In 1985, the Supreme Court said, “The fair use doctrine is not a license for corporate theft, empowering a court to ignore a copyright whenever it determines the underlying work contains material of possible public importance.”1 Last week, a court held to the contrary.

In a September 9th order, the Southern District Court of New York granted summary judgment in favor of TVEyes, a media monitoring company, on the issue of fair use. Fox News Network had filed a lawsuit against TVEyes for recording its station continuously and creating a searchable database out of its content and the content of 1,400 other television and radio stations.

Like other media monitoring services, TVEyes allows subscribers to track news coverage of particular events or issues. The service begins at $500 month; in 2013 the company had revenues of $8 million, with over 2,200 subscribers. Fox News Network owns and operates Fox News Channel and Fox Business Network, delivering twenty-four hour news and business coverage. It also actively licenses video clips to third parties. Fox News asked the court to order TVEyes to stop using Fox content without permission for its service, and both parties moved for summary judgment. In last week’s order, the court only addressed the copying and distribution of Fox News clips to TVEyes subscribers — the service also allows subscribers to “save, archive, download, email, and share clips,” features that the court needs more evidence to rule on.

But in finding this wholesale, commercial copying to be fair use, the decision stands as an example of just how dramatically — and fundamentally — the fair use doctrine has been transformed in just a few decades. What was once a bounded exception allowing reasonable use of copyrighted works when necessary for specific purposes has become a broad and sweeping mechanism that allows courts to seemingly ignore copyright at their own discretion.

Transformative Use

The modern conception of “fair use” — an independent, affirmative defense against copyright infringement that takes into account a number of factors such as the purpose of the use — does not seem to have consistently established itself in US courts until the mid-1950s. This was also the same time that the Copyright Office released a study on fair use as part of the revision process that would eventually result in the 1976 Copyright Act. The 76 Act marked the first statutory reference to fair use. Section 107 of the Act reads:

Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include—

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work.

The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.

But perhaps just as important to the development of the fair use doctrine is a 1990 law review article by federal judge Pierre Leval, Toward a Fair Use Standard. The prescriptive essay argued that the “heart” of the fair use inquiry was the first factor, the purpose and character of the use, and that the answer to the inquiry lied in determining whether the challenged use is “transformative.” Leval wrote:

The use must be productive and must employ the quoted matter in a different manner or for a different purpose from the original. A quotation of copyrighted material that merely repackages or republishes the original is unlikely to pass the test; in Justice Story’s words, it would merely “supersede the objects” of the original. If, on the other hand, the secondary use adds value to the original–if the quoted matter is used as raw material, transformed in the creation of new information, new aesthetics, new insights and understandings– this is the very type of activity that the fair use doctrine intends to protect for the enrichment of society.

Four years later, the Supreme Court referenced Leval’s “transformative” framing, and lower courts have followed its lead since.2 But regardless of how descriptively accurate this framing might be, the TVEyes decision demonstrates its shortcomings as an actual standard.

For one, it is ill-defined, an incoherence revealed by the TVEyes court at the outset. The court begins its discussion by stating that “Transformation almost always occurs when the new work ‘does something more than repackage or republish the original copyrighted work.’” But that sentence is immediately followed by this one: “A use ‘can be transformative in function or purpose without altering or actually adding to the original work.’” Perhaps these two seemingly contradictory statements — both from Second Circuit decisions from the past year — can be reconciled, but the court spends no time doing so. Instead, it offers the following conclusory analysis:

Unlike the indexing and excerpting of news articles, where the printed word conveys the same meaning no matter the forum or medium in which it is viewed, the service provided by TVEyes is transformative. By indexing and excerpting all content appearing in television, every hour of the day and every day of the week, month, and year, TVEyes provides a service that no content provider provides. Subscribers to TVEyes gain access, not only to the news that is presented, but to the presentations themselves, as colored, processed, and criticized by commentators, and as abridged, modified, and enlarged by news broadcasts.

In other words, “the use is transformative because TVEyes copied the entire work verbatim, and don’t worry if that is indistinguishable from the definition for infringement.” The court does little to shed more light on its reasoning when it later endorses TVEyes’ assertion that “monitoring television is simply not the same as watching it.” Along the same lines, I suppose you could argue that it’s fair use to copy reality television shows so long as you watch them ironically.

Fortunately, less than a day ago, the Seventh Circuit explicitly rejected the transformative use test, noting that “To say a new use transforms a work is precisely to say that it is derivative and thus, one might suppose, protected under §106(2).”3 Instead, said the court, “We think it best to stick with the statutory list…”

Commerciality

Another dramatic turn in fair use doctrine is seen in the treatment of “commerciality” in the first factor. Traditionally, courts have given wider berth to scholarly and non-profit users of copyrighted works. In its 1984 Betamax decision, the Supreme Court observed that every commercial use of copyrighted material is presumptively unfair. However, a decade later, the Court would retreat from that holding and remove the presumption. In Campbell, the Court explained that, “If, indeed, commerciality carried presumptive force against a finding of fairness, the presumption would swallow nearly all of the illustrative uses listed in the preamble paragraph of § 107, including news reporting, comment, criticism, teaching, scholarship, and research, since these activities ‘are generally conducted for profit in this country.’” Instead, the Court adopted a sliding scale approach, where commerciality should be treated as merely “a fact to be ‘weighed along with other[s] in fair use decisions.’” Nowadays, commerciality has little, if any, role in the fair use doctrine.4

TVEyes continues this trend. The court does note that “Clearly, TVEyes is a for-profit company, and enjoys revenue and income from the service it provides.” But it follows this with a recitation of the above language from Campbell without a word more.

Amount and Substantiality Used

The implementation of the third fair use factor, which looks at “the amount and substantiality of the portion used in relation to the copyrighted work as a whole” has also noticeably shifted in recent decades. In fact, until Betamax, it was virtually axiomatic that copying an entire work could never be fair use.5 But Betamax held, in part, that home taping of broadcast television by VCR owners was a fair use, despite the fact that exact duplicates of complete works were being made. This holding drew a sharp rebuke from the four Justices on the dissent, who said, “Fair use is intended to allow individuals engaged in productive uses to copy small portions of original works that will facilitate their own productive endeavors. Time-shifting bears no resemblance to such activity, and the complete duplication that it involves might alone be sufficient to preclude a finding of fair use. It is little wonder that the Court has chosen to ignore this statutory factor.”

Since then, the floodgates have been opened. Last year, for example, the Southern District Court of New York held that the wholesale copying of twenty million books (by a for-profit corporation) was a fair use.6

In TVEyes, the departure from third factor tradition is even more striking. Not only is TVEyes copying entire works, it’s copying entire stations. There is nothing Fox News airs that TVEyes doesn’t copy. Yet, not only does the court not consider this a negative that might otherwise be outweighed by the other three factors, it suggests that this factor favors TVEyes. Said the court, “One cannot say that TVEyes copies more than is necessary to its transformative purpose for, if TVEyes were to copy less, the reliability of its all-inclusive service would be compromised.” Or, you can copy everything if your purpose is to copy everything.

Public Benefit

The final area of fair use transformation is seen in the court’s consideration of the fourth factor, “the effect of the use upon the potential market for or value of the copyrighted work.” The court here says, “The fourth factor requires a balance between the ‘benefit the public will derive if the use is permitted, and the personal gain the copyright owner will receive if the use is denied,’” (emphasis added) citing to the Second Circuit’s 2006 decision in Bill Graham Archives v. Dorling Kindersley L’td. Since that language appears nowhere in the statute, it’s worth taking a closer look at where it came from. Bill Graham itself cites an earlier Second Circuit decision: MCA, Inc. v. Wilson. There, the court said of the fourth factor, “where a claim of fair use is made, a balance must sometimes be struck between the benefit the public will derive if the use is permitted and the personal gain the copyright owner will receive if the use is denied.” (Emphasis added). So already we’ve made the jump from a balance that “must sometimes be struck” to an absolute requirement. But if we look even closer, we see that the cases MCA cites to support its proposition are not discussing the fourth fair use factor specifically but fair use in general. This makes sense, since fair use is a doctrine where courts strike a balance between public and private interests. But somewhere along the lines, the Second Circuit duplicated this principle into the fourth fair use factor.

Leaving the doctrinal history aside, TVEye‘s discussion of the public benefit leaves much to be desired (never mind the fact that the service is, as noted by the court, not available to the general public). It essentially boils down to this: TVEye offers a useful service. Of course, most businesses offer useful services; otherwise, they wouldn’t remain in business long. And the operation of business does benefit the public in the broadest sense. But this definition of the public benefit if too wide to be of much use here — and, more importantly, it doesn’t explain why a for-profit business that provides a service involving the regular copying of copyrighted works should be privileged under the law from licensing those works. Maybe I’m old-fashioned, but I don’t think asking a business to pay its suppliers is unfair.

And the Supreme Court would agree, at least thirty years ago. After its line about fair use and corporate theft, quoted at the beginning of this article, the Court in Harper & Row continued:

In our haste to disseminate news, it should not be forgotten that the Framers intended copyright itself to be the engine of free expression. By establishing a marketable right to the use of one’s expression, copyright supplies the economic incentive to create and disseminate ideas.

***

It is fundamentally at odds with the scheme of copyright to accord lesser rights in those works that are of greatest importance to the public. Such a notion ignores the major premise of copyright and injures author and public alike. “[T]o propose that fair use be imposed whenever the `social value [of dissemination] . . . outweighs any detriment to the artist,’ would be to propose depriving copyright owners of their right in the property precisely when they encounter those users who could afford to pay for it.”

Footnotes

  1. Harper & Row, Publishers, Inc. v. Nation Enterprises, 471 US 539, 558, quoting Iowa State University Research Foundation, Inc. v. American Broadcasting Cos., Inc., 621 F. 2d 57, 61 (1980). []
  2. Campbell v. Acuff-Rose Music, Inc., 510 US 569, 579 (1994). []
  3. Kienitz v. Sconnie Nation, No. 13-3004 (7th Cir. 2014). The court characterized the discussion of transformative use in Campbell as a “suggestion.” []
  4. See Matthew Sag, Predicting Fair Use, 72 Ohio State Law Journal 47, 77 (2012) (finding commercial use as a factor insignificant in a study of 280 fair use decisions from 1978-2011); Barton Beebe, An Empirical Study of U.S. Copyright Fair Use Opinions, 1978–2005, 156 U. PA. L. Rev. 549 (2008) (finding commerciality has no significant impact on case outcomes in study of 306 fair use decisions from 1978-2005). []
  5. See Williams & Wilkins Company v. United States, 487 F. 2d 1345, 1366 (Ct of Claims 1973); Public Affairs Associates, Inc. v. Rickover, 284 F.2d 262, 272 (DC Cir. 1960); Benny v. Loew’s Inc., 239 F.2d 532, 536 (9th Cir.1956); Leon v. Pacific Telephone & Telegraph Co., 91 F.2d 484, 486 (9th Cir.1937) (“Counsel have not disclosed a single authority, nor have we been able to find one, which lends any support to the proposition that wholesale copying and publication of copyrighted material can ever be fair use.”). []
  6. Authors Guild, Inc. v. Google Inc., 954 F. Supp. 2d 282 (SDNY 2013). Though, to be fair, the court did note that the third factor weighed “slightly against” a finding of fair use. []

Last week, the US Copyright Office released the third edition of its Copyright Compendium. This edition was long awaited – the second edition was released in 1984. The Copyright Compendium details internal regulations concerning how the Copyright Office determines whether an application can be registered or not. In the US, works are protected by copyright the moment they are fixed in a tangible format, however, registration does provide certain benefits. It is required before a civil lawsuit for infringement is filed, for example.

Almost immediately, a number of news outlets zeroed in on one sentence within the 1,222 pages of the Compendium. “The Office will not register works produced by nature, animals, or plants,” says the Compendium. This includes, “A photograph taken by a monkey.” This led to what the internet does best: a viral story about nothing of particular consequence.

The Internet took this sentence as a reference to a certain monkey photograph. To recap: in 2011, a British photographer, David Slater, traveled to Indonesia to photograph black macaques. As he was there, one female macaque grabbed his camera and happened to trigger the camera, taking a series of photos. Upon retrieving the camera, Slater found that several of the photos were quite remarkable and published them, leading to a fair amount of fame.

One of the photos was uploaded to Wikipedia without Slater’s permission. Slater requested removal of the photo, but Wikipedia editors refused, coming to the factual conclusion that the macaque, not Slater, was the sole author of the photograph, thus placing it in the public domain.

The internet exploded with a wealth of discussion about monkey selfies and copyright. Some of it was even worth reading.

Just as things began to calm down, the US Copyright Office announced the third edition of the Copyright Compendium, containing its reference to a photograph taken by a monkey. This led to the most recent burst of news, some of it suggesting that “the government” has “settled” the issue.

Comprehending the Compendium

This is not so for a number of reasons.

First, even if the Copyright Compendium is making a definitive statement about the copyrightability (or not) of the monkey selfie, such a statement is not binding as law. The Compendium itself points this out, saying, “The policies and practices set forth in the Compendium do not in themselves have the force and effect of law and are not binding upon the Register of Copyrights or U.S. Copyright Office staff.”  It should also be noted that a decision by the Register of Copyrights to deny a copyright registration is not dispositive of the ultimate question of copyrightability.1

Second, the statement that “The Office will not register works produced by … animals” is not novel nor surprising. But to say that this settles the question of this particular photograph, as many stories in the past week seem to suggest, begs the question that the monkey is the sole author of the photo.

Third, there is no reason why this question would be answered by US law. Copyrightability is most likely “determined by the law of the state with ‘the most significant relationship’ to the property and the parties”,2 which would clearly not be the US under the facts here: Slater is British, and the photo was taken in Indonesia.

Authorship and photographs

But let’s pretend US law would apply.

The Copyright Act has little to say about authorship. 17 USC § 102(a) says that “Copyright protection subsists, in accordance with this title, in original works of authorship fixed in any tangible medium of expression”, and § 201 says, “Copyright in a work protected under this title vests initially in the author or authors of the work”, but these terms – “works of authorship” and “author” are not defined anywhere within the Act.

The Supreme Court, however, has defined “author,” and it has done so, coincidentally, in a decision establishing that photographs can be protected by copyright in the first instance. In Burrow-Giles Lithographic Co. v. Sarony, the Court said that an “author” is defined as “he to whom anything owes its origin; originator; maker.”3 Over a century later, the Court would expand on this idea of the author as originator. “The sine qua non of copyright is originality. To qualify for copyright protection, a work must be original to the author. Original, as the term is used in copyright, means only that the work was independently created by the author (as opposed to copied from other works), and that it possesses at least some minimal degree of creativity.”4

So authorship requires two things: absence of copying and a modicum of creativity.

With this in mind, there are at least three possibilities concerning the authorship of this photo: 1) The monkey is the sole author, 2) Slater is the sole author, or 3) the monkey and Slater are joint authors.

We can quickly dismiss the last possibility. Joint authorship requires, in part, that “each of the authors prepared his or her contribution with the knowledge and intention that it would be merged with the contributions of other authors as ‘inseparable or interdependent parts of a unitary whole.’”5 The claim that a monkey could do such a thing is even more extraordinary than a claim that animals have knowledge or intent in the first place.

In the case of the monkey as author, the sole act involved is the pushing of the button that triggered the camera and resulted in the shot. This act is certainly necessary to the creation of the photo, but I am not convinced that it is sufficient to establish the monkey as an author. The monkey possesses no knowledge of the nature of the camera, nor knows that pushing the button would result in the creation of a photograph. While copyright law is silent on what, if any, knowledge or intent is required for authorship, surely there must be some level needed to distinguish what the monkey did here from any other force of nature or deus ex machina that could cause the creation of a photograph. The intuition is that there is something specifically human required under copyright law for authorship.

Slater, on the other hand, did everything but push the button. He chose the location, camera, film, and time of day. He set it all up with the intention to create photographs. He processed and developed the resulting photos. The photos would not exist but for these conscious acts.

Courts have found similar acts sufficient for copyrightability. The Southern District Court of New York said the following in 1968 when it was confronted with alleged copying of the Zapruder Film by Life Magazine:

Any photograph reflects “the personal influence of the author, and no two will be absolutely alike”, to use the words of Judge Learned Hand.

The Zapruder pictures in fact have many elements of creativity. Among other things, Zapruder selected the kind of camera (movies, not snapshots), the kind of film (color), the kind of lens (telephoto), the area in which the pictures were to be taken, the time they were to be taken, and (after testing several sites) the spot on which the camera would be operated.6

So it would seem to me under this definition that Slater would be considered the author of the photographs.

I do think it’s interesting to note that the division between those who think the monkey is the author of the photo and those who think Slater is the author generally tracks the division between copyright skeptics and copyright proponents. On the one hand are those who have devalued creativity to the point where they think all it involves is the push of a button – even a monkey can do it. So, in that case, why do we even need copyright protection?

On the other hand are those who still recognize some value in human authorship, who think that creativity does not just spring forth independent of human effort, who understand that human effort does not emerge spontaneously but responds to motivation, and that one of the most just and dignified forms of motivation comes in the form of property acquired through creative productive labor.


Updated August 28, 2014 to correct photographer’s name

 

Footnotes

  1. In fact, the Copyright Act expressly allows for a civil infringement suit to be brought in cases where registration is refused. 17 USC § 411(a). []
  2. Itar-Tass Russian News Agency v. Russian Kurier, Inc., 153 F. 3d 82, 90 (2nd Cir. 1998). The court here was looking at the question of ownership, which is distinct from copyrightability, but I believe the analysis is the same. []
  3. 111 US 53, 58 (1884). []
  4. Feist Publications, Inc. v. Rural Telephone Service Co., 499 US 340, 345 (1991). []
  5. H.R.Rep. No. 1476, 94th Cong., 2d Sess. 120 (1976). []
  6. 293 F. Supp. 130, 143 (SDNY 1968). []

On Monday, I looked at the majority’s opinion in American Broadcasting Companies v. Aereo, which held that the online television provider performed to the public under the Copyright Act. Today, I want to take a closer look at the dissent.

The dissent’s argument begins with the assertion, relying on a copyright treatise, that “The Networks’ claim is governed by a simple but profoundly important rule: A defendant may be held directly liable only if it has engaged in volitional conduct that violates the Act.” It then states that “This requirement is firmly grounded in the Act’s text, which defines ‘perform’ in active, affirmative terms: One ‘perform[s]’ a copyrighted ‘audiovisual work,’ such as a movie or news broadcast, by ‘show[ing] its images in any sequence’ or ‘mak[ing] the sounds accompanying it audible.’” Already, the soundness of the dissent’s argument is on shaky ground, as there is nothing necessarily “active” about the making of sounds of a broadcast audible.1

But there’s a bigger problem with how the dissent defines perform, a definition which shapes its entire analysis of the issue: it is incorrect as a textual matter.

Statutory Interpretation

Examining the meaning of a word in a statute with the context of the whole act is a fundamental principle.

The meaning of terms on the statute books ought to be determined, not on the basis of which meaning can be shown to have been understood by a larger handful of the Members of Congress; but rather on the basis of which meaning is (1) most in accord with context and ordinary usage, and thus most likely to have been understood by the whole Congress which voted on the words of the statute (not to mention the citizens subject to it), and (2) most compatible with the surrounding body of law into which the provision must be integrated — a compatibility which, by a benign fiction, we assume Congress always has in mind.2

Obviously, the assumption is even stronger when we are talking not about provisions adopted at separate times but provisions enacted at the same time.

Along with this rule, the Supreme Court has called it “a cardinal principle of statutory construction” that statutes should be interpreted in a way that prevents any clause or provision from being rendered superfluous.3

If we take heed of these canons, we can see that the majority in Aereo had the better interpretation of “perform.”

To begin with, it may not matter how active or affirmative Section 101 of the Copyright Act defines the act of performing, since the language of Section 106 establishes infringement in broader terms. It is only partially correct that Section 106 provides copyright owners the right to perform works publicly. Section 106 actually provides that “the owner of copyright under this title has the exclusive rights to do and to authorize” any of the enumerated acts such as public performance. (Emphasis added). The “and to authorize” language confirms that the exclusive domain of the copyright owner can be encroached by conduct beyond “active, affirmative” acts.

The Exceptions that Prove the Rule

The text of Section 111 supplies further support. Section 111(a) creates exceptions from copyright infringement for certain secondary transmissions of primary (broadcast) transmissions. One of these, Section 111(a)(3), exempts a carrier from liability “who has no direct or indirect control over the content or selection of the primary transmission or over the particular recipients of the secondary transmission, and whose activities with respect to the secondary transmission consist solely of providing wires, cables, or other communications channels for the use of others.” I don’t see how one can come up with a more passive system than this. The statutory text here also undermines the dissent’s argument that the key issue in determining who is directly liable is who selects the content since this exception applies only to carriers who do not select the content.

The exception in Section 111(a)(1) is even more clear. That provision declares that a transmission is not infringement if “the secondary transmission is not made by a cable system, and consists entirely of the relaying, by the management of a hotel, apartment house, or similar establishment, of signals transmitted by a broadcast station licensed by the Federal Communications Commission, within the local service area of such station, to the private lodgings of guests or residents of such establishment, and no direct charge is made to see or hear the secondary transmission.” Save for the fact that Aereo was charging for its transmission, this sounds a lot like how it characterized its service when it argued that it was not performing: “do[ing] no more than supply[ing] equipment that ‘emulate[s] the operation of a home antenna.’” Yet if that does not constitute performing under the Copyright Act, there would be no need for the 111(a)(1) exception.

The dissent’s misstep is reminiscent of the 1892 Supreme Court decision in Church of the Holy Trinity v. United States, which decided that a federal statute that referred to “labor” only applied to manual labor and not “professional” services. Not only is this distinction not found in the text of the statute, it also “renders the exceptions for actors, artists, lecturers, and singers utterly inexplicable.”4 Similarly, the Copyright Act’s specific exceptions for two passive activities would be “utterly inexplicable” under the dissent’s definition of “perform.” If Congress did not mean to include such conduct within the definition of “perform”, it would not have needed to create these exceptions.

In sum, the dissent’s interpretation of “perform” in the Copyright Act does not hold up when we interpret the term within the context of the whole act.

Footnotes

  1. The dissent also asserts that “Every Court of Appeals to have considered an automated-service provider’s direct liability for copyright infringement has adopted that rule.” But that’s not entirely the case, at least when it comes to the Ninth Circuit’s decision in Fox Broadcasting Co. v. Dish Network. The court there did not once utter the word “volition”, and district courts in the Circuit apparently don’t believe the test was adopted. See, e.g., Order Granting in Part and Denying in Part Allvoice’s Motion to Dismiss Plaintiff’s First Amended Complaint, Oppenheimer v. Allvoices, Inc., No. C-14-00499 (ND Cali June 10, 2014) (“Although the Netcom requirement of “volitional” conduct for direct liability has been adopted by the Second and Fourth Circuits, the Ninth Circuit has not yet addressed the issue, and courts within this Circuit are split on it”); Order Granting in Part and Denying in Part Defendant’s Motion to Dismiss, National Photo Group, LLC v. Allvoices, Inc., No. C-13-03627 (ND Cali Jan. 24, 2014) (noting volitional conduct “requirement has not been adopted by the Ninth Circuit and Courts within this Circuit are divided on whether the requirement is valid”). []
  2. Green v. Bock Laundry Machine Co., 490 US 504, 528 (1989) (J. Scalia concurrence). []
  3. Bennett v. Spear, 520 US 154, 173 (1997) (quoting US v. Menasche, 348 US 528, 538 (1955). []
  4. Antonin Scalia, Common-Law Courts in a Civil-Law System: The Role of United States Federal Courts in Interpreting the Constitution and Laws, The Tanner Lectures on Human Values 79, 94 (1995). []

The rise and fall of Aereo was meteoric, with the company going from founding to Supreme Court shutdown in little over two years. Last week, the Supreme Court held in American Broadcasting Companies v. Aereo that the company was liable for publicly performing when it transmitted copyrighted works without permission to paying subscribers.1

Since details of the service and litigation have been recounted here and elsewhere in great detail, I will only very briefly summarize before looking at the Supreme Court decision in more detail. Aereo launched in early 2012 and offered subscribers the ability to watch broadcast television stations online, along with DVR-type capabilities, for a monthly fee. The stations were captured by Aereo using antennas to receive over-the-air signals. Aereo did not license any of the television programs it transmitted.

Broadcasters sued in March 2012, alleging that Aereo was publicly performing television programs they owned the copyright in, and sought a preliminary injunction.2 Aereo argued that it was merely providing equipment to customers rather than performing itself. It also argued that “like the RS-DVR system in [the Second Circuit’s 2008 decision in] Cablevision, its system creates unique, user-requested copies that are transmitted only to the particular user that created them and, therefore, its performances are non-public.” The district court agreed with Aereo and denied the injunction, a decision the broadcasters appealed.

However, the broadcasters were unable to distinguish Aereo from Cablevision to the Second Circuit’s satisfaction, and the court affirmed the lower court’s decision.3 The broadcasters again appealed, this time to the Supreme Court, which granted cert in January and held oral arguments at the end of April.

In a 6-3 opinion by Justice Breyer, the Supreme Court reversed the Second Circuit and held that Aereo does indeed perform to the public. (I’ll look at the dissent in a future post.)

The Aereo Decision

In a series of posts earlier this year following the Court’s grant of cert, I broke the analysis up into a series of questions, asking first “what is to the public”, then asking “what is a performance” and “who is the performer.” The Court approached it in a similar fashion, beginning its analysis by saying, “This case requires us to answer two questions: First, in operating in the manner described above, does Aereo ‘perform’ at all? And second, if so, does Aereo do so ‘publicly’?” (Although the Court at the outset does not separately ask what a performance is, it does address the issue, apparently agreeing, as I did, with the Second Circuit’s rule that a performance requires contemporaneous perceptibility.)4

When does an entity perform?

Turning to the first question, the Court says:

Considered alone, the language of the Act does not clearly indicate when an entity “perform[s]” (or “transmit[s]”) and when it merely supplies equipment that allows others to do so. But when read in light of its purpose, the Act is unmistakeable: An entity that engages in activities like Aereo’s performs.

The Court then examines its previous Fortnightly and Teleprompter decisions, which held CATV providers (community antenna television providers, the precursor to modern cable providers) did not “perform” under copyright law before explaining that Congress sought to overturn those decisions when it revised the Copyright Act in 1976. The Court notes that Congress specifically considered both the broadcaster and the viewer to be a performer under the Act. It also included the Transmit Clause, which, the Court says, “makes clear that an entity that acts like a CATV system itself performs, even if when doing so, it simply enhances viewers’ ability to receive broadcast television signals.”

And, says the Court, Aereo is just such an entity. “Aereo’s activities are substantially similar to those of the CATV companies that Congress amended the Act to reach.”

Aereo sells a service that allows subscribers to watch television programs, many of  which are copyrighted, almost as they are being broadcast. In providing this service, Aereo uses its own equipment, housed in a centralized warehouse, outside of its users’ homes. By means of its technology (antennas, transcoders, and servers), Aereo’s system “receive[s] programs that have been released to the public and carr[ies] them by private channels to additional viewers.” It “carr[ies]… whatever programs [it] receive[s],” and it offers “all the programming” of each over-the-air it carries.

The Court rejects the argument that Aereo doesn’t perform because it emulates equipment that viewers can use at home, saying the same was true of the CATV systems that Congress brought within the scope of the Copyright Act in 1976. The Court does point out that the question of whether a provider performs in cases involving different kinds of services and technologies remains. “But the many similarities between Aereo and cable companies, considered in light of Congress’ basic purposes in amending the Copyright Act, convince us that this difference is not critical here.”

When is a performance to the public?

Next, the Court analyzes whether Aereo’s performances are “to the public.” The Court rejects Aereo’s position that the technology it deployed should be determinative—Aereo accomplishes the same thing cable companies, which clearly perform to the public, do, so why should it matter whether it does so “via a large multisubscriber antenna or one small dedicated antenna?”

It also completely rejects Cablevision’s holding that courts must look at the potential audience of a particular copy of a work to determine whether a performance is to the public.

We do not see how the fact that Aereo transmits via personal copies of programs could make a difference. The Act applies to transmissions “by means of any device or process.” And retransmitting a television program using user-specific copies is a “process” of transmitting a performance. A “cop[y]” of a work is simply a “material objec[t] . . . in which a work is fixed . . . and from which the work can be perceived, reproduced, or otherwise communicated.” So whether Aereo transmits from the same or separate copies, it performs the same work; it shows the same images and makes audible the same sounds.

In previous posts, I argued that, when interpreting what “the public” means, one should focus on the relationship between the performer and the audience. I proposed that “’Public’ relationships are those that tend to be described as commercial, arms-length, or impersonal, and are strongly unidirectional, while ‘private’ relationships tend to be described as familial, social, or collegial, and are much more reciprocal in nature.” The Court came to a similar conclusion, saying “the subscribers to whom Aereo transmits television programs constitute ‘the public.’ Aereo communicates the same contemporaneously perceptible images and sounds to a large number of people who are unrelated and unknown to each other.” But it then adds a further gloss on the term, holding that one should also examine the relationship between the audience and the underlying work.

Neither the record nor Aereo suggests that Aereo’s subscribers receive performances in their capacities as owners or possessors of the underlying works. This is relevant because when an entity performs to a set of people, whether they constitute “the public” often depends upon their relationship to the underlying work. When, for example, a valet parking attendant returns cars to their drivers, we would not say that the parking service provides cars “to the public.” We would say that it provides the cars to their owners. We would say that a car dealership, on the other hand, does provide cars to the public, for it sells cars to individuals who lack a pre-existing relationship to the cars. Similarly, an entity that transmits a performance to individuals in their capacities as owners or possessors does not perform to “the public,” whereas an entity like Aereo that transmits to large numbers of paying subscribers who lack any prior relationship to the works does so perform.

The Court ends by addressing concerns raised about the effects of a holding reversing the Second Circuit on cloud computing services. It notes that its interpretation is influenced by Congress’s intent to cover “cable companies and their equivalents,” that its definition of the public “does not extend to those who act as owners or possessors of the relevant product,” and that fair use and the DMCA safe harbors for online service providers should mitigate any remaining concerns.

Analyzing the decision

I think the Court gets it right. It eliminates the overly-convoluted interpretations of the Copyright Act’s public performance provisions that resulted from Cablevision in favor of a straight-forward approach that is consistent with the Act’s language and intent. In hindsight, it will seem silly that a for-profit company could provide the functional equivalent to cable television, commercially exploiting copyrighted works to the public, and escape liability based on the number of antennas it used.

Already there a number of criticism of the decision, which I won’t address here. But I would add one of my own: I think the Court did not adequately explain the rule it was applying. Such an explanation, especially if it was articulated in more general terms, would provide lower courts with guidance to reach results consistent with the Court’s holding.

In a post published on SCOTUSblog, I argue that the majority’s inquiry resembles a proximate causation analysis. One way to think about the Court’s approach is that it uses analogy as shorthand. The Court says “An entity that engages in activities like Aereo’s performs.” Framed in terms of proximate causation, what it is doing is saying that we will not excuse as a legal cause an actor engaged in the factual cause of a harm when its conduct is functionally equivalent to the conduct of an actor clearly within the scope of the Copyright Act.

The Court explains in more detail some of the factors it considered when reaching its decision, which I note in my SCOTUSblog article:

Although Justice Breyer never raises the issue of proximate causation, he outlines a number of reasons why Aereo is directly liable in this case and which serve to lay the path for future proximate causation analyses. First, Breyer notes that in providing its service, “Aereo uses its own equipment, housed in a centralized warehouse, outside of its users’ homes.” The owner of the equipment is relevant since she maintains dominion and control over the process and is in a position to prevent infringement.

Breyer next points out that Aereo subscribers don’t “receive performances in their capacities as owners or possessors of the underlying works.”  Later, he explains that the decision “does not extend to those who act as owners or possessors of the relevant product.”  The provider of the copyrighted work at issue is relevant because he initiates the process that results in potential infringement and is in a better position to know whether the particular copy was authorized and whether she has a right to copy or perform the work.

Breyer also notes that the holding is limited because “we have not considered whether the public performance right is infringed when the user of a service pays primarily for something other than the transmission of copyrighted works, such as the remote storage of content.”  The range of uses of a particular service speaks to foreseeability and intent.

None of these facts by themselves are sufficient to show proximate causation. But taken together, they support the conclusion that Aereo is the legal cause of the harm and provide guidance to lower courts facing the question in future cases.

In Making Copies! Retiring the Volitional Conduct Test in Favor of Proximate Causation, I proposed that a proximate causation inquiry for cloud computing services that interact with copyrighted works should focus on the individual steps involved in the exploitation of a copyrighted work, including such considerations as the location of the equipment, the provision of the copyrighted work, the participation (or involvement) in the process, the range of uses of the service, and the dominion over any final copy. The Court’s analysis here looked at several of these factors.

But it also examined the service in light of the intent of the Copyright Act. Though it was able to resolve this case by looking at the very narrow intent of Congress to bring cable systems within the scope of the Act, future courts will need to look at other principles. I think it’s fair to say that the copyright law in general evinces three broad principles: (1) that a copyright owner’s exclusive rights to do or authorize any of the Section 106 acts are properly secured absent any limitation or exception, and (2) that copyright law is particularly concerned with acts that multiply copies or communicate works to the public, and (3) that any non-infringing conduct by an actor is not unduly curtailed. Analyzing proximate causation with those principles in mind, courts should be able to apply copyright law to cloud computing services in a consistent and logical manner.

Footnotes

  1. Disclosure: The Copyright Alliance filed an amicus brief in support of broadcasters in the Supreme Court. As with all articles on this site, I am commenting here in my personal capacity. []
  2. American Broadcasting Companies v. Aereo, Inc., 874 F. Supp. 2d 373 (SDNY 2012). []
  3. WNET, Thirteen v. Aereo, Inc., 712 F. 3d 676 (2nd Cir. 2013). []
  4. This rule was adopted by the Second Circuit in United States v. American Soc. of Composers, Authors and Publishers, 627 F. 3d 64, 73 (2nd Cir. 2010). The Court here never explicitly adopts that interpretation, but its opinion suggests at various points that it concurs with the Second Circuit, as when it says, for example, that “an entity only transmits a performance when it communicates contemporaneously perceptible images and sounds of a work.” []

The following comes from a decision released by the Tenth Circuit last week. Though the case involves immigration law, the discussion may be of interest to readers of this site.

To summarize, the Department of Homeland Security initiated removal proceedings of Perez-Paredes, a Mexican native living in the US, after he was convicted under a Utah anti-piracy statute. On advice of his counsel, Perez-Paredes agreed to leave the US voluntarily, but later changed his mind and moved to reopen the removal proceedings based on ineffective assistance of counsel. The Immigration Judge denied that request, a decision that was upheld by the Bureau of Immigration Appeals (BIA).

Here, the Tenth Circuit denied a review of the BIA’s decision, holding that Perez-Paredes was not eligible for cancellation of removal. The Circuit explained (some citations removed and emphasis added):

To be eligible for cancellation of removal, the alien must show that he or she is of “good moral character.” 8 U.S.C. § 1229b. An alien who has been convicted of an aggravated felony or a crime involving moral turpitude is not eligible under § 1229b

…The Immigration and Nationality Act provides that any “theft offense (including receipt of stolen property) or burglary offense for which the term of imprisonment [is] at least one year” is an aggravated felony. Additionally, the Act provides that any “offense relating to commercial bribery, counterfeiting, forgery, or trafficking in vehicles the identification numbers of which have been altered for which the term of imprisonment is at least one year” also constitutes an aggravated felony.

Perez-Paredes admits that he was convicted of a third-degree felony under Utah Code Annotated § 13-10-8. That statute prohibits unlawfully failing to disclose the origin of 100 or more recordings that the defendant has—for commercial advantage or financial gain—sold, rented, or lent, offered to sell, offered to rent, or possessed for any of those purposes when the defendant knows the recordings do not properly contain the true name and address of the manufacturer. Perez-Paredes does not dispute that the permissible term of imprisonment for that crime exceeded one year. He does, however, argue that a conviction under § 13-10-8 is neither a theft offense nor an offense relating to counterfeiting.

The terms “theft offense” and “relating to counterfeiting” are not defined in the Immigration and Nationality Act. But the BIA examined the Utah statute of conviction and reasonably concluded it fit within the Act’s prohibited categories.

Section 13-10-8 is a part of Utah’s Unauthorized Recording Practices Act, which is intended to “prevent the piracy of recorded materials.” It is not unreasonable to deem piracy closely related to both counterfeiting and theft. See, e.g., World Copyright Law 2.29 (3d ed. 2007) (identifying piracy as a form of theft); Elizabeth Friedler, Protecting the Innocent—the Need to Adapt Federal Asset Forfeiture Laws to Protect the Interests of Third Parties in Digital Asset Seizures, 32 Cardozo Arts & Ent. L.J. 283, 311 (2013) (“[T]here is no question that law enforcement agencies treat piracy as theft”); D.O.J. News Release 06-657 (Sept. 28, 2006) (“Whether it is referred to as counterfeiting, or piracy, or willful infringement of trademarks and copyrights, it all comes under the less elegant heading of stealing—pure and simple—and we must continue our efforts to stop it” (quoting U.S. Trade Representative Susan Schwab)).

Order and Judgment, Perez-Paredes v. Holder, No. 13-9593 (10th Cir. May 28, 2014).

Cross-posted on the Law Theories blog.

While the distinction between law and equity may seem antiquated to modern ears, the Supreme Court handed down an interesting copyright opinion last week which turned on whether the plaintiff’s claims were legal or equitable in nature. In Petrella v. MGM, the Court held that the affirmative defense of laches, which bars claims where the plaintiff has unreasonably slept on her rights to the prejudice of the defendant, is only available when the claim is equitable in nature—and even then only when the circumstances are extraordinary, which they were not in Petrella’s case.

The facts of the case are fairly straightforward. The plaintiff, Paula Petrella, sued MGM and others in 2009 for copyright infringement, unjust enrichment, and accounting over the movie “Raging Bull.” Petrella’s father authored a book and two screenplays which were the bases for the movie, and he assigned his rights—including his renewal rights—to MGM’s predecessor-in-interest. However, when Petrella’s father died before the commencement of the renewal period, Petrella inherited his renewal rights—the very rights he had previously assigned away—under the Supreme Court’s holding in Stewart v. Abend. Petrella renewed the rights when the original twenty-eight year term was up in 1991.

But it was not until seven years later in 1998 that Petrella contacted MGM to claim that the movie was an infringing derivative work of the rights she had acquired, and it was not until 2009 that Petrella initiated the instant civil action against MGM. The district court granted summary judgment to MGM, holding that all of Petrella’s claims were barred by the doctrine of laches. The Ninth Circuit affirmed, finding that Petrella’s delay from 1991 (when she acquired the rights) to 2009 (when she finally sued MGM) was unreasonable on her part and prejudicial to MGM. The appellate court was not impressed with the fact that Petrella had waited until the movie was profitable before filing suit.

Interestingly, the Ninth Circuit made a point of noting that Petrella’s claims for unjust enrichment and accounting were equitable in nature:

Recovery of an unjust enrichment is an equitable remedy. Seeking an accounting, where the accounting is not provided for by contract, is also an equitable remedy. Because laches is an equitable defense, we agree with the district court that laches also bars Petrella’s unjust enrichment and accounting claims.1

The Ninth Circuit cited a treatise for the proposition that “since an accounting of profits is an equitable remedy, the plaintiff may be refused the remedy upon equitable grounds.”2 Thus, the Court of Appeals indicated that the availability of an equitable defense such as laches turned on the nature of the remedy being sought, and since unjust enrichment and accounting were equitable remedies, laches could bar such claims.

But the Ninth Circuit was not nearly as cautious when it came to Petrella’s copyright infringement claim. Strangely, the appellate court never mentioned exactly which remedy Petrella sought for the infringement. While it was careful to point out that laches applied to the unjust enrichment and accounting claims because those were equitable in nature, the Ninth Circuit carelessly applied laches to the infringement claim without a single word on whether Petrella there sought legal or equitable relief. The circuit panel instead relied on Ninth Circuit precedent providing that “if any part of the alleged wrongful conduct occurred outside of the limitations period, courts presume that the plaintiff’s claims are barred by laches.”3

The Ninth Circuit thus viewed the laches defense as equitable in nature and applicable to any claim for equitable relief—even for equitable claims within the three-year statute of limitations period.4 Additionally, the circuit court thought that laches was applicable to claims for legal remedies, though the rule it invoked had two parts: If all of the allegedly infringing conduct occurred within the three-year statute of limitations period, then laches presumptively did not apply (though it was still available). On the other hand, if some of the allegedly infringing conduct occurred before the three-year statute of limitations period, then laches presumptively did apply. And since Petrella waited almost two decades to sue MGM, the Ninth Circuit applied its presumption that laches barred her copyright infringement claim—even if Petrella was seeking only legal remedies for the infringement.

While this discussion of law vs. equity may sound archaic and overly formalistic, there is one area of constitutional law where the distinction plays a major role, namely, with the right to a jury trial. The Seventh Amendment to the U.S. Constitution provides:

In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved . . . .5

Whether there is a constitutional right to a jury trial turns on whether the claim constitutes a “suit[] at common law.” The Supreme Court has interpreted this to mean that there is a Seventh Amendment right to a jury trial when the claim is one that would have been an action at law instituted in a court of law—as opposed to a suit in equity brought before a court of equity—back in 1791.6 For modern causes of action that did not exist in 1791, the Court looks at what would have been an analogous claim at the time and characterizes it accordingly. If the claim is legal in nature, then it qualifies as a “suit[] at common law” and there is a constitutional right to a jury trial. Equitable claims, by contrast, carry no constitutional right to a jury trial, and they are instead heard only by a judge.

In Feltner v. Columbia Pictures, the Supreme Court looked at whether the Seventh Amendment provides a constitutional right to a jury trial on the issue of statutory damages for copyright infringement.7 The Ninth Circuit below had characterized statutory damages as equitable in nature, thus providing no constitutional right to a jury trial. The Supreme Court disagreed, noting that “suits at common law” under the Seventh Amendment included both judge-made and statutory causes of action:

The Seventh Amendment thus applies not only to common-law causes of action, but also to actions brought to enforce statutory rights that are analogous to common-law causes of action ordinarily decided in English law courts in the late 18th century, as opposed to those customarily heard by courts of equity or admiralty.8

The Supreme Court employed a two-pronged analysis to determine whether statutory damages were legal or equitable in nature:

To determine whether a statutory action is more analogous to cases tried in courts of law than to suits tried in courts of equity or admiralty, we examine both the nature of the statutory action and the remedy sought.9

In the Supreme Court’s opinion, “close analogues” to claims for statutory damages existed before the Seventh Amendment was adopted in both common law and statutory causes of action for “monetary damages” that “were tried in courts of law, and thus before juries.”10 The “general rule” was that “monetary relief is legal,” the Court noted, “and an award of statutory damages may serve purposes traditionally associated with legal relief, such as compensation and punishment.”11 Since statutory damages were analogous to actions at law for actual damages in the late eighteenth century—actions that would have been tried before a jury in a court of law—the Supreme Court held that statutory damages were legal in nature. This in turn meant that there was a constitutional right to a jury trial on the issue of statutory damages under the Seventh Amendment.

The remedies for copyright infringement available under the Copyright Act are codified in Sections 502 – 505, all subject to the three-year statute of limitations found in Section 507(b).12 Claims for damages and profits fall under Section 504. The copyright owner can elect either “actual damages suffered by him or her” and “any profits of the infringer” under Section 504(b), or “an award of statutory damages” within the given range under Section 504(c). While damages and profits are lumped together in Section 504, it should be noted that the two remedies are quite different in nature. Damages are compensatory, meaning they compensate the plaintiff’s loss and make her whole. Profits, on the other hand, are restitutionary, meaning they disgorge the defendant’s gain under the principle of unjust enrichment.13 Claims for damages are legal in nature, while claims for profits are equitable.

I think much of the modern confusion about the law-equity divide comes from the fact that courts of law and courts of equity were merged over seventy-five years ago. As the Federal Rules of Civil Procedure now declare: “There is one form of action—the civil action.”14 Gone are the procedural differences between an action at law and a suit in equity. A plaintiff seeking both legal and equitable remedies can file a single civil action for both types of claims. But while the procedural differences between law and equity have been abrogated, the substantive differences remain.15 These substantive differences include whether there is a constitutional right to a jury trial on a given claim, and, as the Supreme Court reiterated in Petrella, whether an equitable defense such as laches is available to bar a claim for legal or equitable relief brought within the statute of limitations. The law-equity divide is very much alive in copyright law.

The Supreme Court came down 6-3 in favor of Petrella, with Justice Ginsburg writing for the majority and Justice Breyer in dissent. The Court held that the applicability of laches to claims brought within the statute of limitations turns on whether the remedy sought is legal or equitable in nature:

Section 507(b), it is undisputed, bars relief of any kind for conduct occurring prior to the three-year limitations period. To the extent that an infringement suit seeks relief solely for conduct occurring within the limitations period, however, courts are not at liberty to jettison Congress’ judgment on the timeliness of suit. Laches, we hold, cannot be invoked to preclude adjudication of a claim for damages brought within the three-year window. As to equitable relief, in extraordinary circumstances, laches may bar at the very threshold the particular relief requested by the plaintiff.16

This paragraph needs a bit of unpacking. First, the Supreme Court pointed out that the statute of limitations bars all claims—whether for legal or equitable relief—for infringing conduct that occurred more than three years before the claim accrued. But what happened within the three-year limitations period was a bit more complicated. The Court said that because Congress had spoken on the issue of timeliness in enacting the statute of limitations, the judiciary could not “jettison Congress’ judgment.” This was implicitly based on the separation of powers—but that respect for the judgment of Congress only went so far. The Court said that laches could not trump the statute of limitations—but only when the remedy sought was legal in nature. When the plaintiff sought an equitable remedy, laches could be invoked to trump the statute of limitations—but only in “extraordinary circumstances.”

Justice Ginsburg, writing for the majority, offered a bit of history on the interplay between laches and the statute of limitations. It was not until 1957 that Congress enacted a statute of limitations for civil actions under the Copyright Act.17 Before then, the federal courts would turn to state statutes of limitations for timeliness determinations. Laches could be invoked to trump those state timeliness statutes because doing so was “merely filling a legislative hole,” “not invading congressional prerogatives.”18 But that’s not the case anymore, as Justice Ginsburg noted, since “Congress addressed the matter and filled the hole” when it added the statute of limitations to the Copyright Act.19

Justice Ginsburg observed that the “principal application” of laches was “to claims of an equitable cast for which the Legislature ha[d] provided no fixed time limitation,” and historically statutes of limitations did not apply to “measures of equitable relief.”20 According to the Supreme Court, this tradition of only applying laches to equitable claims survives in modern times. But note the work that laches does today: The statute of limitations in Section 507(b) still bars all claims for equitable relief for infringing acts more than three years old, but within that three-year period, laches can be invoked to bar all equitable claims. Thus, even though Congress, in enacting the statute of limitations, had also explicitly “filled the hole” with respect to the timeliness of equitable claims, the Supreme Court sees no problem with courts invoking laches to bar claims that are equitable in nature.

The Supreme Court’s reasoning was fairly nuanced—yet, to a degree, it was also nonsensical. The Court held that laches cannot be invoked to bar claims for legal relief because Congress had enacted a statute of limitations for all legal claims. Applying laches to legal claims would invade “congressional prerogatives,” that is, implicate separation of powers concerns. But then the Court also held that laches can be invoked to bar claims for equitable relief, despite the fact that Congress had also enacted a statute of limitations for such equitable claims. And this application of laches, the Court must have thought, did not impermissibly invade “congressional prerogatives.” The judiciary seized that power before the merger of law and equity, and apparently it’s not letting go of it now.

Applying its rule to the facts of Petrella, the Supreme Court held that “the courts below erred in treating laches as a complete bar to Petrella’s copyright infringement suit” because the “action was commenced within the bounds of § 507(b), the Act’s time-to-sue prescription, and d[id] not present extraordinary circumstances” that would merit invoking laches to bar the equitable claims. The Court went on to say that even though Petrella’s delay was not extraordinary, such that it should knock out her equitable claims at the outset, it nevertheless could be relevant at the remedial stage—but only for the equitable claims. Thus, even though Petrella’s delay for almost two decades could not bar her claims for equitable remedies as a threshold matter, those remedies, if awarded, could be negatively adjusted on account of her delay.

Follow me on Twitter: @devlinhartline

Footnotes

  1. Petrella v. Metro-Goldwyn-Mayer, Inc., 695 F.3d 946, 956 (9th Cir. 2012) (internal citations omitted). []
  2. Id. (internal citations and quotations omitted). []
  3. Miller v. Glenn Miller Prods., Inc., 454 F.3d 975, 997 (9th Cir. 2006). []
  4. Though the Supreme Court reversed the Ninth Circuit’s application of laches to Petrella’s equitable claims under the particular facts of the case, the Court ultimately agreed with the Ninth Circuit on the general availability of laches to bar equitable claims within the three-year statute of limitations period. []
  5. U.S. Const. amend. VII. []
  6. See, e.g., Chauffeurs, Teamsters & Helpers, Local No. 391 v. Terry, 494 U.S. 558, 564-65 (1990). []
  7. See Feltner v. Columbia Pictures Television, Inc., 523 U.S. 340 (1998). []
  8. Id. at 348 (internal citations and quotations omitted). []
  9. Id. (internal citations omitted). []
  10. Id. at 348-49. []
  11. Id. at 352 (internal citations omitted). []
  12. 17 U.S.C.A. § 507(b) (West 2014) (“No civil action shall be maintained under the provisions of this title unless it is commenced within three years after the claim accrued.”). []
  13. See, e.g., Colleen P. Murphy, Misclassifying Monetary Restitution, 55 SMU L. Rev. 1577, 1585-86 (2002). []
  14. Fed. R. Civ. P. 2 (West 2014). []
  15. See, e.g., Stainback v. Mo Hock Ke Lok Po, 336 U.S. 368, 382 n.26 (1949) (“Notwithstanding the fusion of law and equity by the Rules of Civil Procedure, the substantive principles of Courts of Chancery remain unaffected.”). []
  16. Petrella v. Metro-Goldwyn-Mayer, Inc., No. 12-1315, 2014 WL 2011574 at *4 (U.S. May 19, 2014). []
  17. See Pub. L. 85-313, 71 Stat. 633 (September 7, 1957) (amending Section 115(b) to read “No civil action shall be maintained under the provisions of this title unless the same is commenced within three years after the claim accrued.”). []
  18. Petrella, 2014 WL 2011574 at *5 (internal citations and quotations omitted). []
  19. Id. []
  20. Id. at *9 (internal citations and quotations omitted). []

On Monday, the Supreme Court released its decision in Petrella v. Metro-Goldwyn-Mayer, Inc. The issue there was whether the equitable doctrine of laches could ever bar infringement claims that are brought within the Copyright Act’s statute of limitations period. The Court held that it could not.

But in doing so, did the Court inadvertently weigh in on an unrelated issue, one that is currently the subject of one the widest circuit splits in copyright law?

Application and Registration Approaches

Under US copyright law, works are protected as soon as they are created. However, the law does provide for a voluntary registration mechanism that confers a number of benefits. For example, registration is a prerequisite to filing an infringement lawsuit. Section 411(a) provides that, “no civil action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title.”

Circuits are split on whether Section 411(a) requires a registration to have been processed by the US Copyright Office before a copyright holder can bring suit or whether the requirement is satisfied as soon as the Office receives the application.

The Tenth1 and Eleventh Circuits2 take the first view, the “registration” approach. The Fifth,3 Seventh,4 and Ninth Circuits5 embrace the second, the “application” approach.

The issue remains unresolved in other Circuit Courts. Just this past March, the First Circuit had an opportunity to adopt an approach but declined, as there was no evidence the plaintiff had submitted an application at all, making the question moot.6 While some observers have said the Eighth Circuit has taken the application approach, it does not seem to have definitively ruled on the issue.7

District courts within the Second Circuit are split,8 as are courts in the Fourth.9 (Just last week, a District Court in Virginia took the application approach.)10

The three major copyright treatises, by the way, follow the same pattern as the courts, with Patry in favor of the registration approach, Nimmer favoring the application approach, and Goldstein taking no position.

Which Approach?

The strongest support for the registration approach comes from the plain text of the statute. Section 411(a) says no action for infringement shall be instituted “until registration” has been made, and other provisions in the Copyright Act detail a set of steps involved in the registration process beyond the receipt of the application.

In adopting the registration approach, the Tenth Circuit noted an additional problem under the application approach: “shifting legal entitlements.” “If, for example, an applicant could obtain the advantage of the presumption that the copyright is valid upon application, see 17 U.S.C. § 408(c), but then, after examination the Register of Copyrights determined the material is not copyrightable, the presumption of validity would swing back and forth.”11

Courts adopting the application approach also find support in the statutory language. They point to the ambiguity in Section 408, which says copyright owners “may obtain registration of the copyright claim by delivering to the Copyright Office the deposit specified by this section, together with the application and fee,” as supportive of either approach. In addition, Section 410(d) could also be read in support of either approach since it provides that the effective date of a registration is the date the application is received by the Copyright Office.

Courts have also found other reasons to support the application approach. Section 411(a) allows the institution of an action for infringement even if the Copyright Office refuses an application. The act of delivering an application, then, is all that is necessary on the part of the copyright owner to be able to file a lawsuit, which makes the actual processing of the application a mere formality—one that serves little function since, as noted above, the effective date of a registration is the date the application is delivered. Requiring strict adherence to this formality, as the registration approach does, incurs real costs—copyright applications currently can take at least 3-5 months to process. A copyright owner will suffer unnecessary damages if infringement continues to occur while she waits for her registration certificate, and may lose the ability to sue if she is toward the end of the statute of limitations period.

Did Petrella Adopt the Registration Approach?

Given the wide disagreement in the Circuits and the persuasive arguments on both sides, it is somewhat surprising that the Supreme Court would touch on this issue.

During a discussion rebutting the argument that there is a danger in losing evidence if a copyright owner remains inactive, the Court notes that the registration mechanism reduces the need for extrinsic evidence, saying, “Although registration is ‘permissive,’ both the certificate and the original work must be on file with the Copyright Office before a copyright owner can sue for infringement.” The reference to a registration certificate being on file with the Copyright Office before a copyright owner can sue strongly suggests the Supreme Court has taken the registration approach. But this is hardly an endorsement of the registration approach. There is no indication that the Court intended to weigh in on the issue, not even a footnote pointing out the Circuit split on the issue.

More importantly, the issue of which approach is correct was not in front of the Court, and its point here was not part of its holding, making it most likely dicta. Even then, given the almost off-handedness of the statement, combined with a lack of any discussion about the different approaches, it is not likely any courts will find this statement particularly persuasive.

Still, this is an issue worth noting by practitioners and copyright owners and underscores the importance of timely copyright registration for creators.

H/T to Leslie Burns for first spotting this issue. 

Footnotes

  1. La Resolana Architects, PA v. Clay Realtors Angel Fire, 416 F.3d 1195, 1202-07 (10th Cir. 2005), abrogated on other grounds by Reed Elsevier, 559 U.S. 154. []
  2. M.G.B. Homes, Inc. v. Ameron Homes, Inc., 903 F.2d 1486, 1488-89 (11th Cir. 1990), abrogated on other grounds by Reed Elsevier, 559 U.S. 154. []
  3. Apple Barrel Prods., Inc. v. Beard, 730 F.2d 384, 386-87 (5th Cir. 1984). []
  4. Chi. Bd. of Educ. v. Substance, Inc., 354 F.3d 624, 631 (7th Cir. 2003). []
  5. Cosmetic Ideas, Inc. v. IAC/Interactivecorp., 606 F.3d 612, 615-21 (9th Cir. 2010). []
  6. Aliciea v. Machete Music, No. 12-1548 (1st Cir. Mar. 7, 2014). []
  7. See Tri-Marketing v. Mainstream Marketing Services, Civ. No. 09-13 (DWF/RLE), 2009 U.S. Dist. LEXIS 42694 (D. Minn. May 19, 2009), which held that while the Eighth Circuit appeared to have adopted the application approach in Action Tapes, Inc. v. Mattson, 462 F. 3d 1010 (8th Cir. 2006), the Circuit was not presented with the precise issue of “whether complying with copyright application requirements satisfies the jurisdictional requirements under § 411(a),” thus leaving the question of which approach is correct unresolved. []
  8. Compare Well-Made Toy Mfg. Corp. v. Goffa Intern. Corp., 210 F.Supp.2d 147, 157 (E.D.N.Y.2002) (application approach) to Demetriades v. Kaufmann, 680 F.Supp. 658, 661 (S.D.N.Y.1988) (registration approach). []
  9. See Mays & Associates, Inc. v. Euler, 370 F.Supp.2d 362, 367-370 (D. Md. 2005) for discussion. []
  10. Caner v. Autry, No. 6:14-cv-00004, 2014 U.S. Dist. LEXIS 66508, (W.D. Va. May 14, 2014). []
  11. 416 F.3d at 1205. []

On Friday, the Court of Appeals for the Federal Circuit released its decision in Oracle America Inc. v. Google Inc. The dispute concerned allegations that Google copied elements from Oracle’s Java software platform when it developed its Android platform for the mobile market. The Federal Circuit handed Oracle a solid victory, ignoring Google’s push for an interoperability exception to excuse copying that was not for the purpose of interoperability.

The Litigation

The facts of the dispute are essentially this: Sun Microsystems (which has since been acquired by Oracle) developed the Java platform in 1996 with the idea of creating a virtual machine that allowed software to run on any platform or operating system – allowing programmers to “write once, run anywhere.” In 2005, Google acquired mobile startup Android, Inc. with an eye toward entering the mobile market. It entered into negotiations with Sun to license and adapt the Java platform for its mobile devices. The negotiations were ultimately unsuccessful – Google refused to “make the implementation of its programs compatible with the Java virtual machine or interoperable with other Java programs”, which ran counter to Sun’s commitment to interoperability.

So Google began to develop its own virtual machine to interact with the Java platform. It also wanted to take advantage of the developer community that Sun had built up rather than spending the time and effort building its own, so it copied the declaring source code from 37 Java API packages verbatim, as well as the “taxonomy” of the packages – the structure, sequence, and organization (“SSO”) of the packages and their respective classes. That way, developers already familiar with Java could easily begin writing programs for Google’s mobile platform, increasing its value.

The technology

This case does require some understanding of the technology at issue. The court begins by noting, “This copyright dispute involves 37 packages of computer source code. The parties have often referred to these groups of computer programs, individually or collectively, as ‘application programming interfaces,’ or API packages, but it is their content, not their name, that matters.”

The Java platform in its entirety provides an environment for programmers to develop applications that can run on any device or hardware. It essentially consists of the Java development kit (JDK) that programmers use to create their apps and the Java virtual machine (JVM) that runs the code, translating the app source code into source code that the machine the app is running on can understand.

Included in the development kit are a number of “ready-to-use” Java programs available to programmers to perform common computer functions – these are the API packages involved in the case. They are, in the words of the court, “shortcuts” that allow programmers to execute certain functions rather than writing the function from scratch. Each function is referred to as a “method.” Related methods are grouped together into “classes.” Related classes, in turn, are organized into “packages.”

The source code that the packages are composed of can logically be divided into two types: (1) the “implementing code” is the guts of the methods, the individual steps that comprise a specific function, and (2) the “declaring code” is the “header” that identifies the method and tells the programmer what the method needs, like what inputs must be provided and what outputs can be expected.

Oracle licenses its Java platform and API packages in three different ways: an open source license on its declaring and implementing code that is free but requires licensees to offer any changes or additions they contribute through open source licensing as well; a Specification license that provides licensees with the declaring code but not the implementing code; and a Commercial license, which allows businesses to “use and customize the full Java code in their commercial products and keep their code secret” in exchange for royalties.

The Procedure

A quick discussion of the procedure in the litigation here is also helpful, as it is a bit unusual. The issue of copyrightability – whether the declaring code and SSO are protectable in the first instance – was given to the trial judge to decide. The issue of infringement – whether Google’s copying of these intruded onto Oracle’s exclusive rights – was given to the jury, along with Google’s affirmative fair use defense. Because the issues were being determined simultaneously, the jury was instructed to assume copyrightability when it determined infringement and fair use.

The jury found that, presuming the API packages were copyrightable, Google had infringed, but it was unable to reach a verdict on fair use. However, the trial judge would later determine that the declaring headers and SSO were not protected by copyright, and Oracle appealed.

The Appeal

On appeal, it was undisputed that Google had “copied 7,000 lines of declaring code and generally replicated the overall structure, sequence, and organization of Oracle’s 37 Java API packages.” The question was whether these elements are protected by copyright. The district court had determined they were not because “(1) there was only one way to write the Java method declarations and remain ‘interoperable’ with Java; and (2) the organization and structure of the 37 Java API packages is a ‘command structure’ excluded from copyright protection under Section 102(b).”

Oracle argued that the district court was wrong when it “(1) concluded that each line of declaring code is uncopyrightable because the idea and expression have merged; (2) found the declaring code uncopyrightable because it employs short phrases; (3) found all aspects of the SSO devoid of protection as a ‘method of operation’ under 17 U.S.C. § 102(b); and (4) invoked Google’s ‘interoperability’ concerns in the copyrightability analysis.” The Federal Circuit agreed with Oracle on all its points.

Essentially, said the Federal Circuit, the district court approached the issue from the wrong direction, using doctrines meant to determine the scope of conduct that constitutes infringing activity in order to analyze the threshold question of copyrightability. (Or, as Lee Gesmer states it, “Filtration for interoperability should be performed ex ante, not ex post.”) The Circuit also held that concerns about interoperability that the district court brought up should be reserved for a fair use analysis.

Copyrightability

The Federal Circuit began its analysis by noting that “the application of copyright law in the computer context is often a difficult task” and then proceeded step-by-step through the question of copyrightability.

Computer programs can be protected by copyright as “literary works.” To be protected, a work must be “original” and possess “at least some minimal degree of creativity.” But protection extends only to the particular expression of an idea in a work, not to the idea itself. The Copyright Act refers to this distinction between ideas and expression in Section 102(b), which says:

In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.

The Circuit observes that among the principles incorporated into this section is the rule that “those elements of a computer program that are necessarily incidental to its function are … unprotectable.”

It goes on to state that copyright protection extends to both literal and non-literal elements of computer programs. The literal elements include the verbatim source code. Non-literal elements include such components as the program’s sequence, structure, and organization. Here, Oracle was claiming copyright protection to both: “(1) literal elements of its API packages—the 7,000 lines of declaring source code; and (2) non-literal elements—the structure, sequence, and organization of each of the 37 Java API packages.”

As the court points out, no one disputes that these elements are original. What is at dispute is whether these elements are copyrightable under Section 102(b), and both parties disagree over the Section’s interpretation and application. In the end, the Circuit rejected Google’s argument that copyrightability of software programs is a two-step process, “wherein Section 102(a) grants copyright protection to original works, while Section 102(b) takes it away if the work has a functional component.” The court explained that both sections must be considered in tandem.

Abstraction-Filtration-Comparison

In order do so, the Ninth Circuit endorses the Second Circuit’s three step “abstraction-filtration-comparison” test.

In the abstraction step, the court “first break[s] down the allegedly infringed program into its constituent structural parts.” In the filtration step, the court “sift[s] out all non-protectable material,” including ideas and “expression that is necessarily incidental to those ideas.” In the final step, the court compares the remaining creative expression with the allegedly infringing program.

As the Federal Circuit explains, the second step involves consideration of “traditional copyright principles of originality, merger, and scenes a faire” to determine first whether expression is original to the programmer and second whether a particular element was included because of efficiency considerations, requirements external to the program itself, or taken from the public domain.

The first step of the abstraction-filtration-comparison test is part of the copyrightability analysis. The last question goes to infringement. In the Ninth Circuit, the second step straddles the line; questions of originality go toward copyrightability, while “concepts of merger and scenes a faire are affirmative defenses to claims of infringement.” According to the Circuit, “While the trial court mentioned the abstraction-filtration-comparison test when describing the development of relevant law, it did not purport to actually apply that test. Instead, it moved directly to application of familiar principles of copyright law when assessing the copyrightability of the declaring code and interpreted Section 102(b) to preclude copyrightability for any functional element ‘essential for interoperability’ ‘regardless of its form.’” The Circuit next addresses each holding of the lower court in turn.

First, the district court held that the declaring code was not entitled to copyright protection under the merger and short phrase doctrines. The merger doctrine prevents infringement of expression when that expression is the only way an idea can be expressed. For software, that means merger allows copying of elements that “are the only and essential means of accomplishing a given task.”

As stated above, however, the merger doctrine is used to determine infringement, not copyrightability. In addition, the district court improperly looked at merger from Google’s perspective. Instead, the Circuit explains, “merger cannot bar copyright protection for any lines of declaring source code unless Sun/Oracle had only one way, or a limited number of ways, to write them.” And, as the evidence shows, Sun/Oracle had virtually unlimited ways to write its declaring code.

Short phrases, of course, are not protectable, but as the Circuit observes, that does not mean any work that contains short phrases is not copyrightable. The relevant question is “whether those phrases are creative.” The Circuit explains:

By analogy, the opening of Charles Dickens’ A Tale of Two Cities is nothing but a string of short phrases. Yet no one could contend that this portion of Dickens’ work is unworthy of copyright protection because it can be broken into those shorter constituent components. The question is not whether a short phrase or series of short phrases can be extracted from the work, but whether the manner in which they are used or strung together exhibits creativity.

The Circuit ultimately concludes that “Oracle ‘exercised creativity in the selection and arrangement’ of the method declarations when it created the API packages and wrote the relevant declaring code,” thus affording them copyright protection.

Next, the Circuit looks at the “scenes a faire doctrine,” which the trial court rejected but which Google raises on appeal. This doctrine bars from copyright protection “commonplace expressions” such as stock characters and scenes. For software, says the Circuit, “the scene a faire doctrine denies protection to program elements that are dictated by external factors such as ‘the mechanical specifications of the computer on which a particular program is intended to run’ or ‘widely accepted programming practices within the computer industry.’”

Google argued that “because programmers have become accustomed to and comfortable using the groupings in the Java API packages, those groupings are so commonplace as to be indispensable to the expression of an acceptable programming platform.” The Federal Circuit rejects this argument. As with the merger doctrine, the scenes a faire doctrine involves the question of infringement, not copyrightability. And also like the merger doctrine, “the focus of the scenes a faire doctrine is on the circumstances presented to the creator, not the copier. The court’s analytical focus must be upon the external factors that dictated Sun’s selection of classes, methods, and code—not upon what Google encountered at the time it chose to copy those groupings and that code.”

Structure, Sequence and Organization

The Federal Circuit next looks at the trial court’s conclusion that the structure, sequence, and organization (SSO) of the API packages is not copyrightable because it is a “system or method of operation.” The trial court appears, to the Federal Circuit, to have reached this conclusion by relying on the First Circuit’s Lotus Development Corp. v. Borland International, Inc. decision.

In Lotus, as the Federal Circuit explains, software developer Borland sought to develop a spreadsheet to compete with the popular Lotus 1-2-3. In doing so, it copied the menu command hierarchy of Lotus 1-2-3—where commands such as “Copy,” “Print,” and “Quit” are arranged into menus and submenus—in its entirety in order to make it easier for Lotus users to switch. The First Circuit held that this menu command hierarchy is not copyrightable subject matter. It is instead a “method of operation” which Section 102(b) bars from copyright protection. The First Circuit defined a “method of operation” as “the means by which a person operates something, whether it be a car, a food processor, or a computer” and held that the menu command hierarchy is the means by which a person operates Lotus 1-2-3.

The Circuit agreed with Oracle that it was incorrect to rely on Lotus because “it is distinguishable on its facts and is inconsistent with Ninth Circuit law.” The Circuit explain that, unlike here, Lotus did not involve any copying of the underlying code, the elements copied were not found creative by the Lotus court, and the elements copied were “essential to operating” the system.

“More importantly,” says the Circuit, “the Ninth Circuit has not adopted the court’s ‘method of operation’ reasoning in Lotus, and we conclude that it is inconsistent with binding precedent.” The Circuit sees Lotus’s rule that functional elements are never copyrightable as inconsistent with the abstraction-filtration-comparison analysis, a conclusion the Tenth Circuit had also come to when it rejected the adoption of Lotus. Indeed, notes the Federal Circuit, “no other circuit has adopted the First Circuit’s ‘method of operation’ analysis.”

The problem the Federal Circuit sees with the idea that functional elements can never be copyrightable is that it would mean no computer program is protectable—“computer programs are by definition functional.” The Circuit ultimately concludes “that a set of commands to instruct a computer to carry out desired operations may contain expression that is eligible for copyright protection.” The Circuit explains what this distinction looks like in the case here:

On appeal, Oracle does not—and concedes that it cannot—claim copyright in the idea of organizing functions of a computer program or in the “package-class-method” organizational structure in the abstract. Instead, Oracle claims copyright protection only in its particular way of naming and organizing each of the 37 Java API packages. Oracle recognizes, for example, that it “cannot copyright the idea of programs that open an internet connection,” but “it can copyright the precise strings of code used to do so, at least so long as ‘other language is available’ to achieve the same function.” Thus, Oracle concedes that Google and others could employ the Java language—much like anyone could employ the English language to write a paragraph without violating the copyrights of other English language writers. And, that Google may employ the “package-class-method” structure much like authors can employ the same rules of grammar chosen by other authors without fear of infringement. What Oracle contends is that, beyond that point, Google, like any author, is not permitted to employ the precise phrasing or precise structure chosen by Oracle to flesh out the substance of its packages—the details and arrangement of the prose.

Interoperability

The lower court based its decision in part on the conclusion that “Google replicated what was necessary to achieve a degree of interoperability—but no more, taking care, as said before, to provide its own implementations” and reached this conclusion by relying on the Ninth Circuit decisions in Sega Enterprises v. Accolade, Inc. and Sony Computer Entertainment, Inc. v. Connectix, Corp.

But as the Federal Circuit points out, both Sega and Sony are fair use cases, not copyrightability cases. In addition, they are distinguishable because “defendants in those cases made intermediate copies to understand the functional aspects of the copyrighted works and then created new products.” Here, however, Google copied literal and non-literal elements of Oracle’s software into its own product, not to reverse engineer Java “to figure out the ideas and functionality of the original” in order to create “its own structure and its own literal code.”

The Circuit rejects too Google’s suggestion of a broader “interoperability exception” to copyrightability as inconsistent with Ninth Circuit case law and the abstraction-filtration-comparison inquiry (which the Ninth Circuit endorsed in Sega itself). The Circuit once again reminds of the fact that copyrightability is focused on the choices available to the plaintiff when creating the original program. It notes “the relevant compatibility inquiry asks whether the plaintiff’s choices were dictated by a need to ensure that its program worked with existing third-party programs.  Whether a defendant later seeks to make its program interoperable with the plaintiff’s program has no bearing on whether the software the plaintiff created had any design limitations dictated by external factors.”

The Federal Circuit reserves its strongest words against Google in its discussion of interoperability. “Indeed,” says the Circuit, “given the record evidence that Google designed Android so that it would not be compatible with the Java platform, or the JVM specifically, we find Google’s interoperability argument confusing.” It goes on to point out, “The compatibility Google sought to foster was not with Oracle’s Java platform or with the JVM central to that platform. Instead, Google wanted to capitalize on the fact that software developers were already trained and experienced in using the Java API packages at issue.”

Fair Use

The Circuit ends by looking at Google’s assertion of a fair use defense, which the original jury was unable to reach a verdict on. Oracle argues on appeal that the Circuit should rule against fair use as a matter of law, saying “Google knowingly and illicitly copied a creative work to further its own commercial purposes, did so verbatim, and did so to the detriment of Oracle’s market position.” While the Circuit agrees that “Oracle’s position is not without force,” it ultimately holds that “due respect for the limit of our appellate function requires that we remand the fair use question for a new trial.” It does so because a number of material facts remain in dispute (fair use is a mixed question of fact and law).

First, disagreement remains over whether Google’s use is “transformative,” though the Circuit does point out that “Google overstates what activities can be deemed transformative under a correct application of the law.” Second, though it was error for the judge to consider interoperability in the copyrightability analysis, it may be relevant to a fair use inquiry. Finally, concerning market impact, the Circuit notes that Oracle disputes the district court’s finding that “Sun and Oracle never successfully developed its own smartphone platform using Java technology,” saying it had been licensing in the mobile and smartphone markets when Google copied its API packages, a move that harmed those commercial opportunities.

Next steps

This decision is just shy of a complete victory for Oracle. The Federal Circuit rejected all of Google’s arguments unequivocally. It agreed with all of Oracle’s arguments except for its argument that it should reject Google’s fair use defense—though even then, it showed a good deal of skepticism toward the defense (and, on the market harm prong, moved the needle more in favor of Oracle). But while nothing has been publicly announced yet, I imagine Google will seek a rehearing in front of the entire Federal Circuit before going back to the district court (and there’s always the chance Supreme Court review will be sought at a later point before any return to the district court).

Within hours of the decision, tech advocates and the tech press were already predicting the utter destruction of innovation. It has been called “potentially disastrous” and “dangerous” (along with predictable assertions that the judges involved must not understand technology). I believe, even if you disagree with the outcome of the case, these charges are greatly exaggerated. It’s difficult to see how interoperability is jeopardized by a case where the defendant deliberately set out to create a program that was not interoperable. And the decision does not impact the ability of developers using third-party APIs. At issue was not a defendant interacting with or using a third party’s API, but rather a defendant who copied and replicated an API qua API to be incorporated into its own platform.

I tend to agree with Oracle’s attorney Rosenkranz, who said, “There’s nothing at all astounding in what the Federal Circuit did.” The decision is methodical and well-reasoned. It correctly applies core copyright doctrines and existing precedent. No doubt it will become a seminal case in software copyright law, due in no small part to its thorough discussion of relevant doctrines, unless and until a full panel or the Supreme Court weighs in.

Cross-posted on the Law Theories blog.

The cloud took center stage at the oral argument in the Aereo appeal before the Supreme Court this past Tuesday. Several justices expressed concern over how Aereo’s service can be distinguished from a cloud storage service. As they had argued in their reply brief, the petitioners, represented by Paul D. Clement, note that there’s a difference between a service that allows its users to store and access the content they already possess and a service that supplies the content to its users in the first instance. Clement argues that this distinction flows from the “to the public” language of the Transmit Clause:

Here, I think the ultimate statutory text that allows you to differentiate a cloud locker storage from something like what Aereo does is a language to the public. And I do think that in all sorts of places, including the real world, there’s a fundamental difference between a service that allows – that provides new content to all sorts of end-users, essentially any paying stranger, and a service that provides a locker, a storage service.

And I think if you want a real world analogy off of the Internet, I think it’s the basic decision – the difference between a car dealer and a valet parking service. I mean, if you look at it from 30,000 feet, you might think, hey, both of these things provide cars to the public. But if you looked at it more closely, you’d understand, well, if I show up at the car dealership without a car, I’m going to be able to get a car. If I show up at the valet parking service and I don’t own a car, it’s not going to end well for me. . . .

I think there is a very real way in which you would say, you know, at the end of the day, the car dealer’s providing cars to the public, the valet parking service is not. It’s providing a parking service.

Clement’s “real world analogy” looks at the difference between a car dealer and a valet service. He argues that Aereo is like a car dealer because people go there to obtain a car in the first instance. It’s not like a valet service, where you can only get back the car you dropped off. What makes Aereo different than a cloud storage service like Dropbox is that Aereo supplies the content to its users in the first instance. You don’t go to Aereo to park the car you already own; you go to Aereo to buy the car.

Clement argues that whether a transmission is “to the public” turns on who supplies the content:

If all they can do is, just like the valet car parking service, is get back what they put up there, I think you could easily say that that is not to the public. And that is not just me coming up with a clever distinction. That’s the distinction that’s really been drawn in the real world, because not all cloud computing is created equal, and there are some cloud computing services that use cloud computing technology to get new content to people that don’t have it, and they get licenses. And there is other cloud computing that just has locker services and they don’t think they need a license . . . .

This tracks my own argument, and I think it’s a reasonable line to draw—one that has indeed “really been drawn in the real world.” As I mentioned in my last post, the norm is that a service that supplies the content to members of the public in the first instance—whether by public distribution as with iTunes, by public performance as with Spotify, or by public display as with Westlaw—obtains a license to supply this content. The reason the service needs this license is because the content it supplies is being transferred “to the public” in the first instance, thus making it the quintessential public distribution, performance, or display.

These three exclusive rights (public distribution, performance, and display) are all related in that they make directly liable anyone who supplies the content “to the public” in the first instance. All three rights involve transferring the content from the transferor to the transferee where the relationship between the two is a public one. At the end of the transfer, the transferee obtains the content in the first instance, that is, the content in which the transferee has no prior possessory interest. Without a license (or some other defense), the transferor has violated one or more of the copyright owner’s three exclusive rights to supply the content “to the public” in the first instance.

And this is the difference Clement is talking about. A cloud storage service does not supply the content “to the public” in the first instance. Members of the public use a cloud storage service to store and access the content they already have a possessory interest in. It’s the difference between a library, which publicly distributes a book that it lends out, and a safety deposit box, where I can store a book that I already possess for safekeeping. If I later go to the bank to retrieve the book from my safety deposit box, the bank is not publicly distributing the book. The bank instead is my bailee, and I am merely retrieving my property as a bailor. The relationship, in other words, is one of bailment.

This same distinction based on who supplies the content was invoked by Deputy Solicitor General Malcolm L. Stewart, arguing on the government’s behalf as an amicus curiae in support of the petitioners:

The second thing that I would like to reinforce in Mr. Clement’s presentation is that there is no reason that a decision in this case should imperil cloud locker services generally . . . .

[T]here are obviously services that provide television programming over the Internet. Some of them are licensed because they recognize that they are publicly performing. If a particular company, for instance, recorded television programs and offered to stream them to anyone who paid the fee or offered to stream them for free and make its money off advertising, that would be a public performance because those companies would be providing content to people who didn’t have it.

I think the basic distinction, the one that at least defines the extremes, is the distinction between the company, whether it be Internet-based or a cable transmitter, that provides content in the first instance and the company that provides consumers with access to content that they already have. If you have a cloud locker service, somebody has bought a digital copy of a song or a movie from some other source, stores it in a locker and asks that it be streamed back, the cloud locker and storage service is not providing the content. It’s providing a mechanism for watching it.

Like the petitioners, the government argues that there’s a simple dichotomy between a service that supplies the content to members of the public in the first instance and one that does not. When the service itself supplies the content that its users can stream over the internet, it’s publicly performing. And when the service merely enables users to stream the content that they already possess, it’s not publicly performing. That’s how you can tell the difference between the two.

Not surprisingly, David C. Frederick, representing Aereo, thinks this simple dichotomy just doesn’t work. Justice Kagan asked Frederick why he thinks liability does not turn on who supplies the content:

Mr. Frederick, why isn’t it sufficient to create a line such as the one Mr. Clement said, which said, you know, do you on the one hand supply or provide the content, that puts you in one box; on the other hand, if you are not supplying or providing the content, if the user is supplying and providing the content, and you are just providing the space, a kind of platform for them to do that and for them potentially to share the content, that puts you in another box?

To which Frederick replied:

Well, Justice Kagan, I note that my friend did not reference the words of the Transmit Clause at all when he offered that distinction. And that’s actually quite important, because in order to get there, you have to make up words to put them in the Transmit Clause. But even if you were to think that that was good for a policy reason, you would still have to explain why the hundreds of thousands of people that are subscribers to Aereo’s service don’t have exactly the same fair use right to get over-the-air broadcast content that all of those people who are not Aereo subscribers but they happen to have a home antenna and a DVR. Those people have every bit as right to get that access. And the fact that they are doing it doesn’t make their antenna or their antenna provider a content provider.

As to his first claim, namely, that Clement “did not reference the words of the Transmit Clause,” I don’t think this is true. As noted above, Clement explicitly said his argument flowed from the “to the public” language in the Transmit Clause. What makes it “to the public” is the fact that the content is being supplied in the first instance to members of the public. I would add that this is the same rule that applies whether discussing the public distribution, performance, or display right. We’re interested in whether the transferor has supplied the transferee, a member of the public, with the content in the first instance. That’s what makes it “to the public.”

As to his second argument, I have to first point out that I don’t think there’s any such thing as a “fair use right.” As I explained in a prior post, fair use is a privilege, not a right. There is no affirmative right to make a copy. The only right is the copyright owner’s exclusive right to exclude others from making a copy. Regardless, the question isn’t whether a home user can set up an antenna and DVR to time-shift over-the-air broadcasts. That’s the reproduction right, which does not involve transferring the content from one party to a member of the public. The transfer of the content in that scenario comes from the over-the-air broadcast, which is a licensed public performance on the broadcaster’s part. And it needs to be licensed because the broadcaster is supplying the content “to the public” in the first instance.

But that’s not the issue here with Aereo. The issue is whether Aereo is publicly performing when the content is transmitted from Aereo’s service to members of the public. This is the transmission we are looking at, not the prior over-the-air transmission “to the public” from the broadcaster. The difference between this scenario and the home antenna and DVR scenario is that here Aereo is a middleman between the broadcaster and the member of the public. The transmission doesn’t go directly from the broadcaster to the member of the public; it goes from the broadcaster to Aereo to the member of the public. And the difference between the broadcaster and Aereo is that only the broadcaster has a license to publicly perform, i.e., to supply the content “to the public” in the first instance.

So the question is really whether Aereo is publicly performing by supplying the content to members of the public in the first instance. It seems clear to me that it is. Aereo’s service is “any device or process” that transmits copyrighted works “to the public.” Members of the public use Aereo to obtain the content in the first instance. And the fact that Aereo also enables its subscribers to make copies is beside the point. Those copies are just part of the “device or process” that Aereo uses to supply the content “to the public.” They don’t change the fact that Aereo is still engaging in the quintessential public performance, and Aereo can’t escape liability for copying by way of utilizing more copies.

Follow me on Twitter: @devlinhartline

Cross-posted on the Law Theories blog.

The petitioners have filed their reply brief in the Aereo appeal, and I’m thrilled to see their focus on who supplies the content—a standard for differentiating cloud computing sheep from goats that I’ve been advocating (see here and here).

Right out of the gate, the petitioners note that Aereo supplies the content:

Congress could hardly have been clearer that it did not want technological advances (or, in Aereo’s case, gimmicks) to undermine its basic policy judgment that a third party should not be able to build a business model out of supplying performances of the copyrighted works of others to the public without authorization.1

And the petitioners point out that this makes Aereo different than other cloud computing services:

Nor is there any merit to Aereo’s suggestion that its service is indistinguishable from legitimate cloud computing services. There is an obvious difference between providing storage for content that the end-user independently possesses and making the content itself available to anyone who pays a fee.2

Aereo is not just like any other cloud computing service. Aereo’s subscribers utilize its service to obtain content in the first instance—content that Aereo itself supplies via its tens of thousands of tiny antennae. It doesn’t matter how Aereo supplies the content (uploads, cameras, antennae, etc.). It matters whether Aereo supplies the content. And obviously it does—that’s the very service Aereo provides. Subscribers pay Aereo eight or twelve bucks a month because they want the content Aereo supplies. Without that content, there is no Aereo. In fact, the only content available on Aereo’s service is the content that Aereo itself supplies.

This concept of who the supplies the content is nothing new. If I buy and download a song from iTunes, there is no doubt that iTunes is publicly distributing the content that it supplies. If I use Spotify to stream one of my favorite songs, there is no doubt that Spotify is publicly performing the content that it supplies. And if I look up a law review article on Westlaw, there is no doubt that Westlaw is publicly displaying the content that it supplies. And the fact that I press a button to initiate things doesn’t change the public nature of the distribution, performance, or display.

The difference between all of these services and the kind of passive cloud computing service that Aereo erroneously likens itself to is that these services supply the content in the first instance. Aereo is nothing like, say, Microsoft’s OneDrive, where I have been saving drafts of this post. Aereo instead—like iTunes, Spotify, and Westlaw—supplies the content to members of the public who wish to obtain that content in the first place.

An amicus brief supporting Aereo, filed by a group of thirty-six intellectual property and copyright law professors, argues that Aereo’s service is just like Sony’s VCR:

The Aereo system is the functional equivalent of the Sony Betamax: consumers use it to record television programs for subsequent playback to themselves.3

In their opinion, Aereo lacks the necessary volitional conduct to be held directly liable:

As in Sony, consumers are using a technology to record copyrighted works for their later enjoyment. As in Sony, consumers make every specific decision about how to use the technology. They choose which television programs to record, for how long to record them, when to watch those programs later, for how long to watch them, and when to discard previously stored programs. Consumers call all of the shots. On the present record, if anyone here is a direct infringer, it is the consumers. Aereo lacks the necessary “aspect of volition” to be held directly rather than secondarily liable.

This rule—the “volitional conduct” doctrine—has an impeccable pedigree. Every Court of Appeals to have considered the volitional conduct doctrine has adopted it. In addition, District Courts in another three circuits have endorsed the doctrine.4

I wholeheartedly agree that the volitional conduct test has an “impeccable pedigree” and that it should be applied here to determine whether Aereo is a direct infringer. Properly understood, the volitional conduct test simply looks at the actions taken by the defendant that brought about the particular copying (in the broad sense) at issue. The test, in other words, is causation. And the notion that liability turns on causation is not some special rule applicable only to copyright infringement. It’s foundational to tort law generally.

As with all torts, the question is whether the defendant’s tortious conduct was the legal cause—a term of art—of the violation of the plaintiff’s legal right:

The words “legal cause” . . . denote the fact that the causal sequence by which the actor’s tortious conduct has resulted in an invasion of some legally protected interest of another is such that the law holds the actor responsible for such harm unless there is some defense to liability.5

In order for the defendant’s conduct to be the legal cause of the injury,6 “the act or omission must be a substantial factor in bringing about the harm.”7 “Substantial” denotes “the fact that the defendant’s conduct has such an effect in producing the harm as to lead reasonable men to regard it as a cause.”8 The law is not interested in all conduct that brings about the injury, i.e., the factual causes of the injury. Indeed, such causes could conceivably “stretch back to the dawn of human history.”9 The law instead focuses on proximate causation, which is “shorthand for a concept: Injuries have countless causes, and not all should give rise to legal liability.”10

But where to draw the line between those factual causes that are proximate and those that are not? As with perhaps all line drawing, there’s a certain arbitrariness to it:

What we do mean by the word ‘proximate’ is that, because of convenience, of public policy, of a rough sense of justice, the law arbitrarily declines to trace a series of events beyond a certain point. This is not logic. It is practical politics.11

I take a less cynical view, but I think the arbitrariness is easy to misunderstand. There’s nothing arbitrary about holding a defendant liable for an injury that he factually caused. The arbitrariness comes from not holding a defendant liable for an injury, even though he factually caused it. And the reason proximate causation analysis is somewhat arbitrary in nature is because it has to be:

[T]he infinite variety of claims that may arise make it virtually impossible to announce a black-letter rule that will dictate the result in every case. Instead, previously decided cases identify factors that circumscribe and guide the exercise of judgment in deciding whether the law affords a remedy in specific circumstances.12

Since it’s impossible to create a rule that encompasses every possible way of causing an injury, it’s left to the courts to fashion the contours of the proximate causation analysis. This common law tradition applies in copyright law as it does in all tort law. Copyhype’s ever-brilliant Terry Hart has identified a list of factors that courts have considered while analyzing causation, such as the location of the equipment and who supplies the content. These factors are relevant because they go to whether the defendant is a substantial cause of the copying.

This proximate causation analysis should not be misperceived as a balancing test, such as the one employed when a court determines whether a given use by a defendant is fair. These factors are not relevant because they’ve survived some ad hoc or categorical balancing of the plaintiff’s and defendant’s interests. They are relevant, where applicable, because they represent commonly-occurring conduct by a defendant that goes to whether the defendant caused the copying at issue to occur.

Getting back to the amicus brief submitted by the thirty-six intellectual property and copyright law professors, I think their analogy between Sony’s VCR and Aereo’s service is unpersuasive because the volitional conduct with each is significantly different. Of course, Sony concerned the reproduction right, while Aereo concerns the public performance right. But, more fundamentally, Sony’s liability was ultimately analyzed under the rubric of indirect infringement—and not direct infringement as we have here with Aereo—because Sony’s conduct was sufficiently remote such that it was not directly causing the copying at issue.

While we may tend to think of Sony as a contributory liability case, the fact is that the copyright owner plaintiffs also argued for direct liability in the district court. In support of this claim, the plaintiffs cited Elektra,13 a case that is eerily on point here with Aereo. There, the defendants operated a store where blank tapes, coin-operated tape-duplicating machines, and prerecorded copyrighted works were offered to the public for in-store use. The district court found that the plaintiffs had demonstrated a strong likelihood of success on the merits as to their claim for direct infringement.

But, in analyzing the legality of the VCR, the district court in Sony found Elektra inapposite because the “involvement of the defendants in the infringing activity” there “was much more substantial and direct than that alleged against defendants here.”14 And central to this finding was the fact that Sony did not supply the content:

“Defendants Sony and Sonam manufacture and market the Betamax and blank tapes. They do not, however, loan or otherwise provide the copyrighted work.”15

Thus, even though the defendants in Elektra and Sony both supplied the blank tapes and the copy machines, the cases were distinguishable because, among other things, the defendants in Sony did not also supply the content.

Later in the litigation, this factor was also invoked by the Supreme Court: “Petitioners in the instant case do not supply Betamax consumers with respondents’ works; respondents do.”16 Other factors, such as “the range of [the VCR's] potential use” and the fact that Sony was not “in a position to control the use of copyrighted works by others” played a part in the Court’s analysis as well.17 The Court found it relevant that Sony’s only contact with the users of its VCRs happened at the point of sale. Subsequent to that sale, Sony maintained no direct control over the allegedly infringing activity of those users.

Aereo thus stands in stark contrast to Sony. Like the defendants in Elektra, Aereo does more than simply supply the modern equivalent of blank tapes and copy machines—Aereo supplies the content as well. And unlike Sony’s VCR, Aereo’s service does not have a wide range of potential uses. In fact, the only content that can be reproduced and performed with Aereo’s service is the content that Aereo itself supplies. Moreover, in contrast to Sony, Aereo maintains an ongoing relationship with its subscribers, retaining direct control over its entire service at all times. These differences are significant, and they’re relevant here because they go to causation.

The Aereo petitioners similarly rebut the Sony argument in their reply brief:

Aereo nonetheless attempts to liken itself to a . . . VCR manufacturer, insisting that it is not performing because the user “presses the button to make the recording[]” that Aereo uses to retransmit broadcast television. But Aereo ignores . . . the multiple features that distinguish its examples – including that the . . . VCR manufacturer suppl[ies] only the equipment for copying content, while users supply the content.18

The petitioners point out that a VCR is worthless without access to content, and in contrast to Sony’s VCR, “the whole point of Aereo’s service is to provide access to the content.”19 The petitioners note that Aereo markets itself as providing a means of watching live television, and the only content available with Aereo’s service is the content that Aereo itself supplies. By arguing that it’s just like a VCR—or even a remote DVR for that matter—the petitioners remind us that Aereo “elides the question of where the content being recorded came from.”20

Furthermore, as the petitioners rightly indicate:

[W]ithout the content the antenna receives, Aereo’s DVR functionality would be useless. And where a service like Aereo provides the users with content, it cannot coherently argue that the user is the only one performing that content.21

This is the same rule that applies with services such as iTunes, Spotify, and Westlaw, mentioned above. These services are the ones publicly distributing, performing, or displaying the content because the content made available to the public is supplied by the services themselves. And the same holds true for Aereo:

Because Aereo is offering not just a piece of equipment, but an integrated service that includes access to copyrighted content, its efforts to suggest that it is a mere equipment supplier and only its subscribers perform are doomed.22

This case isn’t about the legality of a DVR or even of the cloud itself. The petitioners are not challenging the notion that time-shifting is fair use or that legally-possessed content can be stored and accessed in the cloud. The petitioners instead are simply arguing that Aereo is a direct infringer because Aereo itself supplies the content to its subscribers. By doing so, Aereo’s conduct is sufficiently proximate such that it has substantially caused the performance to occur. What Aereo does with the content it supplies is no different than what iTunes, Spotify, and Westlaw do—except for the fact that those services have licenses to supply the content, of course.

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Footnotes

  1. Reply Brief for Petitioners, American Broadcasting Companies, Inc. v. Aereo, Inc., No. 13-461, 2014 WL 1430768 at *1 (U.S. April 14, 2014). []
  2. Id. at *3. []
  3. Brief of 36 Intellectual Property and Copyright Law Professors as Amici Curiae in Support of Respondent, American Broadcasting Companies, Inc. v. Aereo, Inc., No. 13-461, 2014 WL 1348474 at *1 (U.S. April 2, 2014). []
  4. Id. at *6 (internal citations omitted). []
  5. Restatement (Second) of Torts § 9 (1965). []
  6. An “injury” is simply the “violation of another’s legal right, for which the law provides a remedy.” Black’s Law Dictionary (9th ed. 2009). []
  7. Restatement (Second) of Torts § 9, cmt. a (1965). []
  8. Restatement (First) of Torts § 431 (1934). []
  9. Laborers Local 17 Health & Benefit Fund v. Philip Morris, Inc., 191 F.3d 229, 235 (2d Cir. 1999). []
  10. CSX Transp., Inc. v. McBride, 131 S.Ct. 2630, 2637 (2011). []
  11. Palsgraf v. Long Island R. Co., 248 N.Y. 339, 352 (1928) (Andrews, J., dissenting); but see Laborers Local 17, 191 F.3d at 235 (“Proximate cause is an elusive concept, one always to be determined on the facts of each case upon mixed considerations of logic, common sense, justice, policy and precedent.”) (internal quotations and citations omitted). []
  12. Associated Gen. Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 535-37 (1983). []
  13. Elektra Records Co. v. Gem Elec. Distributors, Inc., 360 F.Supp. 821 (E.D.N.Y. 1973). []
  14. Universal City Studios, Inc. v. Sony Corp. of Am., 480 F.Supp. 429, 458 (C.D. Cal. 1979). []
  15. Id. []
  16. Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 436-37 (1984). []
  17. Id. at 437. []
  18. Reply Brief for Petitioners, supra note 1, at *16. []
  19. Id. at *17. []
  20. Id. []
  21. Id. at *18. []
  22. Id. []
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