Keeping Tabs on the Ninth Circuit
December 31, 2020 - This Week at the Ninth

This Week at The Ninth: Dr. Seuss and Constitutional Cures

This Week at The Ninth:  Dr. Seuss and Constitutional Cures

As one might expect, the past two weeks in the Ninth Circuit have been relatively quiet (though emergency litigation concerning California’s shelter-in-place order has kept some panels very busy).  But as always, the Court kept churning out opinions in cases of interest.  Here, we focus on two:  the Court’s decision clarifying the application of fair-use doctrine to a book mixing Star Trek with Dr. Seuss, and the Court’s decision resolving whether the Consumer Financial Protection Bureau’s prior actions could be subsequently cured of any separation-of-powers defect. 

The Court holds that a “mash-up” book combining Dr. Seuss’s Oh, the Places You’ll Go! with Star Trek characters is not a fair use of the Dr. Seuss copyright, but does not infringe Dr. Seuss trademarks.

Panel: Judges McKeown, N.R. Smith, and Nguyen, with Judge McKeown writing the opinion.

Key highlight: “The creators thought their Star Trek primer would be ‘pretty well protected by parody,’ but acknowledged that ‘people in black robes’ may disagree. Indeed, we do.”

Background: This case is about a picture book mixing Star Trek with Dr. Seuss (in the court’s words, a “mash-up”).  The idea was to put Star Trek characters into the story and illustrations from the Dr. Seuss classic, Oh, the Places You’ll Go!  The new book’s title:  Oh, the Places You’ll Boldly Go!

The book did not go very far.  The defendants wrote the story, drew the illustrations, and raised $30,000 on Kickstarter.  But they omitted one step:  They never sought permission to use intellectual property associated with Star Trek or Dr. Seuss.  And after receiving cease-and-desist letters, the creators of the book never actually got it into print.

Dr. Seuss Enterprises filed suit for copyright and trademark infringement.  The defendants prevailed in the district court.  As to Dr. Seuss’s copyright claim, the district court held at summary judgment that the mash-up work was a fair use of the Dr. Seuss original.  The district court also granted defendants judgment on Dr. Suess’s trademark claim.

Result: The Ninth Circuit reversed in part and affirmed in part. On the copyright claim, the Court rejected the fair-use defense asserted by the creators of Oh, the Places You’ll Boldly Go!  The Court marched through the four statutory fair-use factors, concluding that all weighed against fair use. 

The first factor—the “purpose and character of the use”—required the Court to confront the defendants’ argument that the mash-up work was a parody (and therefore a “transformative” work protected as fair use).  The Court was unconvinced.  The mash-up was not a parody of the Dr. Seuss original, the Court held, principally because the new book did not “make a point about” the original work.  The Court also emphasized that the mash-up merely repackaged and copied Dr. Seuss’s story and illustrations, which was not a transformative use.

The defendants fared no better on the other factors.  On the second factor, the Court held that the creative (rather than informational or functional) nature of the Dr. Seuss work weighed against fair use.  On the third factor, the Court held that the defendants engaged in “extensive and meticulous copying” of the Dr. Seuss work with no good justification.  And on the fourth factor, the Court held that the defendants failed to show their use would not cause Dr. Seuss market harm.  In so holding, the Court clarified that defendants bear the burden on the market-harm factor of the fair-use analysis.

But the Court reached the opposite result on the trademark claims, which involve a different test for balancing artistic expression and intellectual-property rights.  The Court applied the “Rogers test,” which the Court described as imposing only a “low bar” for defendants seeking to avoid liability.  Under this test, the defendants prevailed because the work had “artistic relevance ‘above zero’” and the use of the trademarks was not “explicitly misleading.”  The Court therefore concluded that Dr. Seuss had no actionable Lanham Act claim.

On remand from the Supreme Court, the Ninth Circuit held that the Consumer Financial Protection Bureau (CFPB) cured the constitutional defect in its previously issued investigative order by later ratifying it.

Panel:  Judges Graber, Watford, and Zouhary (N.D. OH), with Judge Watford writing the opinion. 

Key Highlight:  “Any concerns that Seila Law might have had about being subjected to investigation without adequate presidential oversight and control have now been resolved.  A Director well aware that she may be removed by the President at will has ratified her predecessors’ earlier decisions to issue and enforce the CID.”

Background:  The CFPB issued a Civil Investigative Demand (CID) to Seila Law, demanding that it respond to interrogatories and produce certain documents.  Seila refused to comply, asserting that the CFPB’s structure—namely, the statutory requirement that its director who could be removed by the president only for cause—rendered the agency itself unconstitutional.  The district court rejected that argument and ordered Seila to comply with the CID.  The Ninth Circuit affirmed.

The Supreme Court reversed and remanded, holding that the for-cause removal provision did, in fact, contravene constitutional separation-of-powers requirements.  But the Court also held that this statutory provision was severable from the rest of the statute establishing the CFPB, and thus the unconstitutional for-cause provision did not render the agency itself unconstitutional.  The Court remanded to the Ninth Circuit to address whether the CID against Seila had been validly ratified by then-Acting Director Mike Mulvaney.

Result:  On remand, the Ninth Circuit held that the CID had been validly ratified, albeit by a different actor.  As the Court of Appeals noted, following the Supreme Court’s ruling, CFPB Director Kathleen Kraninger had expressly ratified the agency’s prior decision to issue a CID to Seila, doing so while fully aware “that the President could remove her with or without cause.”  This action, the Ninth Circuit held, “remedies any constitutional injury that Seila Law may have suffered due to the manner in which the CFPB was originally structured.”

The Court rejected Seila’s argument that Kraninger could not ratify the agency’s CID because the CID had been “void” when issued.  As the Court explained, it had previously rejected a nearly identical argument respecting the CFPB when a prior Supreme Court decision called into question the constitutionality of the then-Director’s recess appointment.  The Ninth Circuit had made clear that because any constitutional defect was limited to the director him or herself, and not the agency as a whole, a subsequent ratification cured any constitutional problem in the agency’s prior enforcement action.  The Court of Appeals also observed that if the Supreme Court had a different view of the constitutional defect arising from the for-cause removal provision, “it presumably would have ordered the dismissal of this proceeding rather than remanding for us to consider whether the agency’s actions relating to the CID had been validly ratified.”

The Ninth Circuit also rejected Seila’s argument that the CID could not be ratified because the statute of limitations for bringing an enforcement action against Seila had already run.  The Court reasoned that this limitations period applied only to enforcement actions, and did not limit the agency’s investigatory powers.  As the Court declared, “Whether Seila Law would be able to mount a successful statute-of-limitations defense in a future enforcement action has no bearing on the validity of Director Kraninger’s ratification.”