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Purple Pain: Warhol’s Prince Series Isn’t Fair Use of Photographer’s Image

In a case spanning nearly 40 years of art and touching the estates of two of the world’s most well-known artists, the US Court of Appeals for the Second Circuit clarified its position on the application of the fair use doctrine and its protection of transformative works. In doing so, the Second Circuit reversed the district court’s finding of fair use and held that a series of prints and illustrations of the musical artist Prince created by the visual artist Andy Warhol were substantially similar to a 1981 portrait photograph of Prince taken by the photographer Lynn Goldsmith. The Court remanded for further proceedings. The Andy Warhol Foundation for the Visual Arts, Inc. v. Lynn Goldsmith, et al., Case No. 19-2420-cv (2d Cir. Mar. 26, 2021) (Lynch, J.) (Sullivan, J., joined by Jacobs, J., concurring) (Jacobs, J., concurring).

In 1984, Goldsmith’s agency licensed her 1981 photograph of Prince to Vanity Fair for use as an artist reference for creating a rendering of Prince to accompany Vanity Fair‘s profile of the artist. What Goldsmith did not learn until more than 30 years later, shortly after Prince’s untimely death, was that the artist commissioned by Vanity Fair to create the Prince drawing was Andy Warhol, and that Warhol had also used the photograph to create an additional 15 silkscreen prints and illustrations, known as the Prince Series. In 2017, Goldsmith notified The Andy Warhol Foundation for the Visual Arts (AWF), as the successor to Warhol’s copyright in the Prince Series, of her claims of copyright infringement. AWF responded with a lawsuit seeking a declaratory judgment that the Prince Series works were non-infringing or, in the alternative, qualified as fair use of Goldsmith’s photograph. Goldsmith countersued for infringement. Relying on the Second Circuit’s 2013 holding in the copyright case Cariou v. Prince, the district court granted summary judgment to AWF, agreeing with its assertion of fair use and considering the Warhol work to be “transformative” of the original. Goldsmith appealed.

The appeal required the Second Circuit to consider, de novo, the four fair use factors under § 107 of the Copyright Act: (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.

The Court focused its analysis on the first fair use factor, and specifically the extent to which the Prince Series works were transformative of the original. The transformative nature of a work is determined by whether the new work merely supersedes the “objects of the original creation,” or whether it “instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message.” The Court noted that the assessment of a transformative work is less clear where the [...]

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Freeze Frame: EU Copyright Holders Entitled to Restrict Framing

In a case referred by German authorities, the Court of Justice of the European Union (CJEU) resolved a dispute between a visual arts copyright collecting society and a cultural heritage foundation involving a digital library that includes images and links to the institution providing the subject matter. The CJEU affirmed that the principle of the right of communication to the public is subject to technical measures to prevent infringement. VG Bild-Kunst v. Stiftung Preußischer Kulturbesitz, Case C-392/19 (CJEU, 9 March 2021) (Grand Chamber).

Takeaways:

  • Framing and inline linking remain generally permitted. Both forms of linking do not necessarily constitute an act governed by copyright law.
  • Where the copyright holder has adopted or obliged licensees to employ, measures to restrict framing so as to limit access to its work from websites other than that of its licensees, framing must be authorized by the rights holders concerned.

Framing

At the core of this decision is “framing.” The technique of framing consists of dividing a website page into several frames and posting within one of them, by means of a clickable link or an embedded internet link (inline linking), an element from another site in order to hide from users the original environment to which that element belongs.

Background

The decision was based on a request for a preliminary ruling in proceedings between VG Bild-Kunst, a visual arts copyright collecting society in Germany, and SPK, a German cultural heritage foundation. The proceedings concerned VG Bild-Kunst’s refusal to conclude a license agreement with SPK for the use of its catalogue of works unless the agreement contained a provision obliging SPK as a licensee, when using protected work and subject matter covered by that agreement, to implement effective technological measures to prevent third parties from framing such protected work or subject matter.

The German Federal Court of Justice referred the following question to the CJEU for a preliminary ruling:

Does the embedding of a work—which is available on a freely accessible website with the consent of the right holder—in the website of a third party by way of framing constitute communication to the public of that work within the meaning of Article 3(1) of Directive 2001/29 where it circumvents protection measures against framing adopted or imposed by the right holder?

The Decision

The CJEU’s reasoning behind the above ” takeaways” is that by adopting or obliging licensees to employ, technological measures limiting access to works from websites other than those on which the copyright owner has authorized communication to the public of such works, a copyright holder is deemed to have expressed its intention to attach qualifications to its authorization to communicate those works to the public by means of the internet, in order to confine the public for those works solely to the users of one particular website.

Consequently, where the copyright holder has adopted or obliged licensees to employ, measures to restrict framing so as to limit access to its work from websites other than that of its [...]

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Subscription to RSS Feed Doesn’t Trigger Implied-License Defense

The US Court of Appeals for the 11th Circuit affirmed a district court’s grant of judgment as a matter of law against an alleged copyright infringer on its implied-license defense, finding that a blog operator’s publication of entire articles through a really simple syndication (RSS) feed does not give rise to an implied license without substantial evidence showing an intent to grant a license. MidlevelU, Inc. v. ACI Information Group, Case No. 20-10856 (11th Cir. Mar. 3, 2021) (Pryor, J.)

MidlevelU published a free blog designed to attract potential customers in the midlevel healthcare market. MidlevelU made the full text of its blog articles (instead of only headlines and article summaries) available in an RSS feed. ACI is a content aggregator that subscribed to the blog’s RSS feed. ACI copied and published more than 800 entries from MidlevelU’s blog by including those articles in a curated index of abstracts and full-text articles of academic blogs. ACI had no license agreement with MidlevelU.

After discovering the ACI’s activities, MidlevelU registered 50 of its most recent articles for copyright protection with the US Copyright Office. MidlevelU also sent ACI a cease-and-desist letter demanding that its content be removed from ACI’s index. ACI removed the content from the index and coded links to index entries for MidlevelU’s articles so that they would redirect to the MidlevelU’s website. Months later, MidlevelU discovered that, although its content was no longer available on the index website, it still appeared in the website repositories of university libraries. These entries credited ACI as the content’s publisher and directed visitors to view the blog’s full-text content in the “subscribers only” section of the blog aggregator’s website.

MidlevelU sued ACI in federal district court, alleging copyright infringement of the registered articles. ACI asserted an implied-license defense. Relying on the Latimer case, which sets forth the test for implied license in work-for-hire situations, the district court entered judgment as a matter of law in MidlevelU’s favor, finding that there could be no implied license because the ACI could not meet the “creates a work at another person’s request” element of the Latimer test. ACI appealed.

The 11th Circuit found that the district court read Latimer too broadly by applying its holding outside of the work-for-hire context, but the Court nevertheless affirmed the district court’s decision because a jury could not have reasonably inferred from the evidence that the MidlevelU impliedly granted a license to ACI. The Court noted that it had never held that the Latimer test was the only way to prove an implied license. An implied license may arise from circumstances outside of work-for-hire situations: “Creating material at another’s request is not the essence of a license: an owner’s grant of permission to use the material is.”

When an owner clearly manifests consent to use of its copyrighted material, the owner impliedly grants a non-exclusive license. Citing Fields, a district court case in the search-engine web crawler context, ACI argued that an implied license arose because the MidlevelU did [...]

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Ahoy There: If License Terms Not Clearly Intended to Be a Condition Precedent, It’s a Covenant

The US Court of Appeals for the Federal Circuit held that the US Court of Federal Claims erred by failing to consider defendant’s non-compliance with the terms of an implied license, vacating the claims court’s finding of non-infringement and remanding the case for a calculation of damages. Bitmanagement Software GmbH v. U.S., Case No. 20-1139 (Fed. Cir. Feb. 25, 2021) (O’Malley, J.) (Newman, J., concurring).

Bitmanagement Software filed suit against the US government for infringement of its copyrighted graphics-rendering software, BS Contact Geo. The claims court found that Bitmanagement had established a prima facie case of copyright infringement based on the US Navy’s copying of the software onto all computers in the Navy Marine Corps Intranet, but found that the Navy was not liable for infringement because Bitmanagement had granted the Navy an implied license to make such copies. Bitmanagement appealed, arguing that:

  • The claims court erred in finding an implied-in-fact license between the parties.
  • An implied-in-fact license was precluded as a matter of law.
  • Even if an implied-in-fact license existed, the claims court erred by failing to consider whether the Navy had complied with the terms of the license.

The Federal Circuit did not disturb the claims court’s findings with respect to the existence of an implied license authorizing the Navy to make copies of Bitmanagement’s software.

The Federal Circuit further declined to apply its preclusion rule as set forth in Seh Ahn Lee, i.e., that “the existence of an express contract precludes the existence of an implied-in-fact contract dealing with the same subject matter,” because the Navy and Bitmanagement never actually entered into an express contract with one another. Rather, both parties entered into express contracts with a third party, Planet 9, through which they intentionally chose to conduct their business. The express contracts “do not capture or reflect the discussions that occurred between the Navy and Bitmanagement directly,” nor do they cover the topic of the implied license between the parties, “i.e., the license to copy BS Contact Geo onto all Navy computers.”

With respect to Bitmanagement’s claim that the Navy failed to comply with the terms of the implied license, the Court considered whether a term requiring the Navy’s use of Flexera, a license-tracking software, was a condition that limited the scope of the license, or merely a covenant. The Court explained that a term of a license is presumed to be a covenant—addressable only in contract—rather than a condition, unless it is clear that the term was intended to be a condition precedent. Accepting the lower court’s factual findings that “Bitmanagement agreed to [the] licensing scheme because Flexera would limit the number of simultaneous users of BS Contact Geo, regardless of how many copies were installed on Navy computers,” the Court found that the required use of Flexera was a condition of the license. The Court found there was no reason Bitmanagement would have entered into an implied license that allowed mass copying of its software without the use of Flexera because, absent [...]

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A Closed Book: No Past Infringement, No Reading Between the Lines into the Future

The US Court of Appeals for the Sixth Circuit affirmed a district court’s grant of summary judgment in favor of the defendant, finding no current or future copyright infringement. OverDrive Inc. v. Open E-Book Forum dba International Digital Publishing Forum, Case No. 20-3432 (6th Cir. Jan. 27, 2021) (Sutton, J.)

OverDrive is a digital reading platform and a member of International Digital Publishing Forum, a nonprofit trade association dedicated to the development of electronic publishing standards. The Forum has an intellectual property policy, approved by Overdrive and its other members, which provides that while its members retain copyrights in their contributions, they also grant the Forum a license to “reproduce, adapt, distribute, perform, display, and create derivative works” of any copyrighted contributions to EPUB, the leading eBook file format. The license also allowed the Forum to sublicense others to do the same.

In 2016, the Forum entered into an asset-transfer agreement with the World Wide Web Consortium, an international organization dedicated to developing web standards. The agreement granted the Consortium a “license to use” the Forum’s intellectual property to carry out digital publishing activities. The agreement further provided that the Forum would dissolve and its intellectual property rights, including any in EPUB, would be owned by the Consortium. The Consortium began developing improvements to EPUB. Shortly thereafter, the Forum and the Consortium entered into a second agreement, which provided that the Consortium’s license to “use” the intellectual property encompassed a license to “reproduce, adapt, distribute, perform, display and create derivative works.” In the second agreement the Forum agreed to begin the dissolution process only if and only when it transferred its intellectual property to the Consortium.

OverDrive sought a declaratory judgment that the Forum had violated and would violate its copyrights in EPUB. OverDrive claimed that the Forum infringed its copyrights by giving the Consortium access to EPUB. At the close of discovery, the Forum moved for summary judgment, which the district court granted for two reasons. First, it found that the Forum’s license defeated the infringement claim. Second, it found the claim for future infringement was not ripe. OverDrive appealed.

The Sixth Circuit agreed that the “use” license granted by Overdrive gave the Forum the right to “reproduce, adapt, distribute, perform, display and create derivative works” of Overdrive’s EPUB copyrights, and permitted the Forum to use the copyrighted work in these ways. The license also gave the Forum an unrestricted right to grant sublicenses with respect to those same copyrights. In turn, the appellate court concluded that the Forum permissibly sublicensed EPUB to the Consortium, including any of OverDrive’s copyrights in EPUB.

In support of its claims of future copyright infringement, OverDrive argued that once the Forum dissolved, the Consortium would lose its sublicense and its work on EPUB would then constitute copyright infringement. The Sixth Circuit disagreed. The ripeness doctrine two-question inquiry asks:

  • Does the claim arise in a concrete factual context and concern a dispute that is likely to come to pass?
  • What is the hardship [...]

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No Matter How Many Touched the Flowers, Single Infringement Begets Single Statutory Damages Award

In a dispute over the alleged infringement of a floral print textile design, the US Court of Appeals for the Ninth Circuit affirmed the plaintiff’s ownership of a valid copyright, but reversed and remanded for further proceedings on the issue of statutory damages, finding that the Copyright Act permits only a single award of statutory damages where multiple named defendants infringed one work. Desire, LLC v. Manna Textiles, Inc., et al., Case No. 17-56641 (9th Cir. Feb. 2, 2021) (Bennett, J.) (Wardlaw, J., concurring in part, dissenting in part). Judge Wardlaw’s dissent argued that the majority’s ruling limiting statutory damage awards was contrary to controlling Ninth Circuit precedent

Desire, a Los Angeles-based fabric supplier, sued Manna Textiles and several manufacturer and retail defendants for willful copyright infringement when Manna created a fabric design based on Desire’s two-dimensional floral print textile design, which Desire registered with the US Copyright Office in June 2015. Manna sold the copied floral textile design to the other defendants, which created and sold women’s garments made from the fabric.

After a jury trial, the jury found that Manna and two other defendants willfully infringed Desire’s textile design, and that two other defendants innocently infringed the design, and awarded statutory damages ranging from $10,000 to $150,000 against each defendant. The defendants appealed.

The Ninth Circuit readily affirmed the district court’s holding that Desire owned a valid copyright in its textile design, and noted that the district court was correct to extend broad copyright protection to the design. In particular, the Court confirmed that the Desire floral textile was sufficiently original and independently created, and that the originality of the stylized (rather than “lifelike”) flowers warranted broad protection.

The Ninth Circuit dedicated the majority of its opinion to its finding that the district court erred in permitting multiple awards of statutory damages. First, the Court determined that the district court correctly apportioned joint and several liability among the defendants by assessing which defendants were responsible for which acts of infringement based on the defendants’ distribution or sale of the fabric among one another or to end consumers. In short, based on a particular defendant’s upstream or downstream position in the distribution chain, and the “but for” cause of infringement within the chain, a defendant could be jointly and severally liable with certain other defendants, but not all defendants could be jointly and severally liable with all other defendants.

When statutory damages under 17 USC § 504(c)(1) (c)(1) are elected in lieu of actual damages and profits, ) the number of statutory damages awards available in a particular matter depends on the number of individual works infringed and the number of separate infringers. Here, the Ninth Circuit affirmed that there was only one work at issue (Desire’s floral print textile) and considered whether the Copyright Act authorizes multiple statutory damages awards where one infringer is jointly and severally liable with all other infringers, but the other infringers are not completely jointly and severally liable with one another. “No” was [...]

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2020 IP Law Year in Review: Copyrights

Executive Summary

Copyright jurisprudence in 2020 was, in many ways, a study in the scope of copyright protection. While certain courts brought century-year-old precedent to the forefront to interpret the scope of copyrights, other courts ruled overruled 40 years of precedent to even the playing field between popular works and works that are less known.

In the wake of the US Court of Appeals for the Ninth Circuit’s pivotal copyright decision in the Led Zeppelin “Stairway to Heaven” lawsuit, several district courts, within and outside California, have relied on the en banc decision to resolve similar issues related to copyright infringement. The defining scope of the Zeppelin decision will have long-lasting effects within the music industry and beyond.

Copyrights

  1. Unprotected Subject Matter
  2. Copyright Infringement – Damages
  3. Music – The Scope of Protection
  4. Music – Royalty Rates for Digital Transmissions
  5. SCOTUS Update – Google v. Oracle

2021 Outlook

There is plenty to look forward to in 2021. We are certain to see big ripples from the Supreme Court decision in Google v. Oracle; whether it will “upend the world” is another story. Certainly the Court may rule on the extent to which software should be afforded copyright protection and the degree to which fair use applies to software copyrights. One thing is for sure—both sides agree that the future of software innovation is at stake. We are also certain to see a rising tide of cases relying on Skidmore v. Led Zeppelin, as we have already seen with the Katy Perry and Ed Sheeran cases. With the elimination of the inverse ratio rule, less popular songs will have a fairer day in court. Finally, once the vaccines allow for the courtroom doors to open again, we expect to see a flood of copyright infringement jury trials that were put on hold in 2020. Indeed, 2021 is looking like a very busy year.

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2020 IP Law Year in Review: European Issues

Executive Summary

From a German perspective, 2020 saw highly interesting developments that may well have an impact even beyond the borders of Germany. For example, the Federal Court of Justice (Bundesgerichtshof) in Sisvel v. Haier handed down a landmark decision on fair, reasonable and non-discriminatory (FRAND) law. This decision has already affected many FRAND cases tried before lower instance courts. Generally speaking, the FRAND law judgments issued in Germany in 2020 may have more upsides for standard-essential patent (SEP) holders than for implementers of standardised technologies.

A successful constitutional complaint against the German act to ratify the Unified Patent Court (UPC) Agreement delivered a serious blow to the attempt to establish the UPC. However, German Federal Parliament and Federal Council managed, just before the end of 2020, to pass another UPC ratification act, thereby rectifying the mistake that led to the success of the constitutional complaint. The fate of the UPC project remains somewhat unclear, however, in light of newly filed constitutional complaints.

Finally, 2020 saw the United Kingdom officially withdraw from the European Union on 1 February and become a third-party country after a transitional period that ended on 31 December. This event has multiple consequences for EU intellectual property rights, particularly EU trademarks, depending on whether they were filed or registered as of 1 January 2021.

European Issues

  1. Germany and the UPC
  2. German Federal Court of Justice on FRAND Law: Sisvel v. Haier
  3. How Does Brexit Affect European Trademark Rights?

2021 Outlook

Even though there were major developments in Germany regarding FRAND law and the UPC in 2020, these topics are far from being finally settled.

After the Federal Court of Justice’s Sisvel v. Haier decision led to relatively SEP-holder-friendly decisions by the Munich I District Court and the Mannheim District Court, the Düsseldorf District Court referred several FRAND-related questions to the CJEU in November 2020. The expected CJEU decision has the potential to shape the future of FRAND law not just in Germany, but in the whole European Union.

It will be interesting to follow the further development of the UPC project in the light of new constitutional complaints filed against Germany’s new act to ratify the UPC Agreement. These complaints may put another hold on the UPC undertaking. In any event, Germany is not expected to deposit its instrument of ratification very soon because the UPC still needs time to set up its infrastructure, including the appointment of judges.

The question of whether competitors and consumer associations can issue warning letters for violations of the General Data Protection Regulation (GDPR) continued to occupy the courts in 2020, and likely will do so in 2021 as well. According to a decision of the Stuttgart Court of Appeal dated 27 February 2020 (2 U 257/19), competition associations can issue warning letters for violations of the GDPR. The Berlin Court of Appeal previously affirmed this on 20 December 2019 (5 U 9/18) for consumer associations in the [...]

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IP Implications of the Consolidated Appropriations Act, 2021

On December 27, 2020, Congress signed the Consolidated Appropriations Act, 2021, into law. The omnibus act includes new legislation affecting patent, copyright and trademark law. A brief summary of key provisions is provided below.

Patents – Section 325 Biological Product Patent Transparency

42 USC § 262(k) was amended to require that the US Food and Drug Administration (FDA) provide the public with more information about patented biological products. Within six months, the FDA must make the following information available to the public on its Database of Licensed Biological Products or “Purple Book,” and it must update the list every 30 days:

  • A list of each biological product, by nonproprietary name, for which a biologics license is in effect
  • The license date and application number
  • The license and marketing status (as available)
  • Exclusivity periods

The amendment requires that the holders of a license to market a biologic drug now disclose all patents believed to be covering that drug. The new law is designed to prevent errors that could delay biosimilars from coming to the market.

Copyrights – The CASE Act of 2020

The Consolidated Appropriations Act incorporates the Copyright Alternative in Small-Claims Enforcement (CASE) Act of 2020, as well as legislation designed to increase criminal penalties for the unauthorized digital streaming of copyright-protected content. The CASE Act includes revisions to the Copyright Act, 17 USC §§ 101 et seq., with the goal of creating a new venue for copyright owners to enforce their rights instead of having to file an action in federal court.

The Copyright Claims Board

The CASE Act established the Copyright Claims Board (a small claims court), which is designed to serve as an alternative forum where parties may voluntarily seek to resolve certain copyright claims regarding any category of copyrighted work. A party may opt out upon being served with a claim, choosing instead to resolve the dispute in federal court. A party to a proceeding before the Board may, but is not required to, be represented by a lawyer. A party may also be represented by a law student who is qualified under applicable law, and who provides such representation on a pro bono basis. The Board consists of three copyright claims officers who may conduct individualized proceedings to resolve disputes and must issue written decisions setting forth their factual findings and legal conclusions.

Procedural Matters

The Board must follow the law in the federal jurisdiction in which the action could have been brought if filed in federal court. Because jurisdictional conflicts may arise where a dispute may have been brought in multiple jurisdictions, the CASE Act provides that the Board may apply the law of the jurisdiction that the Board determines has the most significant ties to the parties and the conduct at issue.

Although formal motion practice is not permitted, discovery is allowed on a limited basis, including requests for documents, written interrogatories and written requests for admission. The Board may consider evidence, documentary and (non-expert) testimony, without the application of formal [...]

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Government Contractors May Include Restrictive Markings on ‘Unlimited Rights’ Data

The US Court of Appeals for the Federal Circuit reversed an Armed Services Board of Contract Appeals (ASBCA) denial of summary judgment and held that a federal contractor may include certain restrictive markings on “unlimited rights” data supplied to the US government. The Boeing Company v. Secretary of the Air Force, Case No. 19-2147 (Fed. Cir. Dec. 21, 2020) (Lourie, J.)

Boeing entered into two contracts with the US Air Force that required Boeing to deliver technical data to the Air Force with “unlimited rights” pursuant to Defense Federal Acquisition Regulation Supplement 252.227-7013 (-7013 clause). Boeing marked each technical data deliverable submitted to the Air Force with a legend that described Boeing’s data rights pertaining to third parties. The government rejected Boeing’s technical data deliverables in view of the legend Boeing placed on the data, and Boeing requested a Contracting Officer Final Decision (COFD) regarding the propriety of its marking. The Air Force issued a COFD for each contract, confirming the rejection of technical data marked with Boeing’s legend as a nonconforming marking because it was not in the authorized format pursuant to paragraph (f) of the -7013 clause (Subsection 7013(f)).

Boeing appealed the COFDs to the ASBCA and moved for summary judgment, arguing that Subsection 7013(f) only applies to legends that restrict the government’s rights in technical data and is inapplicable to legends that only restrict third-party rights. The ASBCA denied Boeing’s summary judgment motion because Boeing’s legend was not one of the four specific legends authorized under Subsection 7013(f). The ASBCA entered final judgment, and Boeing appealed.

The Federal Circuit reversed. The Court found that the plain language of Subsection 7013(f) makes clear that the two sentences describe the way in which a contractor “may assert restrictions on the Government’s rights,” and agreed with Boeing that Subsection 7013(f) applies only in situations when a contractor seeks to assert restrictions on the government’s rights. The Federal Circuit explained that under the ASBCA’s reading, the first sentence would be “entirely unnecessary” to the regulation, and the Court “cannot disregard the first sentence.” The Court also explained that its interpretation of Subsection 7013(f) is faithful to the overall purpose of the -7013 clause because the US Department of Defense intended the technical rights regulations to govern allocation of data rights between contractors and the government.

The Federal Circuit remanded the case back to the ASBCA for further proceedings on whether Boeing’s legend did in fact restrict the government’s rights.

Practice Note: This decision strengthens contractors’ ability to ensure that data supplied in a federal procurement remain protected from non-governmental access, particularly in light of evolving standards for the protection of “confidential information” pursuant to the Freedom of Information Act from the Supreme Court holding in Food Marketing Institute v. Argus Leader Media, 139 S. Ct. 2356 (2019).




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