Disney, Books and the Copyright Claims Board

Yesterday, the Copyright Claims Board (CCB) handed down a final determination in its longest-running case: Morly Investments Pty Ltd v. The Walt Disney Company, et al. The case, docket number 22-CCB-0015, was the fifteenth filed after the CCB opened its doors in June 2022.

The case pits an Australian author, Rebecca Lim, and her publisher, Morly Investments Pty Ltd (Imprint: The High Street Publishing Company), against one of the largest media corporations in the world, Disney. It features a dispute over a book publishing contract and allegations that Disney continued authorizing sales of Lim’s book after the agreement ended.

The case is an outlier for the CCB in several ways. It involves the active participation of a large corporation, addresses three separate types of copyright infringement, and deals with statute of limitations issues.

As such, the case is worth exploring and understanding. However, to do that, we first need to examine the facts of the case thoroughly. Then, we can see how the case ended up at the CCB and why the board ruled as it did.

Background of the Case

The story begins in 2010. Lim, through her publisher and a series of deals, granted Disney exclusive North American publishing rights to four planned works of young adult fiction, dubbed the Mercy series, including Mercy, Exile, Mace and Fury.

Though Mercy and Exile were published as planned, the relationship began to sour in 2014. Though the two sides disagree on why, both agree that the contract was ended in or before May 2015.

By June 2015, Disney had removed the book from all platforms other than BN.com and Google Play. According to Disney, those services had a more “manual” process that caused the delay.

However, Lim and her publisher continued to track sales of the books. According to a sales report provided by Disney, between June 2015 and March 2022, Mercy sold 86 times, and Exile sold 26 times. This included various distributors, including Amazon, Apple, Google, Barnes & Noble and Hoopla.

Lim and her publisher filed the case in June 2022. In their claim, they sought $7,500 in damages per work, or $15,000 in total damages.

After Disney decided not to opt out, the case entered the “active phase” in December 2022. Since then, the two sides have provided evidence, witness statements and other documents to try and bolster their case.

What the CCB Found

Immediately, Morly’s case had a major problem: The Statute of Limitations.

Under copyright law, an infringed party must file a lawsuit (or claim) within three years after the claim accrues. However, when a claim accrues is still a complicated and hotly debated issue.

Some courts follow the “injury rule,” meaning the claim must be filed within three years of the infringement. Others follow the “discovery rule,” which says it must be filed three years after a plaintiff knew or reasonably should have known about the infringement.

Here, the CCB acknowledged both rules. However, the CCB determined that both rules point to the same time, May 2015. That was when the first alleged infringements occurred, and the claimant was aware of them then.

As such, the CCB found that the case could only examine alleged infringements dating back to June 2019, three years before the case was filed. During that time, only 13 copies of Mercy and no copies of Exile had been sold.

With that in mind, the CCB evaluated the case to see if Disney was liable for direct, contributory or vicarious copyright infringement.

On the issue of direct infringement, the CCB found no evidence that Disney had distributed any of the books itself. Instead, it appeared that the 13 copies at issue were distributed by Hoopla, an “institutional partner” of Disney.

With contributory copyright infringement, the CCB found that there was no evidence that Disney “induced, caused, or materially contributed to Hoopla’s unauthorized acts of distribution.” Though there was evidence Disney was aware Hoopla was selling the book, there was no evidence it did anything to induce the infringement.

Finally, regarding vicarious infringement, the CCB found no evidence that Disney had “the right and ability to supervise Hoopla’s distribution” of the work. There was simply no evidence or information about Disney’s relationship with Hoopla, and the CCB declined to speculate.

As a result, the CCB dismissed the claims against Disney with prejudice, ending the case barring an appeal.

Analysis of the Case

The case is unusual for the CCB for many reasons. First, it’s unusual for a case to involve contract disputes. Second, it’s unusual for a case to involve a large corporation like Disney. Finally, it’s unusual for a case to go on for nearly two years.

However, looking at the complex issues the case dealt with, it’s easy to see why it lasted so long. Contract disputes, the statute of limitations issues, and three potential types of copyright infringement make for a thorny case.

Overall, the CCB did a good job. Though it cited the most recent Supreme Court ruling, which was handed down just four days before this final determination was published, the CCB didn’t get bogged down needlessly in the injury rule/discovery rule debate. Instead, it turned to the Raging Bull case, allowing the case to move forward but only looking back three years.

That filing delay deeply hurt the claimant. Not only did the vast majority of the alleged infringement take place during the excluded time, but much of the relevant evidence was also from then. Key pieces of that evidence were simply gone.

As the CCB pointed out, the burden of proof is on the claimant. While Disney may have some responsibility, there wasn’t enough (or any) evidence to prove it. If the case had been filed before 2018, things might have progressed very differently.

It is a frustrating case. As small as the infringement may have been, it feels like someone should be held responsible for it. However, the evidence simply didn’t support holding Disney accountable. If this case had been filed earlier or targeted Hoopla directly, there might have been a different outcome.

Ultimately, I think the CCB made the right call, even if my sympathies lie with the author and her publisher.

Bottom Line

In the end, this case is a strong reminder of two things. The first is to file cases timely. Even if a case can be filed later, waiting to do so harms the case in countless ways.

The second is to ensure you have solid evidence. As a claimant, the burden of proof is on you, and even if there is a strong reason to suspect infringement, neither the CCB nor a court can do much without proof.

When it’s all said and done, I don’t feel either side is a villain here. Disney clearly did make a good-faith effort to pull the book. It’s unclear why it continued to be sold, and due to the delay in filing the case, we may never know.

Clearly, something went wrong with the contract termination. If nothing else, I hope a case like this can result in better systems that prevent it from happening again. While that is unlikely, it’s easily the best possible outcome.

Still, I am very sympathetic to the author, even though I have to agree with the CCB’s decision on the case.

Header Image: Kaleeb18, CC BY-SA 4.0, via Wikimedia Commons

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