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“Free Sherlock” Litigation Raises Specter of Antitrust Liability for Distributors Cooperating With Intellectual Property Owners

Leslie Klinger, noted Sherlock Holmes scholar and lawyer, has waged a nearly all-out legal offensive against the Estate of Arthur Conan Doyle over the Estate’s assertion of a copyright in connection with certain works featuring the iconic Sherlock Holmes.  The lawsuit has been a media darling─reports have appeared in outlets such as BusinessweekThe Hollywood ReporterReuters, and The New York Times─with the press often emphasizing the David-and-Goliath-like aspects of the litigation.   A website entitled Free Sherlock has chronicled the ups and downs of the lawsuit (mostly ups for Klinger), and the litigation also inspired its own Twitter hashtag: #freesherlock.  Judge Posner of the Seventh Circuit has stirred the copyright pot with an antitrust analysis that could ensnare distributors that refuse to distribute products that allegedly infringe the rights of an intellectual property owner.

The copyright litigants do not dispute that the bulk of the Sherlock Holmes canon─56 stories and four novels─are in the public domain.  The Estate, however, asserted a copyright over ten post-1923 stories and demanded that Klinger enter into a license agreement.  The Estate also threatened Klinger’s publisher by claiming that it would prevent the distribution of Klinger’s work if a license agreement was not executed.  According to the Seventh Circuit, the Estate told Klinger’s publisher that “If you proceed instead to bring out [Klinger’s work] unlicensed, do not expect to see if offered for sale by Amazon, Barnes & Noble, and similar retailers.  We work with those compan[ies] routinely to weed out unlicensed uses of Sherlock Holmes from their offerings, and will not hesitate to do so with your book as well.”  755 F.3d 496, 498 (7th Cir. 2014).

Klinger refused to enter into a license agreement and instead brought suit in the Northern District of Illinois seeking a declaratory judgment that his to-be-published work would not infringe the Estate’s copyrights.  Klinger prevailed in the litigation on summary judgment.  Id Just last week, the Estate filed a petition for certiorari with the U.S. Supreme Court challenging the grant of summary judgment.

So where does the potential for antitrust liability come in?  In a decision in which the Seventh Circuit awarded Klinger $30,679.93 in attorneys’ fees, Judge Posner, writing for the panel, also commented on the antitrust issues that the Estate’s threat to Klinger’s publisher had raised:

We note finally that the estate was playing with fire in asking Amazon and other booksellers to cooperate with it in enforcing its nonexistent copyright claims against Klinger.  For it was enlisting those sellers in a boycott of a competitor of the estate, and boycotts of competitors violate the antitrust laws.  The usual boycott is of a purchaser by his suppliers, induced by a competitor of the purchaser in order to eliminate competition from that purchaser . . . This case is different, in its facts but not in economic substance or legal relevance, because the boycotters enlisted by the Doyle estate were buyers from the victim, rather than sellers to it.  But functionally they were suppliers─suppliers of essential services to Klinger.

2014 U.S. App. LEXIS 15172, at *9 (7th Cir. July 15, 2014) (citations omitted).  According to Judge Posner, coordination between the Estate and the book distributors could lead to liability under Section 1 of the Sherman Act on the facts of this case.

What does Judge Posner’s dicta mean for distributors who may cooperate with intellectual property owners to prevent infringing uses of IP?  At the very least, distributors will want to make their own determination that the IP owners with whom they’re asked to cooperate have enforceable intellectual property rights.  Implicit in Judge Posner’s antitrust analysis is that the Estate’s alleged rights were “nonexistent.”