by the United States Court of Appeals for the Seventh Circuit

“ If we are within our power to give guidance when we believe a single judge has 'erroneously invaded' the province of a three-judge court, we suggest both plaintiffs and defendants here stand to benefit from a hearing before a three-judge court. The jurisdiction of a three-judge court extends to all the questions involved and it can decide such of the questions as in its opinion disposes of this case. If the regulation is found constitutional, it will free defendants from further defense of such cases in the federal courts. ”

“ The defendants’ second and more substantial argument is that it is not enough that Schrock’s photographs might pass the ordinary test for originality; they claim that as derivative works, the photos are subject to a higher standard of originality. A leading copyright commentator disagrees. The Nimmer treatise maintains that the quantum of originality required for copyright in a derivative work is the same as that required for copyright in any other work. ”

“ When there are issues fairly open to debate they should be left for development *696 in a three-judge hearing and the merits assessed by three judges, not one. Whether or not plaintiffs' activity is illegal and whether the regulation does or does not invade the area of their protected freedoms is not for this court to decide. We cannot decide if plaintiffs' claims are good or bad. Nor are they questions for a single judge. The single judge's opinion indicates an extensive consideration of the arguments, the merits and a weighing of interests. ”

“ The concern expressed in Gracen was that a derivative work could be so similar in appearance to the underlying work that in a subsequent infringement suit brought by a derivative author, it would be difficult to separate the original elements of expression in the derivative and underlying works in order to determine whether one derivative work infringed another. ”

“ In Goosby the Supreme Court again reminded Courts of Appeals that they are without jurisdiction to adjudicate the merits of constitutional contentions. The Stratton rule is still good law. It was reaffirmed in Idlewild and referred to in Goosby. Thus, we are left here, figuratively, in a statutory strait jacket with little room to maneuver within the confines of the three-judge acts and the cases limiting our power. Our action is void if we review and incorporate equitable considerations in our decision. ”

“ The determination as to whether an issue is substantial does require a legal judgment and often the issue is clear either because the precise issue has been decided or because recent decisions of the Supreme Court strongly suggest the issue is foreclosed. But if a question is a difficult or close one, wasted effort can be avoided by prompt request by the single judge for the assistance of two additional judges. ”

“ Schrock explained how he used various camera and lighting techniques to make the toys look more “life like,” “personable,” and “friendly.” He explained how he tried to give the toys “a little bit of dimension” and that it was his goal to make the toys “a little bit better than what they look like when you actually see them on the shelf.” The original expression in the representative sample is not particularly great (it was not meant to be) , but it is enough under the applicable standard to warrant the limited copyright protection accorded derivative works under § 103 (b) . ”

“ A complaint should be liberally construed. When a motion to dismiss is made, well pleaded allegations must be taken as admitted. A complaint may be dismissed if clearly without merit but it should not be dismissed for insufficiency unless it appears to a certainty that plaintiff is entitled to no relief under any state of facts which could be proved in support of the claim. ”

“ The district court relied on this language from Gracen to conclude that Schrock has no copyright in his photos because he was not authorized by Learning Curve to copyright them. This was error.
First, Gracen’s language presupposing a permission-to-copyright requirement was dicta; the case was actually decided on nonoriginality grounds. Id. at 305. More importantly, the dicta was mistaken; there is nothing in the Copyright Act requiring the author of a derivative work to obtain permission to copyright his work from the owner of the copyright in the underlying work. ”

“ The Supreme Court emphasized in Feist that “the requisite level of creativity is extremely low; even a slight amount will suffice.” Id. The Court also explained that “ [o] riginality does not signify novelty; a work may be original even though it closely resembles other works.” Id. What is required is “independent creation plus a modicum of creativity.” Id. at 346.
Federal courts have historically applied a generous standard of originality in evaluating photographic works for copyright protection. ”

“ As the Supreme Court said in Zwickler, a federal court has a duty 'to give due respect to a suitorhs choice of a federal forum for the hearing and decision of his federal constitutional claims,' and federal courts do not have the right to decline the exercise of jurisdiction 'simply because the rights asserted may be adjudicated in some other forum'. ”

“ The defendants’ argument seems to be that because images of its “Thomas & Friends” toys will be common to all product photos of the toys, no product photos can be copyrighted. If this were true, then no derivative work would be copyrightable; by definition, derivative works incorporate the underlying work in some way. ”

“ Plaintiffs-appellants have argued to this court that the line of decisions is not an unbroken line and that the question raised here is open for future consideration. They argue the case must be decided on its own particular facts and 'that when commercial speech has been clearly suppressed unless a very similar situation has been adjudicated, the constitutional claims raise a substantial issue'. Plaintiffs contend Ag 122 is 'vague, arbitrary and uncertain as to prevent one from knowing whether or not his activities are proscribed'. ”

“ The regulation has been construed by the state's Supreme Court and plaintiffs allege 'no adequate remedy . . . obtains at law' and that 'no court of federal jurisdiction has as yet addressed the federal question arising herein'. [8] [9] A state has the power to regulate business to protect the public interest and defendants argue to this court that the validity and need for Chapter Ag 122 has been 'unreservedly upheld' by both the trial court and Wisconsin Supreme Court in the H. M. Distributors case, supra. ”

“ In the meantime, Price Waterhouse turned to another consultant for assistance in improving its software program. The new consultant successfully increased the speed of the program, and Price Waterhouse incorporated these improvements into its software. Liu then sued Price Waterhouse for copyright infringement. Price Waterhouse counterclaimed for infringement and filed a third-party complaint against Yang for contributory infringement and various state-law claims sounding in misappropriation. ”

“ Since our jurisdiction is no greater than that of the district judge, we too must look to the allegations of the complaint and at the regulation challenged. The state regulation in question here was issued by the Wisconsin Department of Agriculture pursuant to authority vested in the Department of Agriculture by § 100.20 of the Wisconsin statutes. [FN1]
FN1. Section 100.20 of the Wisconsin statutes provides in part: 'Methods of competition and trade practices. (1) Methods of competition in business and trade practices in business shall be fair. ”

“ It is undisputed that Schrock was authorized to photograph the “Thomas & Friends” toys, and as the creator of the photos, Schrock’s copyright arose by operation of law. [8] We cannot tell, however, whether the parties altered this default rule in their agreements. We note that HIT apparently attempted to do so, at least vis-à-vis Learning Curve; it claims that its licensing agreement with Learning Curve expressly retained the intellectual-property rights in all works that were based upon its copyrights. ”

“ Many small investors lack commercial expertise and anticipate unrealistic profits through use of the chance to further perpetuate a chain of distributors, without regard to actual market conditions affecting further distribution and sale of the property purchased by them or its market acceptance by final users or consumers. Substantial economic losses to participating distributors have occurred and will inevitably *692 occur by reason of their reliance on perpetuation of the chain distributor scheme as a source of profit. ”

“ Novelty, Inc., 482 F.3d 910, 915 (7th Cir. 2007) , “copyright protection begins at the moment of creation of ‘original works of authorship,’ ” id. at 914. This principle applies with equal force to derivative works.
The leading treatise on copyright law confirms this basic understanding. “ [T] he right to claim copyright in a noninfringing derivative work arises by operation of law, not through authority from the copyright owner of the underlying work.” [7] 1 Nimmer on Copyright § 3.06, at 3-34.34. We have cited Nimmer with approval on this point. ”

“ Whether or not plaintiffs can prove such allegations as 'irreparable harm' and 'chilling affect,' they are alleged on the face of the complaint. It is undisputed that plaintiff corporations are being sued for violations of Ag 122 in the state courts and they allege they are 'threatened' with further actions. ”

“ A. Photographs as Derivative Works Whether photographs of a copyrighted work are derivative works is the subject of deep disagreement among courts and commentators alike. See 1 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 3.03 [C] [1] , at 3-20.3 (Aug. 2009) . The district court held that Schrock’s photos came within the definition of derivative works because they “recast, transformed, or adapted” the three-dimensional toys into a different, two-dimensional medium. For this conclusion the judge relied in part on language in Gracen and in the Ninth Circuit’s decision in Ets-Hokin v. ”

“ They argue 'overbreadth' and that 'promotion' necessarily involves some protected speech and that the regulation fails to draw a distinction between mere advocacy and advocacy directed to incite to produce imminent lawless action. ”

“ A limitation as to the number of persons who may participate, or the presence of additional conditions effecting eligibility for the above license or right to recruit or the receipt of profits therefrom, does not change the identity of the scheme as a chain distributor scheme.
(2) 'Investment' is any acquisition, for a consideration other than personal services of personal property, tangible or intangible, for profit or business purposes, and includes, without limitation, franchises, business opportunities and services. ”

“ N. Am. Philips Consumer Elecs. Corp., 672 F.2d 607, 616 (7th Cir. 1982) (mazes and tunnels in Atari’s PAC-MAN video game are common to this class of video games and are therefore scènes à faire and not copyrightable) . ”

“ Title 28 U.S.C. § 2281 does not require the convening of a three-judge court when the constitutional attack upon the state statutes is insubstantial. 'Constitutional insubstantiality' for this purpose has been equated with such concepts as 'essentially fictitious,' Bailey v. Patterson, 369 U.S. (31) , at 33 (82 S.Ct. 549, 551, L.Ed.2d 512 (1962) ) ; 'wholly insubstantial,' ibid; 'obviously frivolous,' Hannis Distilling Co. ”

“ That said enforcement and threatened enforcement is in restraint of free trade and constitutes an improper and excessive imposition on interstate commerce in violation of Article One, Section 8, of the United States Constitution. (c) That said enforcement and threatened enforcement has been pre-empted by the jurisdiction of the United States, the Federal Trade Commission, and the Interstate Commerce Commission under laws of the United States, and has been specifically pre-empted as to various defendants by acts of the Federal Trade Commission in enforcements of Federal laws. (d) That said Ag. ”

“ Stats.; that individuals have, owing to actions of defendants, been prosecuted and convicted in the past of alleged criminal violations of the said order and various other individuals, corporations, and associations including the plaintiffs herein, are presently engaged in defense of alleged violations of said order seeking civil and quasi-criminal penalties and relief, including fines, civil forfeitures, injunctions, restraining orders, temporary injunctions or restraining orders, declaratory relief, etc. ”

“ For his authority to dismiss the single judge relied on Ex parte Poresky, 290 U.S. 30, 54 S.Ct. 3, 78 L.Ed. 152 (1933) . In Poresky, at page 32, the Supreme Court said: The existence of a substantial question of constitutionality must be determined by the allegations of the bill of complaint. ”