Disney Looks to Hold Onto ‘Avengers’ Profits in Dispute Over “Stolen” Technology

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In a long-running lawsuit, the studio argues that its legal adversary can’t establish a link between the use of special effects software and why consumers are buying movie tickets.

Just why do consumers pay to see movies? The question is more than academic. On Wednesday night in a legally adventurous lawsuit over the way that Disney and 20th Century Fox used “stolen” technology for CG characters in blockbuster movies including AvengersBeauty and the Beast, and Night at the Museum: Secret of the Tomb, Disney suggested the reason wasn’t because of any software tool.

“There are limitless reasons why consumers pay to see any particular motion picture, including (among many others) stars, script, costumes, and music,” states Disney is a summary judgment motion.  “It is highly speculative to say which of these factors lead people to pay to see a motion picture, but at least these are things that consumers actually see visually or hear aloud.”

The lawsuit comes from Rearden, a Silicon Valley company asserting ownership over a visual effects technology that captures the facial performance of an actor wearing makeup and processes the data into computer-generated heads of odd-looking characters in films. The genesis of the latest motion is somewhat complicated, but in prequels to the lawsuit, Rearden battled a VFX vendor called Digital Domain 3.0 and a Chinese firm. After prevailing there, Rearden then targeted the customers of the facial capture technology — Disney, Fox, and Paramount — studios that had once outsourced VFX work to Digital Domain 3.0.

This legal dispute involves movies that generated billions of dollars, and now before any trial, a judge is being asked to weigh in on an important aspect of potential damages. Namely, the causal nexus between intellectual property infringement and Disney’s profits.

Disney asserts that Rearden can’t establish a link between the use of software and why consumers are buying movie tickets.

“Rearden has no evidence that consumers decided to see any of the Motion Pictures at issue here because a third-party vendor, months (or more) before the Motion Picture’s release, made temporary RAM copies of software that no consumer saw,” writes Disney’s attorney Ginger Anders, a partner at Munger, Tolles.

Why a focus on RAM, or a computer’s random access memory? To understand this, one must know more about the unusual copyright theories in this case.

Initially, Rearden alleged that it owned the copyright in a software program’s output. and that as such, CG characters in blockbuster films — think Thanos in Avengers or the Beast in Beauty and the Beast — represented unauthorized derivatives. U.S District Court Judge Jon Tigar didn’t like that theory. After hearing from Hollywood studios sounding quite the alarm, he rejected the proposition that the technology at hand performed “the lion’s share of the creativity” needed to generate the fixed work instead of actors and directors.

But Rearden regrouped and came up with a new copyright theory that met a judge’s approval. The plaintiff asserted that the software was 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. Meaning that since Hollywood had the right to supervise its vendors, Disney is partially responsible for what’s on their vendors’ computers.

For those who witnessed Hollywood’s legal attack against piracy at the onset of file-sharing, the turnabout is ironic. Still, though, Rearden is now challenged to transform a preliminary legal win into real money. The plaintiff could elect statutory damages, but that’s just up to $150,000 per infringement. How about some of the profits from Guardians of the Galaxy and Avengers: Age of Ultron? That’s what Disney’s latest motion is attempting to prevent.

“Rearden’s indirect profits claim confuses liability under patent and copyright law,” continues Disney’s motion. “Rearden’s claim is not based on DD3’s copying of the MOVA software into RAM through a routine computer operation, but on the use of that software, which is protected (if at all) by patent law. Had Rearden maintained and proved its patent claims, rather than dismissing them, Rearden might have been able to seek damages based on the use of the software. But Rearden’s remedies under patent law would not include claims to the Motion Pictures’ profits. Instead, damages would be limited to a reasonable royalty or perhaps amounts saved by DD3’s use of MOVA relative to the use of another software tool or no facial motion capture technology at all— which is presumably the reason Rearden dismissed its patent claims.”

Disney then characterizes Rearden’s attempt at indirect profits as “mischief in the extreme” before going into detail about the technology itself, how special effects get incorporated into motion pictures (see, for example, this declaration), and the nitty gritty of the legal arguments.

“Rearden cannot proffer concrete, non-speculative evidence of a causal nexus between the temporary copies of MOVA software—which was not and could not be seen by consumers—and Motion Picture revenues,” concludes Disney. “Even the use of the MOVA software (which is not protected by Rearden’s copyright) was a preliminary process that was superseded by numerous artistic and technical efforts and innumerable hours of additional work even to create a single CG character.”

Here’s the full memorandum. Rearden will be submitting an opposition brief soon, which based on some of the discovery requests, may emphasize how Disney and its creative talent promoted these movies.

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