Does it ever pay to use intellectual property loopholes to save a few bucks? If you wish to remain disentangled from legal action, the answer is likely “No.” 

This is especially true in a complex area of copyright licensing like live televised events, since there may be different contracts addressing the initial airing of an event vs. subsequent airings. The owners of CJ’s Bar & Grill, a sports bar in Kingsport, TN, have learned this in the outcome of a recent ruling.

The Showtime Fight: Boxer vs. MMA

At the center of this copyright licensing conflict is a historical fight between the boxer Floyd Mayweather and the MMA fighter Conor McGregor. The fight was livestreamed on Showtime in August 2017. At the time, viewers could pay $99.99 to watch it.

Showtime’s purview was clear in the first, live broadcast. But as we know, most live events are also recorded these days for viewers to catch in perpetuity. This avenue introduced a new arrangement for copyright licensing.

Contracts and Subcontracts for Copyright Licensing

Sometimes, larger corporations will dole out copyright licensing and collection responsibilities to smaller regional entities. In fact, even for individual artists, you see an analogous practice. Musicians will join a music publisher like BMI to help collect their royalties. 

In other words, it is fun to receive a paycheck; it is less fun and a whole lot of work to go out and scour the fees that are owed you. So why not free up your time by giving part of your fee to the collector?

In this vein, Showtime contracted Mayweather Promotions to distribute the recording of the live broadcast. Mayweather, in turn, subcontracted Joe Hand Promotions (JHP) to deal in commercial licensing and fee collection for a particular region, which covered the TN territory of CJ’s Bar & Grill.

The IP Fight: Commercial Licensing vs. Personal Use

Before any of the distribution contracts happened, however, CJ’s had already made its essential mistake. One of the owners purchased a personal viewing of the fight on Showtime for $99 – then played it in the sports bar. 

This transformed the use from personal to commercial, especially since live sports broadcasts are the bread and butter of a sports bar.

Arguments and Reversal

When JHP later sued the owners of CJ’s for copyright infringement, they argued that JHP was not even in the picture yet in August 2017. The initial court ruling sided with CJ’s Bar & Grill. 

But copyright licensing for live broadcasts works on a different schedule – owners are allowed to enforce infringement as long as they register within three months of the live airing. 

Showtime had indeed met that window, claiming its copyright for the fight in November 2017. And those whom Showtimes entrusted with the right to enforce its copyright license – including JHP – received the same rights. The Sixth Circuit Court delineated this chain of power and reversed the earlier court’s decision.

Recompense

How will CJ’s fare after this ruling? 

Well, JHP sold commercial licenses to air the fight within a range of $3,700 to $15,700 – basically, depending on occupancy, how many potential viewers could fit in that bar. 

CJ’s may have to pay at least minimum compensation for the absent commercial license – plus, years of attorney’s fees have stacked up. So this may turn out to be a very expensive $99 for CJ’s Bar & Grill. 

Take it as a cautionary tale: IP loopholes are not worth it.