A (Brief) Overview of Fourth Estate Public Benefit Corporation v. Wall-Street.com, LLC

A (Brief) Overview of Fourth Estate Public Benefit Corporation v. Wall-Street.com, LLC Blog Post | 107 KY. L. J. ONLINE | July 20, 2018Nicole E. Pottinger^[1]On June 28, 2018 the Supreme Court granted a petition for certiorari to determine when “registration of [a] copyright claim has been made” within the meaning of 17 U.S.C. § 411(a).^[2] Lower courts are split in deciding whether “registration” means when the copyright holder delivers the required application, deposit, and fee to the Copyright Office or only once the Copyright Office acts on that application.Fourth Estate Public Benefits Corporation is a news organization that produces online journalism, often licensing articles to websites and retaining the copyright to the articles.^[3] Wall-Street.com is a news website that obtains licenses to a number of articles produced by Fourth Estate.^[4] The license agreement in question required Wall-Street to remove all of the content produced by Fourth Estate from its website before Wall-Street cancelled its account.^[5] When Wall-Street cancelled its account with Fourth Estate, it continued to display Fourth Estate articles.^[6]Fourth Estate filed a complaint for copyright infringement pursuant to 17 U.S.C. § 501 against Wall-Street.com, alleging that Fourth Estate had filed “applications to register [the] articles with the Register of Copyrights.”^[7] However, the complaint did not specify if the Register of Copyrights had yet to act on the application. Wall-Street.com moved to dismiss the complaint, arguing that the Copyright Act permits a suit for copyright infringement only after the Register of Copyrights approves or denies an application to register a copyright.The lower court, the Court of Appeals for the Eleventh Circuit, held the requirements of § 411(a) to be met only once the Copyright Office acts on that application.  Other circuits have concluded that registration occurs when the owner files the application with the Copyright Office.^[8]  The United States Copyright Office joined a CVSG brief^[9] filed by the U.S. solicitor general, which argued that based on the text, structure, and history of the Copyright Act, a copyright infringement suit may not be filed until the Register of Copyrights has either approved or refused registration of the work.The brief argues that the plain text of § 411(a) “imposes a precondition to filing a claim”^[10] of infringement, which can be satisfied via registration “only when the Register has approved an application”^[11] or when the registration has been rejected.  Further, the brief notes that Petitioner’s interpretation of the Copyright Act is either mistaken,^[12] or “subverts the Congressional purpose” of the third sentence of § 411(a), which permits the Register, after refusing registration, to become a party to civil actions with respect to the issue of registerability.  Finally, it points out that other provisions of the Copyright Act^[13] reinforce the court of appeals’ interpretation, as well as the history of the Copyright Act. The Copyright Act of 1909 stated that “[n]o action or proceeding shall be maintained for infringement of copyright in any work until the provisions of this Act with respect to the deposit of copies and registration of such work shall have been complied with.”^[14] Courts subsequently interpreted that language as “requiring dismissal of any infringement suit that was filed before the owner had obtained a certificate of registration, even if the proper deposit had been made.”^[15]  Even after registration had been refused, a copyright owner was previously required to obtain a writ of mandamus compelling the Register to grant registration of its copyright before instituting an infringement suit. This rule was the backdrop for § 411(a) of the 1976 Act.^[16]Fourth Estate argues that the 11th Circuit misreads the word “registration” alone to refer to the action of the Copyright Office.^[17] They argue that a correct reading refers to the action of the copyright holder, rather than that of the Register.^[18] Fourth Estate also argues that a copyright holder’s rights do not depend on any affirmative government action, therefore registration with the Copyright Office should not be a necessary precondition to enforce rights.^[19] Finally, Fourth Estate argues that the “application” approach does not limit the Register’s power to refuse registration because the “copyright owner still has the right to sue and enforce those rights.”^[20]There are practical consequences of the Supreme Court’s decision. If the “application” approach is adopted, the Copyright Office will no longer play a mandatory role in the road to litigation. While a plain reading of the Copyright Act may indicate registration is not required, it should be. The Copyright Office provides invaluable guidance to the courts regarding copyrightable subject matter due to years of experience.^[21]A further investigation into Fourth Estate, as well as its effect on the registration process and the Copyright Office, may be found in a forthcoming article written by University of Kentucky College of Law Professor Brian L. Frye and student Nicole E. Pottinger._________________________________________________________________________________________________________________________ [1] Online Content Manager, Kentucky Law Journal. Candidate for J.D. 2019, University of Kentucky College of Law; B.A. Centre College, 2016.[2] Section 411(a) allows a copyright holder who filed an application for registration to file an infringement suit if “registration has been refused.” 17 U.S.C. § 411(a).[3] Fourth Estate Pub. Ben. Corp. v. Wall-Street.com, LLC., 856 F.3d 1338, 1339 (2017).[4] Id. [5] Id. [6] Id. [7] Id. [8] See Cosmetic Ideas, Inc. v. IAC/InteractiveCorp, 606 F.3d 612 (9th Cir. 2010) (following the “application” approach, which requires a copyright owner to plead that he has filed the appropriate documents before filing a suit for infringement); see also Positive Black Talk Inc. v. Cash Money Records Inc., 394 F.3d 357, 365 (5th Cir. 2004), abrogated in part by Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154 (2010) and Action Tapes, Inc. v. Mattson, 462 F.3d 1010 (8th Cir. 2006).[9] The Supreme Court, when deciding whether it should grant certiorari in a case, thinks the view of the federal government would be relevant or useful, will call for the views of the Solicitor General (“CVSG”). The U.S. solicitor general will then file a brief in the case expressing the views of the government. Glossary of Supreme Court Terms, ScotusBlog, http://www.scotusblog.com/reference/educational-resources/glossary-of-legal-terms/.[10] Brief for the United States as Amicus Curie at 13, Fourth Estate Pub. Ben. Corp. v. Wall-Street.com, LLC, 138 S. Ct. 720 (2018) (No. 17-571) (citing Reed Elsevier, Inc., 559 U.S. at 166).[11] Id. [12] “But if Congress had intended [for the copyright owner to notify the Register of litigation if the Register refuses registration while the litigation is ongoing], it could have required the copyright owner to provide notice to the Register in order to ‘maintain’ or ‘continue with’ the suit,” rather than “institute.”  Id. at 15.[13] See generally 17 U.S.C. §§ 408(f)(2)–(3), 410(d), 411(a).[14] Act of Mar. 4, 1909, ch. 320, § 12, 35 Stat. 1078.[15] Lumiere v. Pathe Exch. Inc., 275 F. 428, 430 (2d Cir. 1921).[16] Brief for the United States as Amicus Curie at 6, Fourth Estate Pub. Ben. Corp. v. Wall-Street.com, LLC, 138 S. Ct. 720 (2018) (No. 17-571).[17] Reply Brief for Petitioner at 6, Fourth Estate Pub. Ben. Corp. v. Wall-Street.com, LLC, 138 S. Ct. 720 (No. 17-571).[18] Id. [19] Id. at 8.[20] Id. [21] The Copyright Office has 121 years of experience in granting and rejecting applications for federal copyright protection. See U.S. Copyright Office, A Brief Introduction and History, Circular 1a, available at https://www.copyright.gov/circs/circ1a.html

Sales Tax in a Brave New World: A Brief Look at South Dakota v. Wayfair, Inc.

Sales Tax in a Brave New World: A Brief Look at South Dakota v. Wayfair, Inc. Blog Post | 107 KY. L. J. ONLINE | June 24, 2018Bethany Davenport^[1]The case that any student of state and local tax knows is that of Quill Corp. v. North Dakota.^[2] In Quill, the Supreme Court ruled that North Dakota lacked the authority to require a mail-order business to collect and remit a use tax from its purchasers who were residents of North Dakota.^[3] This holding was based on the fact that the business did not have employees or a physical presence in North Dakota.^[4]  A use tax “is a sales tax on purchases made outside one's state of residence for taxable items that will be used, stored or consumed in one's state of residence and on which no tax was collected in the state of purchase.”^[5]  The sales tax in question with any out-of-state seller is going to be a use tax.The ruling in Quill built on the Court’s interpretation of the dormant commerce clause and a reliance on Congress’s power to regulate commerce.^[6] The physical presence test was intended as a limit on a “state[’s] burden[ ] on interstate commerce.”^[7]Since the 1992 decision in Quill, states have not had the authority to require business without a physical presence to collect and remit a use tax for purchases where the consumer is a resident of that state. Quill arguably became archaic in 1995, when commercial use restrictions on the internet were lifted and the internet as we know it today began to emerge.^[8] According to the National Conference of State Legislatures, states lost approximately $23 billion annually because of their inability to tax these online transactions.^[9]Then, South Dakota v. Wayfair, Inc.^[10] happened. On June 21, 2018 the Supreme Court in a 5-4 vote ruled to overturn Quill.^[11] Justice Kennedy, who concurred in Quill,^[12] wrote the opinion of the Court.^[13] The Wayfair holding shifts the burden of taxation from the consumer to the seller in online transactions.^[14] States can now require sellers to collect and remit use taxes, even if they do not have a physical presence in that state.^[15]States have the authority to tax sales.^[16] The collection of the use tax on online transactions before Wayfair relied on consumers to self-report their out-of-state purchases.^[17] The number of consumers self-reporting was “notoriously low.”^[18] Although some online retailers used to advertise these transactions as tax-free transactions, this was never the case.^[19] The states just lacked the capability and resources to track these purchases when it came to individual consumers.Amazon voluntarily started collecting and remitting use taxes in 2017 for states in which it did not have a physical presence.^[20] The dissent in Wayfair touched on voluntary collection and remittance by citing a Government Accountability Office reporting that 80% of taxes that could be remitted to states are already voluntarily done so.^[21] This is likely from large retailers voluntarily tracking sales tax laws. Something to consider is that South Dakota changed its law on sales tax collection in 2016.^[22] Amazon started collecting sales tax from every state regardless of its physical presence in 2017.^[23] Large retailers have likely been paying attention to a changing opinion on how sales and use taxes should be collected.The decision in Wayfair was expected, but overturning decades of stare decisis is still shocking. The Court is putting the ball in Congress’s court to either supersede this decision or to place laws into place that will help administer the headache that will be caused by this change. The headache will likely be felt the sharpest by small online retailers who do not have the manpower to juggle the different rules and regulations for the over 10,000 taxing jurisdiction in the United States.^[24]  How these competing jurisdictions reconcile with an ever-connected commerce stream will be important for our national economyThere have been several resolutions dealing with sales tax in the past decade that have not been taken on by Congress. This includes RTPA which would have required a simplification of sales tax laws^[25] and calls to nationalize the Streamlined Sales and Use Tax Agreement.^[26]Although the Wayfair decision does put an end to the “paradox of condemning interstate discrimination in the national economy” while the Supreme Court upholds it,^[27] there are still many flaws with the functionality of state sales tax._________________________________________________________________________________________[1] Editor-in-Chief, Kentucky Law Journal. University of Kentucky College of Law, J.D. expected May 2019.[2] 504 U.S. 298 (1992).[3] Id. at 317–18.[4] Id.[5] Amy Fontinelle, Use Tax, Investopedia, https://www.investopedia.com/terms/u/use-tax.asp (last visited, June 22, 2018).[6] Quill, 504 U.S. at 313.[7] Id. [8] A Brief History of NSF and the Internet, National Science Foundation, (Aug. 13, 2003),  https://www.nsf.gov/news/news_summ.jsp?cntn_id=103050.[9] Ezra Klien, The long shadow of Quill Corp. v. North Dakota, The Washington Post, (July 9, 2012), https://www.washingtonpost.com/news/wonk/wp/2012/07/09/the-long-shadow-of-quill-corp-v-north-dakota/?noredirect=on&utm_term=.46ce93e70e1c.[10] South Dakota v. Wayfair, Inc, No. 17-494, 2018 U.S. LEXIS 3835 (June 21, 2018).[11] See generally, id.[12] Quill, 504 U.S. at 319.[13] Wayfair, 2018 U.S. LEXIS 3835, at *9.[14] Cf. id. at *30–*31.[15] No. 17-494, 2018 U.S. LEXIS 3835, at *39 (June 21, 2018).[16] Id. at *21.[17] Id. at *10.[18] Id.[19] See Marguerite Reardon, Confused about online sales taxes? You’re not alone, CNET, (Dec. 4, 2013, 12:00 AM), https://www.cnet.com/news/confused-about-online-sales-taxes-youre-not-alone/.[20] Chris Isidore, Amazon to start collecting state sales taxes everywhere, CNN (Mar. 29, 2017, 2:59 PM), http://money.cnn.com/2017/03/29/technology/amazon-sales-tax/index.html.[21] South Dakota v. Wayfair, Inc, No. 17-494, 2018 U.S. LEXIS 3835, at *48–*49 (June 21, 2018).[22] Id. at *11.[23] Isidore, supra note 19.[24] Wayfair, 2018 U.S. LEXIS 3835, at *51.[25] Joseph Bishop-Henchman, Previewing SCOTUS South Dakota v. Wayfair Online Sales Tax Case, The Tax Foundation, (April 10, 2018), https://taxfoundation.org/previewing-scotus-south-dakota-v-wayfair-online-sales-tax-case/.[26] See 12 S. 336, 113th Cong. (2014); 13 H.R. 684, 113th Cong. (2014). The Streamline Sales Tax and Use Agreement aims to simplify state sales and use taxes to increase tax collection by reducing the burden of tax compliance. About Us, Streamlined Sales Tax Governing Board, Inc., http://www.streamlinedsalestax.org/index.php?page=About-Us (last visited June 23, 2018).[27] South Dakota v. Wayfair, Inc, No. 17-494, 2018 U.S. LEXIS 3835, at *43 (June 21, 2018).