously involved in a complicated fight against Digital Domain 3.0 and the Chinese company Shenzhenshi Haitiecheng Science and Technology Co., Ltd. Ultimately, Rearden came out ahead on tech known as the MOVA Contour Program, which has been used to capture the motion of the human face to create computer graphic images in movies.

What happened next was follow-up lawsuits against various studios that had contracted with Digital Domain to use the technology.

In February, U.S District Court Judge Jon Tigar allowed Rearden to move forward with its claims that the studios violated trademarks as well as claims the studios induced patent infringement. However, Tigar rejected copyright claims in his earlier decision.

The following month, Tigar amended the complaint and tested a new copyright theory. This one generates more success.

Originally, Rearden alleged that it owned the copyright in a software program's output and that as such, CG characters in blockbuster films represented unauthorized derivatives. Tigar didn't find it plausible that the MOVA Contour output is created by the program without any substantial contribution from the actors or directors. The issue came down to who was performing "the lion’s share of the creativity" in the facial motion capture.

In the amended version, Rearden focused less on the output and more on the software. The plaintiff asserted that its program is an original literary work of authorship fixed in a tangible medium of expression when stored on computer hard drives. Rearden looked to hold the studios as vicariously responsible for infringement because the studios are "in a position to police DD3 and/or had the right and ability to supervise and control DD3's performance."

The defendants responded that Rearden hadn't plausibly alleged they had the right to stop or limit infringing conduct, which had Tigar examining whether the studios were more like Google or Napster. With regard to Google, in the case of Perfect 10 v. Amazon, the 9th Circuit noted that Google had the contractual right to terminate Perfect 10's "adsense partnership" but this did not add up to any right by Google to stop direct infringement by third-party websites. With regard to Napster, in A&M Records v. Napster, the peer-to-peer music company had a closed system requiring user registration and could terminate its users' accounts and block their access. The 9th Circuit found this was enough to give Napster the right and ability to prevent its users from engaging in infringing activity.

"Here, the Studios are more similarly situated to the swap meet operator and Napster," writes Tigar in his order Monday. "Rearden alleges that DD3 provided services pursuant to contracts that gave each studio 'the unrestricted right to cancel any portion of the Services.' Thus, Rearden alleges that the Studios had the right to prevent DD3 from engaging in the infringing activity because they had the unrestricted right to cancel the use of the MOVA Contour program. Unlike in Amazon.com, where Google only had the right to terminate the Adsense partnership — which would not have stopped direct infringement by third parties — the studios could have ended the direct infringement by cancelling the use of the MOVA Contour program."

The judge also says that Rearden has, at least at this stage, made a plausible showing that the studios received direct financial benefit in exploitation of Rearden's copyright in the Contour program.

The decision represents a blow to the studios, which had warned the judge of consequences. Repeatedly throughout the litigation, for instance, defendants' attorney highlighted how under plaintiff's theories, Microsoft could be deemed the owner of what authors create in Word. The use of technology shouldn't add up to infringement, argued Kelly Klaus of Munger Tolles & Olson.

Steve Berman, the attorney representing Rearden, has been aggressive. On Monday, he gets the judge to sign off on both vicarious and contributory copyright claims.

For the latter, Rearden has to show that the studios had knowledge of someone else's infringing activity, and induced, caused or materially contributed to that infringing conduct.

Tigar notes that allegations that Disney performed due diligence on intellectual property when it contracted with Digital Domain and knew its vendor didn't have the right to provide services and works are "unquestionably thin, but they are enough to survive a motion to dismiss."

The judge also says it "is not implausible" that Fox and Paramount became aware of the infringing situation when reviewing color and grayscale Contour output works consistently and extensively marked with Rearden's copyright notice.

"Defendants argue that 'hiring a vendor does not materially contribute to the vendor’s infringing use of unlicensed software,'" continues the judge. "But, Rearden does not simply allege that Defendants hired a vendor. It alleges Defendants directed that vendor to use the copyrighted MOVA program by contracting with DD3 to use the MOVA Contour program."

The judge says the truth will be tested at a later stage. On a brighter note for the studios, they were once again able to fend off allegations of direct patent infringement. Here's the judge's order.