From the New York Law Journal, a detailed history of HarperCollins v. Open Road and the earlier and similar Rosetta Books case:
Open Road effectively picks up where Rosetta Books left off (even the same firms are representing the respective parties in the district court). Given the significance of the issues, we will briefly summarize the pleadings in the new action and then review how many of the key issues were dealt with a decade ago.
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In its 2001 suit against Rosetta Books for copyright infringement and tortious interference, Random House argued that its publishing agreements with certain authors, dating back to the 1960s, 1970 and 1982, included an exclusive license to publish e-books. Its motion for a preliminary injunction was denied by the district court based on “the language of the contracts and basic principles of contract interpretation.”
Random House, which was founded in the 1920s, was and remains a major publisher of books. In 2001, Rosetta, like Open Road, sought to publish electronically back-list classics licensed to others under longstanding book publishing agreements. Its success depended on the exclusion of electronic book publishing rights from the scope of those agreements.
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The district court’s opinion first discussed the nature of e-books. The court noted that they are created by converting digitized text into a format that computer software could deal with, which readers downloaded to read on a desktop or laptop computer, personal digital assistant or dedicated handheld device. Although the text of an e-book matched its printed counterpart, “various features” were added to e-books such as electronic search, storage and manipulation of electronic notes by the reader, and the capacity to highlight text and to “bookmark” text that could then be accessed through hyper-links. Tables of contents of e-books could jump via hyperlinks to specific chapters and the “font size and style” of the text could be modified to show more or fewer words on a page. Users of e-books also could summon up the definition of any word in the text.
Turning next to the language of the Random House agreements with these authors, the court noted that there were various differences among them, but they all used the phrase “print, publish and sell the work[s] in book form” to convey rights to Random House. The Styron, Parker and one of two Vonnegut agreements also contained non-compete clauses, appearing in various forms, which restricted further use by the authors. Two agreements forbade the authors from publishing material that was reasonably likely to injure the sale of their books by Random House. Another agreement forbade the author from publishing any “edition, adaptation or abridgement” of the work. Two agreements granted Random House the exclusive right to “Xerox” and other forms of copying, “either now in use or hereafter developed.” One agreement granted “microfilming” rights. (The 1982 Parker agreement, however, reserved to the author “mechanical or electronic recordings of the text.”)
Random House contended that the phrase “in book form” meant “to faithfully reproduce the author’s text in its complete form as a reading experience and that since e-books concededly contain the complete text of the work, Rosetta cannot also possess those rights.” It also cited the non-compete clauses as evidence it was granted broad exclusive rights that included e-books.
In construing the scope of the copyright licenses, the district court looked to New York state contract law, which expressly governed the interpretation of each agreement. This required the court to “consider the entire contract and reconcile all parts, if possible, to avoid an inconsistency.” Citing Second Circuit precedents, the district court then focused on how the scope of licensee rights would be determined when “new marketing channels made possible by technologies developed after the licensing contract” came into being.
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The district court decided that “the most reasonable interpretation of the grant” in all of the contracts—to “print, publish and sell the work in book form”—does not include the right to publish as an e-book. It consulted a dictionary published by Random House for the meaning of “book”: “a written or printed work of fiction or nonfiction, usually on sheets of paper fastened or bound together within covers.” References in the agreements to publication in “book club editions, reprint editions, abridged forms and editions in Braille” would have been superfluous if “in book form” embraced all types of books. The court also found that the phrase “is understood in the publishing industry to be a ‘limited’ grant.”
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Further, the court noted that the “new use” in question—electronic digital signals sent over the Internet—is a separate medium from the original use—printed words on paper—and could be manipulated in ways that analog information cannot. Accordingly, Second Circuit precedents that “apply to new uses within the same medium” (such as display of a motion picture on television or videocassette) were inapposite. Instead, the district looked to a New York state appellate decision, Tele-Pac Inc. v. Grainger,7 that distinguished Second Circuit “new use” principles and held that the right to broadcast by television “or any other similar device now known or hereafter to be made known” was “so dissimilar from display on videocassette and videodisc” as to preclude inclusion of video rights.