Copyright’s Values

Expendables 3 and the negative effects of piracy

July 30, 2014 · Terry Hart · 11 comments

This past week, a DVD quality copy of Expendables 3 leaked onto online pirate sites, weeks before its August 15 box office debut. Along with the news came the usual claims that filmmakers shouldn’t worry about pre-release piracy—it’s good promotion, says David Pierce at the Verge, and internet commenters offer scores of other rationalizations.

But over at the Technology Policy Institute Blog, researcher Michael W. Smith says the unauthorized pre-release copy will likely hurt box office revenues for the film. He and his colleagues studied the effect of pre-release movie piracy on box office revenue and found that, on average, it “results in a 19% reduction in box office revenue relative to what would have occurred if piracy were only available after the movie’s release.”

Smith’s study is the first peer-reviewed journal article to look at this particular form of piracy. It was recently accepted for publication in the Information Systems Research journal, but a pre-publication draft is available at SSRN.

The study casts doubts on claims that pre-release piracy has no impact on theatrical revenue or even has a beneficial effect by generating buzz. On the contrary, Smith finds that “pre-release piracy significantly reduces a movie’s expected box office revenue and that this impact is stronger earlier in a movie’s lifecycle than in later periods.”

Smith concludes the report by noting some of its limitations. It doesn’t look at the intensity of pre-release pirating, nor at the quality of the unauthorized copies, data which may provide additional insights. It also does not consider the effect of pre-release piracy on different types of films, nor does it examine the effects on revenue streams besides the box office, such as DVD sales.

These last two limitations are particularly worth further research. Most films—particularly indie and niche films—don’t ever screen in theaters, and even among those films that do, box office revenue is only a part of overall revenues.

While Smith’s study is the first peer-reviewed article to look specifically at pre-release piracy and its effects, it is not the first to look at the effects of other forms of piracy on films. In fact, in his article, Smith notes that eight peer-reviewed studies so far have looked at the effect of piracy on film sales, and, more significantly, seven of the eight studies have found “that piracy results in significant harm to motion picture sales.” A broader literature review – focusing not solely on films but on other types of works such as recorded music – found that “The vast majority of papers which have been published in peer-reviewed academic journals — papers spanning a variety of methods, time periods, and contexts — find that piracy causes a statistically significant decrease in sales.”

And yet some measure of file-sharing denialism persists. It, first, runs counter to common sense—yes, if people can get something for free they’ll buy less, and if people buy less of something, less of it will be produced. But it also, as seen above, is not supported by the overwhelming majority of empirical evidence.

In ‘The Expendables 3’ Torrent and the Techno-Utopian Delusion, Indiewire writer Sam Adams sees through this denialism, or, as he calls it, “sheer self-justifying delusion.” In doing so, he touches on a larger point.

Adams notes that some of the rationalization for downloading The Expendables 3 is based on the idea that it is not a movie but a show, one in which the experience of watching in the theater takes precedence (and thus justifies watching an illegitimate, lower-quality version). Because of this, he cautions:

And when you’re paying for the experience — not out of curiosity or as a way of supporting an ecosystem that allows the creation of new work — it only makes sense to sample the product beforehand. But in so doing, you’re pushing cinema in a direction where every movie has to be a show: Either it’s big and loud enough to make you feel like you’re missing out by watching it (legally or illegally) at home or it might as well not show up to play.

CNET’s Nick Statt raises similar concerns:

We often complain about “sequelitis” and the onslaught of low-quality, brainless action movies and series reboots, yet don’t ever seem to take responsibility for the fact that our collective unwillingness to pay for things that don’t have formulaic payout is what drives creative decision making.

In the current model, everything from “Boyhood” and “12 Years A Slave” to “Zero Dark Thirty” and “Gravity” are more harmed by systemic piracy because it devalues films as an art form. Risks are not rewarded when the only movie with a concrete return on its investment is a $200 million narrative train wreck about robot cars or a tongue-and-cheek ensemble action flick featuring Rocky, the former governor of California, and Han Solo.

I enjoy such films, as do millions of others. But it would be a shame if that was all we got to see. The ultimate point is that piracy has societal effects beyond any given film’s bottom line.

In Copyright Extremophiles: Do Creative Industries Thrive or Just Survive in China’s High-Piracy Environment?¹ published earlier this year, Eric Priest digs into some of these less obvious effects of piracy in more detail. The claim is sometimes made that maybe copyright—the legal foundation that provides exchange value for creative works—is irrelevant since creativity still exists in areas, such as China, where piracy runs rampant. Priest refutes this by comparing creators in high-piracy areas to biological organisms known as extremophiles.

Just as microorganisms have evolved to thrive in superheated deep-sea vents or highly acidic environments, so too can a subset of creative professionals find ways to monetize their works even in a high-piracy environment. The fact that some monetization models can work for some types of producers or artists in China does not mean that optimal or even near-optimal conditions exist for the development of flourishing, healthy, and stable creative industries. In short, poor copyright enforcement inflicts significant and persistent harms on China’s music and film industries. To invoke the extremophiles analogy, China’s inhospitable creative industry environment may support narrow strains of creative “life,” but with an effective regime of copyright norms and enforcement, China’s creative ecosystem could more closely resemble a lush, diverse rain-forest.

Priest’s research unpacks some of the more pernicious results that piracy has on China’s film and music industries. Along with undermining the ability of a professional class of creators to sustain their livelihoods, high piracy has made these industries “neither robust nor stable” and lead them to become “hyper-dependent on a single revenue stream” (box office for films and ringback tones for music). Priest concludes:

This lack of revenue stream diversity distorts and undermines the creative ecosystem in at least three ways. First, the scarcity of monetization options creates a winner-take-all market dominated by big producers. The paucity of other revenue sources seriously undermines financial support for smaller, independent producers.

Second, rampant piracy and concentration of revenue streams distorts market signals to producers. For example, film producers are incentivized to invest in a relatively narrow range of works that attract the audience whose tastes are most easily monetized – young, urban cinemagoers. Music producers likely are incentivized to produce music that will make the most marketable ringtones.

Third, and perhaps most importantly, reduced revenue stream diversity disproportionately exposes producers to the whims of peculiar markets and exploitation by gatekeeper or monopsonist intermediaries. China’s music industry proves an especially vivid example, as ringback tones gross more than $4 billion annually, but the mobile operators who control ringback tone distribution keep more than ninety-eight percent of that revenue for themselves. The meager two percent that goes to copyright owners amounts to ninety percent of those copyright owners’ total income from recorded music. So if ringtones lose their appeal with consumers, the recording industry will collapse. Without other viable revenue streams to leverage, musicians, producers, and record labels have little choice but to grin and bear it while a state telecommunications monopoly enjoys the great bulk of the rewards of their artistic efforts.

It seems difficult to make a more compelling case for copyright. How creators and the film industry responds to pre-release and other forms of piracy is a wholly separate topic, but the fact remains that any type of piracy has a significant negative effect on revenues as well as the stability and vitality of creative and cultural industries. If we want to maintain robust and independent creativity, we should not be so quick to treat copyright as expendable.

Footnotes

27 Harvard Journal of Law & Technology 469 (2014). [↩]

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Happy 4th of July to my US readers!

July 04, 2014 · Terry Hart · 4 comments

It may with propriety be remarked, that in all countries where literature is protected, and it never can flourish where it is not, the works of an author are his legal property; and to treat letters in any other light than this, is to banish them from the country, or strangle them in the birth.

Thomas Paine, 1792.

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Copyright as Property in Petrella

June 03, 2014 · Terry Hart · 2 comments

On May 19, the Supreme Court decided Petrella v. Metro-Goldwyn-Mayer. Devlin Hartline recently discussed the decision here, and I have previously noted one particular passage relating to the application/registration debate.

But there is another passage in Petrella that has sparked some interest. It appears as Justice Ginsburg is countering arguments against its holding. She says,

MGM insists that the laches defense must be available to prevent a copyright owner from sitting still, doing nothing, waiting to see what the outcome of an alleged infringer’s investment will be. It is hardly incumbent on copyright owners, however, to challenge each and every actionable infringement. And there is nothing untoward about waiting to see whether an infringer’s exploitation undercuts the value of the copyrighted work, has no effect on that work, or even complements it. Fan sites prompted by a book or film, for example, may benefit the copyright owner. Even if an infringement is harmful, the harm may be too small to justify the cost of litigation.

If the rule were, as MGM urges, “sue soon, or forever hold your peace,” copyright owners would have to mount a federal case fast to stop seemingly innocuous infringements, lest those infringements eventually grow in magnitude. Section 507(b)’s limitations period, coupled to the separate-accrual rule, allows a copyright owner to defer suit until she can estimate whether litigation is worth the candle.

Several among the copyright skeptic crowd were overjoyed when they read this. Kevin Smith, who serves as Scholarly Communications Officer at Duke University, wrote:

I don’t know that the Court has every [sic] before acknowledge [sic] that infringements might be beneficial to rights holders. Perhaps this is an acknowledgement of the myriad potential for reuse and remix. Certainly the authors of fan fiction should feel buoyed by the remark. From a more technical perspective, it seems to me to further undermine what was once a strongly held belief that whenever infringement was found, harm could be presumed. It seems clear that the Court is now reinserting harm as a separate element in the plaintiff burden of proving the tort of copyright infringement.

The CCIA’s Matt Schruers wrote:

A more interesting wrinkle is Justice Ginsburg’s explicit embrace of a point that I had previously characterized as “taboo” — that not all infringements impose costs on the rights holder. In fact, when I wrote last year that some infringements have no economic cost, and that other infringements will reallocate wealth instead of destroy it, the site admins had to install a profanity filter for the comment section. Yet today, Justice Ginsburg goes a step further and states that some infringement “may benefit the copyright owner.”

I hate to rain on their parade.

This statement is actually one that should buoy authors and creators. It is perhaps one of the more robust endorsements by the Supreme Court of the conception of copyright as a property right—an endorsement that goes beyond mere semantics, such as when Justice Breyer said “deliberate unlawful copying is no less an unlawful taking of property than garden-variety theft”, or, when the Court was confronted with evidence that deliberately placed mistakes had been copied, that “such indicia is held to indicate a substantial theft of copyright property.”

For it endorses copyright as a right that “trumps utility.” Ginsburg plainly states that uses which undercut a work’s value, have no effect on it, or even complement it are all actionable infringements. This perfectly comports with other forms of property. If you break into my home, that’s trespass. If you break into my home to wash my dishes, that’s still trespass, even if your act may ultimately benefit me.

Though Ginsburg never explicitly references the notion of property here, the thrust of her remarks are made clearer by her reference to the availability of injunctive relief to a copyright owner not once, but twice in this brief section. The injunction, of course, is the quintessential remedy for property rules.

What’s more, Ginsburg implies that tolerating such non-harmful uses does not operate to the prejudice of a copyright holder. Copyright litigants should make note of this when faced with an implied license or fair use defense. (And Smith’s conclusion that “the Court is now reinserting harm as a separate element in the plaintiff burden of proving the tort of copyright infringement” misreads the passage entirely.)

Why do property rights confer such high standing in our society? That’s a question that can’t be answered in a mere blog post. But perhaps I can offer some general remarks. Assuming private property rights are justly allocated, their recognition protects the dignity and autonomy of individuals. Individuals have an array of equally valid choices about how to exploit their property that others cannot encroach upon. Ignoring respect of that choice invites trouble of all sorts—the harm from infringement of property rights is not necessarily what, if any, damage may be done to the res, but the invasion into the property owner’s sovereignty itself.

This trouble, in my opinion, is aggravated when we start talking about one’s expression. It’s one thing for society to dictate what you should do with land you bought and quite another to dictate what you should do with a book you wrote, or a photo you took, or a song you recorded—none of which, by the way, existed before you created it. These are not only your property but your expression, extensions of your personality. We should be cautious against societal encroachments to something so core to our being. That does not make such rights absolute in all directions; like all forms of property, they must be properly scoped and coexist with doctrines that mediate conflicts with other rights. And, in some cases, must give way to compelling public interests.

But bottom line, it is heartening to see the Supreme Court calmly and without ceremony advance the well-founded conception of copyright as property.

Thanks to Devlin Hartline for feedback during drafting!

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“The profit motive is the engine that ensures the progress of science”

March 24, 2014 · Terry Hart · 38 comments

Earlier this month, the US Copyright Office held a two day public roundtable on the issues of orphan works and mass digitization.

During one of the panels, a brief side debate broke out over what the purpose of copyright law was—particularly, what the proper role of the public benefit is and how much weight it should be accorded.

The first participant essentially quoted the Betamax decision’s description of public benefit.¹ There the Supreme Court said:

The copyright law, like the patent statutes, makes reward to the owner a secondary consideration… The sole interest of the United States and the primary object in conferring the monopoly lie in the general benefits derived by the public from the labors of authors.

In response, a panelist refuted characterization of reward to the owner as a “secondary consideration”. Disagreement arose. A separate panelist tried to make peace by remarking that both panelists’ explanations of the public benefit come from Supreme Court opinions. Maybe this is a case of agreeing to disagree.

But consider this: the Supreme Court refuted Sony‘s description of the public benefit of copyright in the much more recent Eldred v. Ashcroft. There, the majority said:

JUSTICE STEVENS’ characterization of reward to the author as “a secondary consideration” of copyright law, understates the relationship between such rewards and the “Progress of Science.” As we have explained, “[t]he economic philosophy behind the [Copyright] [C]lause … is the conviction that encouragement of individual effort by personal gain is the best way to advance public welfare through the talents of authors and inventors.” Accordingly, “copyright law celebrates the profit motive, recognizing that the incentive to profit from the exploitation of copyrights will redound to the public benefit by resulting in the proliferation of knowledge…. The profit motive is the engine that ensures the progress of science.” Rewarding authors for their creative labor and “promot[ing] … Progress” are thus complementary; as James Madison observed, in copyright “[t]he public good fully coincides . . . with the claims of individuals.” JUSTICE BREYER’s assertion that “copyright statutes must serve public, not private, ends,” similarly misses the mark. The two ends are not mutually exclusive; copyright law serves public ends by providing individuals with an incentive to pursue private ones.

Well sure, the copyright skeptic might respond, that’s all well and good. But the Supreme Court only has authority over the law; it’s ruminations on matters of philosophy are not binding.

But consider this: Eldred‘s description of the public benefit is, as the Court notes, a direct descendant of the justification offered by James Madison, the very drafter of the Constitution’s Copyright Clause.

The description of the public benefit in Sony, on the other hand, comes from the misquotation of a state sales tax case.

Yes, Sony directly quotes Fox Film Corp. v. Doyal, a 1932 Supreme Court case, about the “sole interest of the United States.” In Fox Film, a film company sued to prevent the state of Georgia from collecting state tax on its income from licensing films. The film company argued that copyrights are “instrumentalities” of the federal government, so any income derived from them are immune from state taxation.

The Court disagreed. The federal government doesn’t retain any possessory or ownership interest in a copyright it secures. A copyrights is not a “franchise or privilege to be exercised on behalf of the Government ” Instead, “Copyright is a right exercised by the owner during the term at his pleasure and exclusively for his own profit and forms the basis for extensive and profitable business enterprises. The advantage to the public is gained merely from the carrying out of the general policy in making such grants and not from any direct interest which the Government has in the use of the property which is the subject of the grants.”

So when the Fox Film Court speaks of “the sole interest of the United States”, it is merely making the distinction that the federal government does not retain any right or title in a copyright such that license income would be exempt from state taxation. But the Court would later take this quote out of context,² and Sony perpetuates this error. Indeed, the above quote from Fox Film about the advantage to the public is more consistent with Eldred‘s explication of the public interest than Sony‘s.

So what is the point here?

Copyright skeptics will often proclaim that copyright law must serve the public interest. But that is not controversial. Of course it should serve the public interest; all laws should serve the public interest.

What is overlooked is how copyright serves the public interest. Skeptics will focus on how exceptions to and limitations on copyright further the public interest. Missing is the inherent public interest in copyright, in preserving incentives to create and disseminate expressive works.

Like any free market, enabling a free market in creative works tends toward the public good. Copyright is the economic building block of this market, allowing voluntary transactions to occur and private ordering to emerge. It encourages investment in creating and distributing the types of works that advance society and enrich our lives, the types of works that shouldn’t be considered an afterthought.

Some will suggest that creators will create and disseminate works even without copyright protection. This counterfactual is unconvincing. That there are creators who will create and distribute their works despite adequate copyright protection is a demonstration of human resilience, not an affirmation that society can continue to benefit while artists, authors, and creators are undermined.

So yes, let us celebrate the public benefit of copyright, let us celebrate how the profit motive serves as the engine ensuring the progress of science. But let’s not confuse the short term gains of ignoring copyright with the public benefit, or focus solely on the benefits of copyright’s limitations at the expense of the public benefit of protecting creators’ rights.

Footnotes

Sony Corp v. Universal City Studios, 464 US 417, 429 (1984). [↩]
United States v. Paramount Pictures, Inc., 334 US 131, 158 (1948). [↩]

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Redefining Free Culture

June 13, 2013 · Terry Hart · 5 comments

In the prologue of his 2004 book, Free Culture, Lawrence Lessig writes:

A free culture supports and protects creators and innovators. It does this directly by granting intellectual property rights. But it does so indirectly by limiting the reach of those rights, to guarantee that follow-on creators and innovators remain as free as possible from the control of the past. A free culture is not a culture without property, just as a free market is not a market in which everything is free. The opposite of a free culture is a “permission culture”—a culture in which creators get to create only with the permission of the powerful, or of creators from the past.

Lessig starts out well enough with his observation that intellectual property rights are part of a free culture, but things go quickly downhill after that, and the remainder of the book does nothing to rehabilitate this descent.

Although Lessig was not the first to use the term “free culture” as an antithesis to “overly restrictive” copyright laws, he did play a major role in developing and popularizing the concept.

The problem with this description of a “free culture” is that it is placed opposite of “permission culture.” This could not be more wrong. Permission, or consent, is not the opposite of freedom, it is a necessary part of freedom.

In Western philosophy at least, consent is considered one of the foundations of a democratic society.¹ Not only does legitimate authority derive solely from the “consent of the governed”, but one of the ends of government is the preservation of property — which, essentially, is a framework for organizing consent. As John Locke wrote:

Men therefore in society having property, they have such a right to the goods, which by the law of the community are their’s, that no body hath a right to take their substance or any part of it from them, without their own consent: without this they have no property at all; for I have truly no property in that, which another can by right take from me, when he pleases, against my consent.

In addition, property has long been considered integral to the maintenance of a free society.² — once wrote, “Let the people have property, and they will have power — a power that will for ever be exerted to prevent a restriction of the press, and abolition of trial by jury, or the abridgement of any other privilege.”

Lessig’s conception of a “free culture” is fatally flawed. The opposite of consent, of permission, is not freedom, but force. Freedom requires consent, property is built on consent, and the two are inextricably intertwined.

This holds true whether we are talking about the species of property governing tangible items or the species of property governing intellectual items.

I would argue that the nature of the works protected by copyright — expressive, cultural, scientific, etc. — makes it more, not less, important to fit them within this liberty/property paradigm. For in addition to the freedom and self-realization creators gain when they are able to reap what their labor has sown, the works they create enrich the general public, allowing society itself to flourish.

The necessity of this to a free culture was recognized most recently by a federal court less than three months ago:

Paraphrasing James Madison, the world is indebted to the press for triumphs which have been gained by reason and humanity over error and oppression. Investigating and writing about newsworthy events occurring around the globe is an expensive undertaking and enforcement of the copyright laws permits AP to earn the revenue that underwrites that work. Permitting Meltwater to take the fruit of AP’s labor for its own profit, without compensating AP, injures AP’s ability to perform this essential function of democracy. (Emphasis added).³

Journalism’s role in fostering democracy may be somewhat obvious, but the fine arts play their role as well.

It has not been customary to include the arts, the fine arts, as an important part of the social conditions that bear upon democratic institutions and personal freedom. Even after the influence of the state of industry and of natural science has been admitted, we still tend to draw the line at the idea that literature, music, painting, the drama, architecture, have any intimate connection with the cultural bases of democracy. Even those who call themselves good democrats are often content to look upon the fruits of these arts as adornments of culture rather than as things in whose enjoyment all should partake, if democracy is to be a reality. The state of things in totalitarian countries may induce us to revise this opinion. For it proves that no matter what may be the case with the impulses and powers that lead the creative artist to do his work, works of art once brought into existence are the most compelling of the means of communication by which emotions are stirred and opinions formed. The theater, the movie and music hall, even the picture gallery, eloquence, popular parades, common sports and recreative agencies, have all been brought under regulation as part of the propaganda agencies by which dictatorship is kept in power without being regarded by the masses as oppressive. We are beginning to realize that emotions and imagination are more potent in shaping public sentiment and opinion than information and reason.⁴

Now, what copyright brings to the table is not a necessary condition for creating expressive works; surely we will still have writers and artists without these rights. Instead, it brings a type of creativity that is separate from government, whether such sponsorship is benign or “part of the propaganda agencies by which dictatorship is kept in power”, and separate from the whims of the wealthy elite, such as you might find under a patronage system. It is the freedom to create independently, facilitated by copyright, that has long been recognized as essential to a free press, a free society, and a free culture. Just a few examples from a diverse array of sources over the past two centuries that speak to this recognition include…

…this passage from a journal article in 1844:

If the public desire a really free press, they must not look to it as a source of taxation; and if they are anxious for truth, for elevated and elevating sentiments, for ideas matured by study and reflection, and an honest exposition of grievances, they must recognise original articles as property, and secure them against a plundering appropriation by a copyright.⁵

…British lawyer James Paterson in 1880:

When any person is free to publish whatever he deems interesting or valuable either as a mode of procuring profit to himself or as a means of influencing the minds and will of his fellow-citizens on matters on which union and combination can effect great results, this is the highest mark of freedom.⁶

…historian Edward Bloom in 1949:

Recognition of proprietary rights of authors under the Copyright Act of 1709 was an extremely important step in liberating the press. Copyright security helped to stimulate private initiative by providing authors of books some measure of financial independence. By at least partially obviating the economic function of political patrons, the Act of 1709 aided immeasurably in the freedom of the press.⁷

…former Register of Copyrights Barbara RInger in 1974:

[T]he concept of copyright changed radically as a result of the revolutionary political movements of the late 18th and 19th centuries, and the first copyright statutes were based on a rejection of autocratic repression and monopoly control and upon a new recognition of individual liberty and the human rights of authors. … Freedom of speech and freedom of the press are meaningless unless authors are able to create independently from control by anyone, and to find a way to put their works before the public.⁸

…or copyright scholar Neil Netanel in 1996:

By according authors and their assigns a proprietary entitlement, copyright fosters the development of an independent sector for the creation and dissemination of original expression, a sector composed of creators and publishers who earn financial support for their activities by reaching paying audiences rather than by depending on state or elite largess.⁹

So I think it is no stretch to say that property in expressive works, built on consent, plays a vital role in the maintenance of a free culture. The modern definition of “free culture” to mean a permissionless culture — one that calls for a regressive weakening of creators’ rights — is a dramatic reversal of longstanding conceptions of property and freedom. And, ironically, it achieves the opposite of what it purports to address. As legal scholar Guy Pessach observed in a forthcoming article (which I wrote about on Monday), weak copyright protection increases media concentration and decreases cultural diversity. In addition, Thomas Joo has argued that more permissive rules toward “remix” also reinforce dominant culture, contrary to what proponents of such rules (including Lessig) have claimed.

In a recent commentary, Lawrence Lessig stated the need to “learn how liberty can live in the digital age.” Just last month, Ethernet inventor Bob Metcalfe said, “The Internet needs to deal with property properly.” I would suggest the two are interdependent, which is clear once we start with a better definition of “free culture.”

Footnotes

See, for example, The Ethics of Consent, pp. 45-51 (Oxford University Press 2010), citing Thomas Hobbes, Adam Smith, Immanuel Kant, and John Stuart Mill. [↩]
See, for example, Lynch v. Household Finance Corp., 405 US 538, 552 (1972), Noah Webster — who, coincidentally, considered an author’s copyright equivalent to, and deserving of, the same protection as all other species of property ((See Letter to Daniel Webster, Sept. 30, 1826. [↩]
The Associated Press v. Meltwater US Holdings, Dist. Court, No. 12 Civ. 1087 (DLC) (SDNY March 21, 2013). [↩]
John Dewey, Freedom and Culture, pp. 9-10 (Capricorn Books 1963) (1939). [↩]
“Impediments to Knowledge“, The Reasoner No. 17, 264 (1844). [↩]
The Liberty of the Press, Speech, and Public Worship, pg 14. (Macmillian 1880). [↩]
Edward Bloom, Johnson on a Free Press: A Study in Liberty and Subordination, A Journal of English Literary History (Dec. 1949). [↩]
The Demonology of Copyright, R.R. Bowker Memorial Lecture, 1974. [↩]
Copyright and a Democratic Civil Society, 106 Yale Law Journal 283, 347 (1996). [↩]

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The Downside of Disintermediation

June 10, 2013 · Terry Hart · 2 comments

Skeptics of copyright are generally not too fond of “gatekeepers.”

Prior to the widescale adoption of the internet, these “gatekeepers”, the typical narrative goes, controlled what the masses read, watched, and listened to, reinforcing a dominant culture and creating the concept of media “consumers.” But the networked, one-to-one nature of the internet challenged this one-to-many model. It allowed creators to bypass “gatekeepers” and connect directly with fans, supporting more diverse and decentralized culture.

To many proponents of this view, current copyright law facilitates the former, broadcast model. Legal professor Guy Pessach thinks this is wrong.

In his forthcoming article, Deconstructing Disintermediation — A Skeptical Copyright Perspective, Pessach examines the effects that disintermediation has had in the copyright realm and comes to the conclusion that it has decreased cultural diversity, decentralization, and artist welfare.

Deconstructing Disintermediation

As Pessach notes, the conventional wisdom of disintermediation and copyright has been championed by many over the past decade, including academics like Jessica Litman, Neil Netanel, William Fisher, and Yochai Benkler. The basic premise is that copyright law has evolved to primarily benefit corporate media at the expense of users and individual creators. This system is criticized for undermining cultural diversity, making amateur and “civic-engaged activity” that involves the use of copyrighted cultural materials more difficult, and eroding the ability of creators to get a fair return for their work.

By focusing on cutting out the middleman, copyright law reformers hope to decrease corporate media’s influence on culture and make it easier for creators to reach audiences and for readers to enjoy a more diverse range of creative works. This would be achieved in part by enhancing existing provisions in copyright law like termination and work-for-hire rules to be more favorable to creators and in part by shielding some peer-to-peer activities from infringement liability and broadening safe harbors for online intermediaries.

Pessach is skeptical of this argument, and his article advances this skepticism on three grounds. First, the new intermediaries, like YouTube and Facebook, are not as different from traditional media as disintermediation proponents might think and may, in fact, be worse in many ways. As Pessach notes, “the creative destruction of traditional corporate media and its replacement by mega networked intermediaries may generate realms that are more concentrated, homogeneous and exploitive of creators.” Related to this is Pessach’s next argument that as new intermediaries gain power over audiences, the preservation of “traditional” media may have an increasingly important role mitigating that dominance. Finally, Pessach shows that incorporating disintermediation provisions in copyright law tends to have the opposite effect than intended, resulting more often in centralization of media, less cultural diversity, and less leverage for creators.

In short, argues Pessach, when you recognize that copyright law regulates power relationships between different actors in creative markets, you recognize that “extreme concentration of media power could derive not only from excessive copyright protection, but also from excessive ability to freely utilize content.” Pessach concludes,

Once this aspect is acknowledged, a novel and hidden role of copyright law is unveiled. Copyright law is a dynamic mechanism for regulating power relationships in media and information markets. It does so both by acknowledging copyright protection and by exempting from copyright liability. Hence, under certain economic and social conditions, copyright protection may have a legitimate role in mitigating media and market powers of copyrightless intermediaries that leverage copyright exemptions and limitations as their gateway to control over audience attention.

Money for Nothing

Pessach next turns to exploring these ideas in greater detail. First up: the nature of the new intermediaries. Pessach writes that

the bargaining position of originating authors and creators, versus a handful of Internet intermediaries, may be weaker than it was for traditional distributors and corporate media. The more concentrated the layer of effective networked distribution is, the weaker the bargaining position and economic welfare of authors and creators becomes. Seemingly, the Internet and networked communication platforms provide almost an unlimited range of distribution platforms. Nevertheless, if one adds the parameter of effective audience attention and the ability to effectively reach audiences, in realms of information overflow, reality appears different.

YouTube is used as a case study here. The sheer size and popularity of the site makes it a must for video creators to distribute their content online. But YouTube invests very little in producing the works available on its site¹ and only pays about 5% in ad revenues to creators.

When compared to traditional creative industries, this state of affairs does not seem encouraging. For example, within the audio-visual creative industries, the guilds’ collective agreements between authors, directors and performers, on the one hand, and motion picture/television studios, on the other, seem to provide authors, creators and performers with financial conditions that are much better than the YouTube scenario, particularly because the financial investment and risk are born entirely by corporate media. As for the music industry, indeed, there are many reports and evidence regarding the imbalanced allocation of revenues between most artists and record companies. However, even in this regard, revenues from the “bad” old record company seem higher than the new digital distribution system. If one takes into account elements such as advances, coverage of production costs and even percentages of revenue share, the new boss might be worse than the old bad boss at the end of the day.²

Other examples of how the new intermediaries have not resulted in better conditions for authors and creators. Pessach cites to the purchase of the Huffington Post by AOL in 2011 by $300 million, value created by its thousands of unpaid bloggers who received no benefit from the sale as well as the Instagram flap earlier this year. Both cases demonstrate the enormous bargaining and negotiating power new intermediaries have over authors and creators.

Be Sure to Drink Your Ovaltine

In addition to reintermediation of expressive works, Pessach examines the monetization of these works online. Advertising has become the dominant method of monetization for online works, further exacerbating the negative effects to creators and culture. Pessach explains that an ad based model places emphasis on creating the most popular content in order to attract the most “eyeballs.” “Traditional” media has relied in part on advertising, of course, but disintermediation offers a more extreme version of this model. The former found the pressure to deliver eyeballs on the traditional intermediary. But the latter places that pressure on the creator himself. Pessach says the difference is that “as opposed to corporate media, individual creators and authors lack the financial resources required to spread risks between different types of cultural products or seek and develop other distribution platforms.”

Thus, Pessach concludes, disintermediation has not improved creators’ welfare, it has not increased cultural diversity, and it has amplified media concentration. One of the takeaways from this conclusion is that the internet has made “corporate” media more relevant, not less. Pessach notes the many essential roles that record labels, movie studios, book publishers, broadcasters and other traditional media have as social networks, search engines, and user-generated content platforms increase their dominance. First, their size puts them in a better negotiating position against digital distribution channels, getting, in many cases, a better “deal” for the creators of works in their portfolio than individual creators could likely get on their own. Second, these institutions carry “a cultural legacy of commitment to the creative industries”, which Pessach says is “currently absent in the commitments and cultural DNA of networked intermediaries.” Finally, the financial investment, risk allocating, and filtering functions of these companies help facilitate a broad range of cultural production that is highly unlikely to appear in a disintermediated digital environment.

Disintermediation and Copyright

So what does this all of this have to do with copyright?

To answer this question, Pessach next discusses two “themes” that have emerged from efforts to increase disintermediation through copyright law. The irony is that the actual effect appears to be contrary to the purported goals.

The first of these relates to the protection of online service providers through DMCA safe harbors, most notably the § 512(c) safe harbor for user-uploaded material. Part of the hope of this safe harbor was to support the development of new, decentralized distribution platforms. Reality tells a different story, which Pessach demonstrates by using the example of YouTube once again:

The dominant and unprecedented market and power position that YouTube has managed to obtain is… mostly due to § 512(c)’s safe harbor regime. It is the safe harbor regime that enabled the hosting and public provision of endless amounts of popular copyrighted cultural materials, and it is this ability that made the platform so dominant in terms of its market share. The growing popularity of the platform was largely based on its ability to cover entire portfolios of content (“full repertoire”) under one umbrella and highly demanded (copyrighted) content. The ability to do so without any need to obtain ex-ante authorizations from copyright owners and with the safe harbor’s limited legal risk is what facilitated the economic and cultural conditions for the current market domination of YouTube, particularly due to elements of network economics. Practically, the fact that under § 512(c)’s safe harbor regime, YouTube was obliged to remove (ex-post) infringing materials, based on a takedown notice by copyright owners, was not a real obstacle in establishing the platform’s dominance. By itself, such an obligation did not prevent the rapid growth in the platform’s popularity and the immense portfolio of popular copyrighted content that it hosted.

Once this dominant market position was achieved, however, it was also the stage to move toward business models, which are based on collaboration and revenue-sharing with creators and rights owners, only now from a completely different negotiation (or one may say, coercive) position. At this stage, authors, creators and rights owners were faced with a highly dominant and popular intermediary, which attracts a significant portion of audience attention and which is already partially shielded from legal liability for the hosting of their materials. Under such conditions, YouTube’s ability to launder its content activities under its own terms was considerable. Authors, creators and performers have very few options other than agreeing to YouTube’s terms and conditions or vanishing from audiences’ awareness.

The second theme Pessach looks at are proposals to vest more rights, particularly initial ownership rights, in creators. Though at times inelegantly phrased, the argument here is essentially that a focus on initial ownership rights takes the focus off the more important mechanisms that can provide meaningful bargaining power to decentralized and diffused creators. One self-published author is going to get whatever deal Amazon gives her, but a publisher that can negotiate on behalf of many authors could get a better deal.

The entire article is worth a read. Though astute observers may not find much surprising within, Pessach does an admirable job tying together various themes — “maybe the internet only wants one of everything”, the continuing importance of “traditional” intermediaries, the sharp decrease in creator welfare caused by disintermediation — and adds to a growing academic literature that highlights the flaws in the arguments of copyright’s skeptics.³ It is tragic that the erosion of creators’ rights has had the opposite effect than those responsible had intended. Disintermediation has benefitted few but a handful of giant internet firms. Hopefully, Pessach’s article shines a light on the fact that meaningful copyright protection remains just as vital to the public interest, if not more so, in the digital age.

Footnotes

Pessach states that “YouTube does not finance or invest in the production of the content,” though in the past year, the site has begun at least advancing ad revenues for some original production. [↩]
Pessach cites here to David Lowery’s seminal article, Meet the New Boss, Worse than the Old Boss. [↩]
See, for example, Randolph May & Seth Cooper, The Constitutional Foundations of Intellectual Property, 8 Perspectives from FSF Scholars, Free State Foundation (May 10, 2013); Ronald Cass & Keith Hylton, Laws of Creation: Property Rights in the World of Ideas (Harvard Univ. Press 2012); Thomas Joo, Remix Without Romance, 44 Conn. L. Rev. 415 (2011); Marc H. Greenberg, Reason or Madness: A Defense of Copyright’s Growing Pains, 7 John Marshall Review of Intellectual Property Law 1 (2007); Justin Hughes, Copyright and Incomplete Historiographies – of Piracy, Propertization, and Thomas Jefferson, 79 Southern California Law Review 993 (2006); Stan Liebowitz, Economists’ Topsy-Turvy View of Piracy, 2 Review of Economic Research on Copyright Issues 5 (2005); Thomas Nachbar, Constructing Copyright’s Mythology, The Green Bag, Vol. 6 (2002). [↩]

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You Keep Using That Word: Aereo and “Innovation”

April 04, 2013 · Terry Hart · 8 comments

“Innovation” is one of the Internet’s favorite words (along with “disruption”).¹ It’s a glittery word — who can be against innovation! — and seems to be used to express just about any concept that is needed. The word was once a pejorative; “A spirit of innovation is generally the result of a selfish temper, and confined views,” wrote Edmund Burke. Its normative meaning has since flipped.²

On April 1st, the Second Circuit affirmed the denial of an injunction against Aereo. The company had been sued by several television broadcasters alleging copyright infringement for retransmitting programs without permission. Last year, a district court refused to grant a preliminary injunction after finding that the broadcasters had been unable to distinguish Aereo’s system from a system held not infringing in the earlier Second Circuit decision in Cartoon Network v. CSC Holdings (“Cablevision“). On appeal, the Second Circuit agreed with the lower court, holding “Plaintiffs have provided us with no adequate basis to distinguish Cablevision from the Aereo system.”

Technology advocates celebrated the decision. The Disruptive Competition Project wrote that it considers Aereo a perfect example of the type of “disruptive innovation” it champions. Consumer Electronics Association CEO Gary Shapiro called the decision a “big victory for innovation.” Public Knowledge hailed the decision as a victory for “video innovation.” The EFF proclaimed the court decision as a Victory for Aereo, TV Watchers, and Innovation Without Permission ((One might find it telling how consistently internet focused civil society groups are aligned with the consumer electronics industry.)) Even Aereo itself has proudly proclaimed that it is on the side of innovation, progress, and consumer choice.

But how innovative is Aereo? From a viewer’s perspective, the system is largely indistinguishable from cable TV, which has been around for decades. Pay a monthly fee, watch television.

At least one of the Second Circuit judges didn’t see anything particularly innovative about the company. In a dissenting opinion, Judge Chin called Aereo’s “technology platform” a “sham”, describing it as “a Rube Goldberg-like contrivance, over-engineered in an attempt to avoid the reach of the Copyright Act and to take advantage of a perceived loophole in the law.”

Aereo is doing precisely what cable companies, satellite television companies, and authorized Internet streaming companies do — they capture over-the-air broadcasts and retransmit them to customers — except that those entities are doing it legally, pursuant to statutory or negotiated licenses, for a fee. By accepting Aereo’s argument that it may do so without authorization and without paying a fee, the majority elevates form over substance. Its decision, in my view, conflicts with the text of the Copyright Act, its legislative history, and our case law.

The decision also seems to conflict with the idea, as expressed above, that Aereo is innovative.

To put it another way: imagine the reaction to Aereo if it was in all respects identical — e.g., same channel lineup, same price — except it was licensed to retransmit programming. Would we still be hearing about how innovative the service is? I don’t think it would be too far off to imagine such a service being greeted by yawns, or even derided as outdated. That is, it seems plausible that the primary feature that makes Aereo lauded as an innovation is the fact that it is unlicensed.

It is heartening to see that others besides Judge Chin recognize this. In When copyright leads to wasted innovation, Alex Hern observes, “All of this innovation – the tiny antennas, better transcoding technology, and office placed with line-of-sight to the Empire State Building for perfect reception – isn’t being focused towards making life better for customers, or even just making money for Aereo. Instead, it’s just being used to get around the law.” I disagree with Hern, however, when he concludes that “The government could render all that effort useless overnight by just allowing Aereo to stream signal from one aerial to all its users at once.” Aereo is allowed to do this under current law, it just doesn’t want to bother seeking the necessary permission from the owners of the programs it wants to retransmit or pay the necessary licenses.

So how is it that so many celebrate this type of free-riding as innovation?

Part of the blame may be the vague definition of “innovation” itself by those who employ it the most. Author Evgeny Morozov recently wrote of this phenomenon

While the brightest minds of Silicon Valley are “disrupting” whatever industry is too crippled to fend off their advances, something odd is happening to our language. Old, trusted words no longer mean what they used to mean; often, they don’t mean anything at all. Our language, much like everything these days, has been hacked. Fuzzy, contentious, and complex ideas have been stripped of their subversive connotations and replaced by cleaner, shinier, and emptier alternatives; long-running debates about politics, rights, and freedoms have been recast in the seemingly natural language of economics, innovation, and efficiency. Complexity, as it turns out, is not particularly viral.

Part may also be the embrace of “permissionless innovation” as a norm. The idea was once defined rather narrowly, referring to the fact that one could deploy an online service or website without needing any sort of prior approval by any central governing body.³ Since then it has been expanded to include an absence any sort of obstacles to Innovation, both online and off.

An unqualified endorsement of such a broad definition of permissionless innovation is troublesome, not least of which because it contradicts the centrality of consent and rule of law in any free society. But to the concept’s proponents, permission is simply an obstacle to Innovation that must be torn down. “Permission” can be required by governments in the form of regulations and laws. These are often described solely as rent-seeking by incumbent firms, holding no legitimate purpose on their own and existing only to keep “disruptive innovators” out of the market.⁴ But permission can also be required from other individuals. Copyright and other forms of intellectual property, held by individuals or other entities, are characterized as the quintessential obstacle to innovation. This is essentially the core thesis in Lawrence Lessig’s 2003 book, Free Culture: The Nature and Future of Creativity: copyright is a restriction that creates a “permission culture“, as opposed to a free one.

Is copyright a restriction that blocks innovation? I say no. As Ronald Cass and Keith Hylton note in their new book, Laws of Creation: Property Rights in the World of Ideas this view is premised on the erroneous “zero sum” view of intellectual property that has become engrained in copyright skeptic thinking.

[T]he modern academic view treats intellectual property law as a set of rules determined in a zero-sum conflict between rights-holders and members of the public. Beyond some modest realm, for one side to gain, the other side must lose. The individual is encouraged y this view to choose a side: either you are with the public or with the rights-holders. For some writers, the choice is put in even more loaded terms: either you side with those who are rooted in the past or line up with the vanguard of the future, freed of entangling rights.⁵

But copyright is not a zero sum game. Cass and Hylton explain that IP protection, including copyright, comes with static costs, but it produces dynamic benefits. IP protection benefits society when those dynamic benefits are greater than the static costs, leading Cass and Hylton to conclude that, while not perfect, “existing legal rules are generally defensible within an analysis of their costs and benefits.”⁶

George Mason law professor Adam Mossoff has recently provided a real world example of this equation in action. In his latest article, How Copyright Drives Innovation in Scholarly Publishing, Mossoff looks at an area that has been especially fertile to charges of copyright as an obstacle. In his abstract, Mossoff writes

Today, copyright policy is framed solely in terms of a trade off between the benefits of incentivizing authors to create new works and the losses from restricting access to those works. This is a mistake that has distorted the policy and legal debates concerning the fundamental role of copyright within scholarly publishing, as the incentive-to-create conventional wisdom asserts that copyright is unnecessary for researchers who are motivated for non-pecuniary reasons. As a result, commentators and legal decision-makers dismiss the substantial investments and productive labors of scholarly publishers as irrelevant to copyright policy. Furthermore, widespread misinformation about the allegedly “zero cost” of digital publication exacerbates this policy distortion.

This paper fills a gap in the literature by providing the more complete policy, legal and economic context for evaluating scholarly publishing. It details for the first time the $100s millions in ex ante investments in infrastructure, skilled labor, and other resources required to create, publish, distribute and maintain scholarly articles on the Internet and in other digital formats. Based on interviews with representatives from scholarly publishers, it reveals publishers’ extensive and innovative development of digital distribution mechanisms since the advent of the World Wide Web in 1993. Even more important, this paper explains how these investments in private-ordering mechanisms reflect fundamental copyright policy, as copyright secures to both authors and publishers the fruits of their productive labors. In sum, copyright spurs both authors to invest in new works and publishers to invest in innovative, private-ordering mechanisms. Both of these fundamental copyright policies are as important today in our fast-changing digital world as they were in yesteryear’s world in which publishers distributed scholarly articles in dead-tree format.

True innovation grows the entire pie. The type of false innovation of services like Aereo simply shift the pieces around — and, if such a service negatively affects those providing the television programs that Aereo relies on to attract subscribers, then, in the long run, nobody wins.

Footnotes

Its overuse by some borders on unintentional parody; for example, this recent article on Techdirt features an amazing four instances of some form of “disrupt” and three instances of some form of “innovate” in the first paragraph alone. [↩]
A 2009 literature review found that only 1 in 1,000 social science articles discussing innovation studied the undesirable consequences of innovation, suggesting a strong pro-innovation bias in recent decades. [↩]
See, for example, Vint Cerf in 2009: “Many now-successful companies have deployed their services on the Internet without the need to negotiate special arrangements with Internet Service Providers, and it’s crucial that future innovators have the same opportunity. We are advocates for “permissionless innovation” that does not impede entrepreneurial enterprise.” [↩]
Larry Downes, for example, said in a recent article, Ready to Innovate? Get a Lawyer, “But more often the imposition of legal constraints comes indirectly, the maneuverings of incumbents caught off-guard by something dramatically better and often cheaper than their core products and services. Performing a bit of regulatory judo, they often respond to such threats by pressuring regulators who oversee their own activities to declare the innovator illegal or otherwise in violation of rules that were never designed to cover it.” [↩]
Pp. 209-10. [↩]
Pg. 220. [↩]

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A Visit to the Library of Congress

February 21, 2013 · Terry Hart · 1 comment

This past weekend, my parents came to visit me in my new place in Washington, DC. They wanted the “grand tour” of the city, and, as I myself had yet to do the tourist thing, I asked around for recommendations beyond the obvious drive past monuments. At the top of the list: the Library of Congress, which had the added bonus of being open to the public on Presidents’ Day.

Located next to the U.S. Capitol building at the top of the Hill, the Library actually consists of three primary buildings: the original building (renamed the Thomas Jefferson Building in 1980), the John Adams Building, and the James Madison Building. The Library itself was established in 1800 and was initially, well, a library for the use of Congress. Most of the library’s collection was burned by the British in 1814, but was replenished after Thomas Jefferson offered to sell the Library books from his own extensive collection. Beginning in the 1850s, there was a push to create a National Library in the U.S., and the Library of Congress grew (unofficially) into that role under the leadership of Ainsworth Spofford, who directed the Library — and pushed its expansion — from 1865 until 1897. Today, the Library is the largest in the world, with over 150 million items in its collection, including over 20 million books. It’s also worth noting (since this is a copyright blog) that since 1897, the Library of Congress has housed the U.S. Copyright Office.

Library of Congress, Great Hall The Great Hall and exhibition areas of the Thomas Jefferson Building are open to the public Monday through Saturday, with guided tours led by Library of Congress docents several times throughout the day. I’d highly recommend a visit and a tour, as this is one of the most remarkable buildings ever built. If you would build a cathedral for science and useful arts, it would look like this. Every inch of the walls and ceilings are covered with murals and sculptures, created by over 40 individual artists. Amazingly, this artwork was possible because as the building was being constructed, it was under-budget — not something typically associated with government work. And even with the additional cost of commissioning artwork, the final cost of the Thomas Jefferson Building was less than planned. For a complete description of all the works one can see in the building, see the Library’s On These Walls pages.

For example, in the East Mosaic Corridor, murals on the wall and ceilings depict 13 fields of knowledge — including, as shown in the photo, law — as well as native-born Americans celebrated in those fields (for law, these Americans are Shaw, Taney, Marshall, Story, Gibson, Pinckney, Kent, Hamilton, Webster, and Curtis).

Monday was also one of only two days each year that the Main Reading Room is open to the general public — and photography is permitted.

The Main Reading Room

Featured in the 2008 film National Treasure: Book of Secrets (a major driver of awareness about the room, judging by comments I overheard), the magnitude of the Main Reading Room is difficult to convey in photos — though the Library of Congress does offer a virtual tour if you can’t make it in person. Capped by a dome 125 feet in the air, surrounded by marble Corinthian columns (decorated with American tobacco leaves instead of the traditional acanthus) and 11-foot bronze statues, the Main Reading Room does a good job of inspiring awe.

Also open to the public and adjacent to the Main Reading Room is the Main Card Catalog, which houses part of the Library’s old card catalog. No, the Library does not still maintain this. The Library had long ago moved to a computerized catalog — no new cards have been added since 1980, but it has kept the old system around.

To the left is an example of an individual card. The Library’s catalog is available online, with a newer version at catalog2.loc.gov that also includes links to resources where you can search other collections and archives beyond books. Here, by the way, is the digital version of the card in the photo.

The Library is a monument to knowledge, the artwork in the Thomas Jefferson Building practically consecrates the book. And since this is a site dedicated to copyright, I’d like to point out the pivotal role copyright law has played in creating the world’s largest library.

Copyright Deposit

Two provisions in the Copyright Act have provided the Library of Congress with many of the materials in its collection.

First, the US Copyright Act allows for voluntary registration of copyrighted works with the Copyright Office. Registration is not a prerequisite for protection, but it does confer a number of benefits, including the ability to file a civil suit for infringement and the ability to seek certain remedies, such as statutory damages.¹ Registration requires the submission of two copies of the work;² this serves to provide a record of exactly what work a specific registration covers. The Copyright Office forwards one copy of works acquired here to the Library of Congress to use in its collection.

Separately, under 17 U.S.C. § 407, the owner of a copyright is required to deposit two copies of a work with the Library of Congress within three months of publication. While deposit is not a prerequisite for copyright protection (that is, if you fail to deposit, you do not lose your copyright), the Register of Copyrights may demand compliance from any copyright owner who fails to deposit, and the law provides for fines for non-compliance. And, perhaps a bit surprisingly, the Copyright Office does exercise this authority; in 2010, it made over 4,000 demands for certain titles.³

In 2011, over 700,000 works were added to the Library of Congress under the first provision, over 300,000 under the second.⁴ It would have cost the Library over $30 million to acquire these works if it had to purchase them.

Laws of the latter kind — which might be called “legal deposit” laws and are distinct from any copyright system — first appeared in Western Europe during the Renaissance.⁵ The earliest is from France — the Ordonnance de Montpellier, 1537. Similar laws spread throughout Europe, and England enacted a legal deposit system in 1662.

In the US, the 1790 Copyright Act provided for deposit only for copyright registration purposes, which was handled by the District Court nearest an author. A copy of each book registered was to be sent to the Secretary of State. The first attempt at legal deposit was made when the Smithsonian Institute was created in 1846, which provided that copies of each book registered under the copyright law be sent to both the Smithsonian and the Library of Congress. Few authors and publishers complied with this provision, however, and the requirement was repealed in 1859.

When Spofford took charge of the Library of Congress, he set his sights on legal deposit rules that would actually work. After a few unsuccessful attempts, Congress achieved that goal in its 1870 general revision of the copyright laws. The effect was immediate and substantial. In a 1960 study on legal deposit, the U.S. Copyright Office noted, “By 1875, copyright had become the Library’s largest source of acquisition for books and almost the only source for some other materials.”⁶

The great value of the copyright deposit to the collections of the Library of Congress since 1870 has been recognized many times. In the past it has materially assisted the Library in building its collections on all aspects of American history, literature, law, music, and social culture.⁷

Footnotes

See 17 U.S.C. § 408(a), 411, 412. [↩]
17 U.S.C. § 408(b). [↩]
Library of Congress Annual Report 2011. [↩]
Elizabeth K. Dunne, Deposit of Copyrighted Works, Copyright Law Revision Study 20, pg. 1 (US Copyright Office, 1960). [↩]
Id. at 14. [↩]
Id. at 30. [↩]

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Copyright is for the author first and the nation second

October 23, 2012 · Terry Hart · 8 comments

At a Congressional Hearing last April, Representative Zoe Lofgren (D-Silicon Valley) grilled Register of Copyrights Maria Pallante over a statement she had made during an interview published in the ABA’s Landslide magazine. Lofgren took issue especially with Pallante’s remark during the interview that “Copyright is for the author first and the nation second.” At one point during the hearing, Lofgren asked Pallante about the remark:

Now, this comment attracted quite a bit of attention among some people, especially my constituents in Silicon Valley, and it seems to me when you look at the Constitution, which empowers congress to grant exclusive rights in creative works in order, and i quote, “to promote the progress of science and the useful arts.” It seems to me that the Constitution is very clear that copyright does not exist inherently for the author but for the benefit for society at large.

Now, I’m concerned when any public official, especially one in charge of regulation of a particular industry or area of law seems to favor particular stakeholders in that very industry. We’d be alarmed, for example, if the chairman of the FCC said the Telecommunications Act was for the telecom companies first and the nation second, and it’s not clear to me how your statement, if it was accurately reported, is any different.

This struck me at the time as a bizarre attempt to create controversy over a relatively benign statement. To set the record straight: Lofgren was wrong, and Pallante was right. Lofgren’s attack is full of misguided statements — not least of which is the notion that the Register of Copyrights is “in charge of regulation of a particular industry or area of law”¹ — but most of all was her misconstruction of the “public interest” in copyright.

Saying that “copyright is for the author first” does not ignore the public interest but rather recognizes that the public’s interest is served when authors are protected. Lofgren’s remarks seem oblivious to the public interest in securing exclusive rights to creators and instead substitute a vague, chameleon-like conception — an “untethered public interest”, one that more often than not provides cover for the private interests of economic users of copyrighted works.

Far from controversial, the public’s interest in encouraging the creation of expressive works by protecting creators’ rights — which Pallante was alluding to in her statement — has been recognized since the earliest days of copyright law. James Madison, the primary architect of the Constitution’s Copyright Clause, said of it in the Federalist Papers, “The public good fully coincides… with the claims of individuals.” Pallante’s remarks, as she notes herself in her response to Lofgren, are primarily a restatement of what the Supreme Court said in Twentieth Century Music Corp. v. Aiken:

The immediate effect of our copyright law is to secure a fair return for an “author’s” creative labor. But the ultimate aim is, by this incentive, to stimulate artistic creativity for the general public good.

On another occasion, the Supreme Court noted

The economic philosophy behind the clause empowering Congress to grant patents and copyrights is the conviction that encouragement of individual effort by personal gain is the best way to advance public welfare through the talents of authors and inventors in “Science and useful Arts.” Sacrificial days devoted to such creative activities deserve rewards commensurate with the services rendered.²

To put it bluntly: society benefits when creators get paid. The private right that copyright law secures is what advances the public’s interest in new expressive rights. And the importance of this private right shouldn’t be minimized, as the Ninth Circuit noted in 1981:

Despite what is said in some of the authorities that the author’s interest in securing an economic reward for his labors is “a secondary consideration,” it is clear that the real purpose of the copyright scheme is to encourage works of the intellect, and that this purpose is to be achieved by reliance on the economic incentives granted to authors and inventors by the copyright scheme. This scheme relies on the author to promote the progress of science by permitting him to control the cost of and access to his novelty.³

Other courts have reiterated the public’s benefit from copyright law, especially when considering preliminary injunctions (since the public interest must be considered when deciding to issue a preliminary injunction). Just a few examples:

“There is a strong public interest in the copyright system’s function of motivating individuals to make available their creative works and increase the store of public knowledge.”⁴
“Since Congress has elected to grant certain exclusive rights to the owner of a copyright in a protected work, it is virtually axiomatic that the public interest can only be served by upholding copyright protections and, correspondingly, preventing the misappropriation of the skills, creative energies, and resources which are invested in the protected work.”⁵
“Google argues that the “value of facilitating and improving access to information on the Internet . . . counsels against an injunction here.” This point has some merit. However, the public interest is also served when the rights of copyright holders are protected against acts likely constituting infringement.”⁶
“The object of copyright law is to promote the store of knowledge available to the public. But to the extent it accomplishes this end by providing individuals a financial incentive to contribute to the store of knowledge, the public’s interest may well be already accounted for by the plaintiff’s interest.”⁷

“One of the great fallacies of modern copyright jurisprudence”

The notion of an “untethered public interest”, as I referred to it above, and its ascendancy over the private right has seeped into the copyright skeptic zeitgeist (Lofgren is certainly not alone in her views) However, this has partly been the result of a mistake.

In the 1932 Supreme Court case Fox Film Corp. v. Doyal, a company that licensed films challenged the collection of state taxes on the gross receipts of royalties from its licenses.⁸ The company argued that its copyrights were “instrumentalities” of the federal government and, thus, immune from state taxation.

The Supreme Court rejected this argument, saying, “the mere fact that a copyright is property derived from a grant by the United States is insufficient to support the claim of exemption.” To be exempt from state taxation, the government must reserve some sort of controlling interest in a grant or privilege. But here, as the Court notes earlier, “The sole interest of the United States and the primary object in conferring the monopoly lie in the general benefits derived by the public from the labors of authors.” In other words, the government only has a policy interest, not a property interest; “After the copyright has been granted,” said the Court, “the Government has no interest in any action under it save the general one that its laws shall be obeyed.”

But then a curious thing happened. This language, which only served to distinguish a pecuniary interest from a general interest, transmogrified into a declaration of the interest itself.

In 1948, the Supreme Court was faced with the question of whether the practice of “block-booking” — “licensing, or offering for license, one feature film or group of features on the condition that the exhibitor will also license another feature or group of features released by the distributors during a given period” — violated the Sherman Act.⁹ In holding that it did, the Supreme Court said, “The copyright law, like the patent statutes, makes reward to the owner a secondary consideration.”

As support, it then stated, “In Fox Film Corp. v. Doyal, Chief Justice Hughes spoke as follows respecting the copyright monopoly granted by Congress, ‘The sole interest of the United States and the primary object in conferring the monopoly lie in the general benefits derived by the public from the labors of authors.’”

This case, in turn, was cited by the Supreme Court in the 1984 Betamax case to support the idea that “The monopoly privileges that Congress may authorize are neither unlimited nor primarily designed to provide a special private benefit.”¹⁰ And so, the eisegesis was complete; scholars today continue to rely on this quote, taken out of context, to support the supremacy of an untethered public interest over the private right.¹¹

Legal scholar David Householder has called this notion espoused by the Betamax court, “one of the great fallacies of modern copyright jurisprudence.”¹² As Householder explains:

It would be similarly fallacious to say that in a real estate transaction, the money paid to the seller is only a secondary consideration, with the primary value of the transaction consisting of the conveyance of the parcel to the buyer. Both the money and the land in such a transaction are consideration; neither is more important to the public, although at the time of the transaction the money is more important to the seller and the land is more important to the buyer. The value to society consists merely in the existence of a market for the land so that property may be obtained by those who are likely to put it to better use. Likewise, for intellectual property; the value to society consists in the existence of a market for the authors’ writings. The money paid to the author is by no means secondary. Rather, it is the unavoidable result of the creation of a market because a market cannot exist without the promise of reward to owners of property who choose to place that property on the market.

Echos from 1909

Another element that feeds into this misconstruction of copyright and the public interest is a statement made over a century ago.

During the drafting of the 1909 Copyright Act, New Hampshire Representative Frank Currier submitted a report from the Committee on Patents, which at one point stated, “Not primarily for the benefit of the author, but primarily for the benefit of the public, such rights are given.” To hear some put it, this lone statement plucked from the middle of a Committee Report represents the be-all and end-all of copyright justification in the US, an explicit and certain rejection of any consideration due the private right itself.

But immediately following, Currier distinguishes exactly what he means by the “benefit of the public,” and it sounds far more like the view expressed by Pallante:

Not that any particular class of citizens, however worthy, may benefit, but because the policy is believed to be for the benefit of the great body of people, in that it will stimulate writing and invention, to give some bonus to authors and inventors.

In enacting a copyright law Congress must consider, as has been already stated, two questions: First, how much will the legislation stimulate the producer and so benefit the public; and, second, how much will the monopoly granted be detrimental to the public. The granting of such exclusive rights, under the proper terms and conditions, confers a benefit upon the public that outweighs the evils of the temporary monopoly. [Emphasis added.]

It’s also worth noting how Currier’s statement comports with what the 1909 Copyright Act actually did to further this public benefit:

The term of protection for copyright was extended by 14 years.
Copyright protection was expanded to include mechanical reproductions (interestingly, Currier said of this provision, “The main object to be desired in expanding copyright protection accorded to music has been to give to the composer an adequate return for the value of his composition”).
New remedies against infringers were added, including impoundment during actions and destruction of infringing copies and plates.
Criminal penalties were expanded to include willful infringment of any right in any subject matter (formerly, only the unauthorized public performance of dramatic works and musical compositions carried criminal penalties).

As the Supreme Court noted in 1939, the 1909 Copyright Act “introduced many changes and was intended definitely to grant valuable, enforceable rights to authors, publishers, etc. … ‘to afford greater encouragement to the production of literary works of lasting benefit to the world.’”¹³ That is, the public interest was served by first securing the exclusive rights of creators.

Finally, Currier’s statement regarding the public interest in copyright law is far from an unequivocal proclamation by Congress. In 1975, former Register of Copyrights Barbara Ringer testified in front of Congress during a hearing on the revisions that would become the Copyright Act of 1976. She disagreed that, “Not primarily for the benefit of the author, but primarily for the benefit of the public, such rights are given.”

This sounds great and for a long time, I felt that this was probably correct. But, the more I have looked upon the status of authors in this country and the fact that the public interest is badly served when authors are badly served, I have felt that too often the ‘public interest’ has been identified with economic users rather than with authors.

In recent years, partly as a result of this whole revision exercise, I have been trying to gage individual issues in terms of their impact upon creativity and authorship, which I consider the ultimate public interest.

The Constitution speaks of the desirability of promoting the progress of science and useful arts, science in the broad sense of learning or knowledge, by offering protection for limited times to authors and inventors.

It seems to me that it is this protection, the exclusive rights that are supposed to be granted to authors, that is the ultimate public interest that the Constitution and its drafters were thinking about. I do not think that this has ever been fully or even partly realized in any copyright law we have had in our entire history.

Footnotes

The US Copyright Office has little direct role in regulating copyright law. The bulk of its work is in administering the registration of copyrighted works. The only area it exercises substantive rulemaking authority is in the triennial DMCA anticircumvention exemption proceedings, a relatively minor aspect of copyright law in the grand scheme of things; see Joseph Liu, Regulatory Copyright, 83 North Carolina Law Review 88, 148 (2004). [↩]
Mazer v. Stein, 347 US 201, 219 (1954). [↩]
Universal City Studios v. Sony Corp, 659 F.2d 963 (9th Cir. 1981). [↩]
ABC v Aereo, No. 12-Civ-1540(AJN), order denying preliminary injunction (SDNY, July 11, 2012). [↩]
Klitzner Industries v HK James & Co, 535 F.Supp. 1249, 1259-60 (ED Pa. 1982); cited by Taylor Corp v Four Seasons Greetings, 403 F.3d 958 (8th Cir 2005); Concrete Machinery v Classic Lawn Ornaments, 843 F.2d 600 (1st Cir 1988); Apple Computer v Franklin Computer Corp, 714 F.2d 1240 (3rd Cir 1983); Coach v Ocean Point Gifts, No. 09-4215, Order on Motion for Default Judgment (D. NJ, June 14, 2010); FMC Corp v Control Systems, 369 F.Supp.2d 539 (ED Pa 2005); TalkISP v XCast Laboratories, No. C05-0055, Report and Recommendation on Motion for Preliminary Injunction (ND Iowa, Dec. 19, 2005); Video Pipeline v Buena Vista Home Entertainment, 192 F.Supp.2d 324 (D. NJ 2002); Budish v Gordon, 784 F.Supp 1320 (ND Ohio 1992); EF Johnson v Uniden Corp, 623 F.Supp 1485 (D. Minn 1985); Albert E. Price, Inc v Metzner, 574 F.Supp 281 (ED Pa 1983); Ass’n of American Medical Colleges v Mikaelian, 571 F.Supp 144 (ED Pa 1983). [↩]
Perfect 10 v Google, 416 F.Supp.2d 828, 859 (2006). [↩]
Salinger v Colting, 607 F.3d 68, 82 (2nd Cir. 2010). [↩]
286 US 123. [↩]
United States v. Paramount Pictures, 334 US 131. [↩]
Sony Corp. v. Universal City Studios, 464 US 417, 429 (1984). [↩]
See, for example, Jessica Litman, Readers’ Copyright, 58 Journal of the Copyright Society of the US 325 (2011); Edward Lee, Technological Fair Use, 83 Southern California Law Review 797, 819 (2010); William Patry, Moral Panics and the Copyright Wars, pg. 123 (Oxford Univ. Press 2009); Pamela Samuelson, Unbundling Fair Uses, 77 Fordham Law Review 2537, 2580-81 (2009); Rebecca Tushnet, Legal Fictions: Copyright, Fan Fiction, and a New Common Law, 17 Loyola L.A. Entertainment Law Journal 651 (1997). [↩]
The Progress of Knowledge: A Reexamination of the Fundamental Principles of American Copyright Law, 14 Loyola LA Entertainment Law Review 1, 35 (1993). Householder similarly notes how the notion is premised in part on the mistake discussed above. [↩]
Washingtonian Co. v. Pearson, 306 US 30, 36. [↩]

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The Genius of The Hunger Games

August 08, 2012 · Terry Hart · 4 comments

On Friday, the Cynical Musician posted an article titled Demystifying Creativity, in which he asks the question, “What is creativity?” It’s an interesting post, worth a read, and it got me thinking.

I find myself in agreement with much of what Faza says, but I wanted to look at the question through the lens of copyright law. To do so, I’ll eventually get to The Hunger Games. But first, I’d like to look at the concept of “genius.”

Genius and Generation

Copyright, at its dawn in the US, was often spoken of in terms of “genius.” In March 1783, the US Continental Congress appointed a committee to “consider the most proper means of cherishing genius and useful arts through the United States by securing to authors or publishers of new books their property in such works.”¹ In May, the committee issued its report, stating that it was “persuaded that nothing is more properly a man’s own than the fruit of his study, and that the protection and security of literary property would greatly tend to encourage genius.”² The pre-constitutional state copyright statutes of Connecticut, Georgia, and New Hampshire were titled Acts “for the encouragement of literature and genius.” The acts of New York and North Carolina both adopted the Continental Congress’s language that securing the rights of literary property would encourage genius and “persons of learning and genius”. During the ratification of the Constitution, future Supreme Court Justice James Iredell also referred to the Copyright Clause as an encouragement to genius.³

Nowadays, we often think of a “genius” as someone with exceptional intelligence. But at the time, the term was broader: “a man endowed with superior faculties; mental power or faculties; disposition of nature by which any one is qualified for some peculiar employment.”⁴ The word comes from the Latin genius, an aspect of ancient Roman religion. It was used both to describe the “guardian deity or spirit which watches over each person from birth”⁵ and the “rational soul of every one.”⁶

The latin term itself is derived from the Proto-Indo-European root “*gen-”, meaning “to produce” or “to beget”, and it shares a common heritage with words like “generate”. I mention this because it is interesting how the purpose of copyright, to encourage genius, and the scope of copyright, protection over what a creator generates, share an etymological relationship.

Genius and Copyright

Interesting because the exclusive rights only extend to what an author personally creates. “The sine qua non of copyright is originality.”⁷

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. …

Originality is a constitutional requirement. The source of Congress’ power to enact copyright laws is Article I, § 8, cl. 8, of the Constitution, which authorizes Congress to “secur[e] for limited Times to Authors . . . the exclusive Right to their respective Writings.” In two decisions from the late 19th century—The Trade-Mark Cases, 100 U. S. 82 (1879); and Burrow-Giles Lithographic Co. v. Sarony, 111 U. S. 53 (1884)—this Court defined the crucial terms “authors” and “writings.” In so doing, the Court made it unmistakably clear that these terms presuppose a degree of originality.

In The Trade-Mark Cases, the Court addressed the constitutional scope of “writings.” For a particular work to be classified “under the head of writings of authors,” the Court determined, “originality is required.” The Court explained that originality requires independent creation plus a modicum of creativity: “[W]hile the word writings may be liberally construed, as it has been, to include original designs for engraving, prints, &c., it is only such as are original, and are founded in the creative powers of the mind. The writings which are to be protected are the fruits of intellectual labor, embodied in the form of books, prints, engravings, and the like.”

In Burrow-Giles, the Court distilled the same requirement from the Constitution’s use of the word “authors.” The Court defined “author,” in a constitutional sense, to mean “he to whom anything owes its origin; originator; maker.”⁸

The idea/expression distinction is derived from this same reasoning. Facts and ideas do not owe their origin to any individual.

The author of a book comes to the great ocean of human thought which belongs to all; he dips up a portion of the brine, evaporates it, causes it to crystallize, purifies the crystals from unpleasant ingredients, and presents it in a new form, a form by which it is made his own. He enters the great forest of ideas, which is common ground, hews down trees, shapes them into articles of furniture, or builds a house with them, and he who takes from him that furniture is a thief, and he who breaks into that house is a burglar. The author clothes ideas in words of his own selection, forms the words into sentences of his own construction, gives the ideas his own arrangement, combines and illustrates them in his own manner, and in this state they are his own, made so by his labor, skill and invention, and they belong as properly to him as the product of salt-works on the edge of the sea belongs to the manufacturer.⁹

“No Man Writes Exclusively”

Above, we see recognition of the fact that creators always build on the works of the past. No creator creates in isolation, but instead “stands on the shoulders of giants.” And progress in the arts and sciences is made by encouraging genius: the originality that a creator generates.

Justice Story said as much in 1845:

In truth, in literature, in science and in art, there are, and can be, few, if any, things, which, in an abstract sense, are strictly new and original throughout. Every book in literature, science and art, borrows, and must necessarily borrow, and use much which was well known and used before. No man creates a new language for himself, at least if he be a wise man, in writing a book. He contents himself with the use of language already known and used and understood by others. No man writes exclusively from his own thoughts, unaided and uninstructed by the thoughts of others. The thoughts of every man are, more or less, a combination of what other men have thought and expressed, although they may be modified, exalted, or improved by his own genius or reflection. If no book could be the subject of copy-right which was not new and original in the elements of which it is composed, there could be no ground for any copy-right in modern times, and we should be obliged to ascend very high, even in antiquity, to find a work entitled to such eminence. Virgil borrowed much from Homer; Bacon drew from earlier as well as contemporary minds; Coke exhausted all the known learning of his profession; and even Shakespeare and Milton, so justly and proudly our boast as the brightest originals would be found to have gathered much from the abundant stores of current knowledge and classical studies in their days. [Emphasis added.]¹⁰

Even classical fair use can be said to embrace these ideas. “From the infancy of copyright protection, some opportunity for fair use of copyrighted materials has been thought necessary to fulfill copyright’s very purpose, “[t]o promote the Progress of Science and useful Arts.”¹¹

[T]he author’s consent to a reasonable use of his copyrighted works ha[d] always been implied by the courts as a necessary incident of the constitutional policy of promoting the progress of science and the useful arts, since a prohibition of such use would inhibit subsequent writers from attempting to improve upon prior works and thus . . . frustrate the very ends sought to be attained.¹²

It’s a misnomer, then, to claim that the idea that “everything is a remix” somehow negates the basis for copyright.

But there are those who do indeed claim that the idea that creativity is built on the past is foreign to a legal framework that protects specific expression. There are those who say copyright “stifles” creativity, or those who say, “our system of law doesn’t acknowledge the derivative nature of creativity”, or academics who quote Michel Foulcault and speak of the notion of “Romantic authorship” — even though the cumulative nature of creativity is baked into copyright law.

The Genius of The Hunger Games

With that, let’s turn to The Hunger Games as an example.

Suzanne Collins’ hit trilogy (and now feature film) tells the tale of a dystopian future where children are forced to battle to the death. Since it was published, a few have compared it to the 2000 Japanese film Battle Royale, about a dystopian future where children are forced to battle to the death. Some have even asked if the former was a rip-off of the latter. Collins, however, has said in interviews that she had never watched Battle Royale before writing her books,¹³ and aside from the central conceit, both stories differ substantially.

In other interviews, though, Collins admits that she had drawn inspiration from another, existing story: the ancient Greek myth of Theseus and the Minotaur. Says Collins, “In her own way, Katniss [the heroine of The Hunger Games] is a futuristic Theseus.” And in its own way, Hunger Games is a “remix” of the ancient Greek myth.

But would it be copyright infringement? Obviously, the myth of Theseus was written thousands of years before copyright even existed, but let’s say it wasn’t. And obviously, as with most myths, there is no single, definative version of the story, but let’s say there was (for example, Plutarch’s version, 75 A.D., trans. John Dryden). Even then, there wouldn’t be any verbatim copying between the two. And you’d be hard-pressed to make the case for nonliteral substantial similarity between the stories.¹⁴ Though the two may share some plot elements and stock characters, the differences far surpass any similarities.

The Hunger Games, in other words, though it builds on existing works, is decidedly original in the copyright sense; it is a product of Collins’ genius in the classical sense.

Footnotes

24 Journals of the Continental Congress 180. [↩]
24 Journals of the Continental Congress 326. [↩]
Answers to Mr. Mason’s Objections to the New Constitution Recommended by the Late Convention at Philadelphia, in Pamphlets on the Constitution of the United States, pg. 361 (1788). [↩]
Thomas Sheridan, A General Dictionary of the English Language (1780). [↩]
“Genius“, Online Etymology Dictionary. [↩]
St. Augustine, City of God, VII.13 (trans. Marcus Dods, 1887). [↩]
Feist Publications, Inc. v. Rural Telephone Service Co., 499 US 340, 345 (1991). [↩]
Id. at 345-46. [↩]
Speech of William Cullen Bryant, International Copyright: Meeting of Authors and Publishers, at the rooms of the New York Historical Society, pg. 14 (1868). [↩]
Emerson v. Davies, 8 F.Cas. 615 (D. Mass. 1845). [↩]
Campbell v. Acuff-Rose Music, 510 US 569, 575 (1994). [↩]
Harper & Row, Publishers v. Nation Enterprises, 471 US 539, 549 (1985), quoting H. Ball, Law of Copyright and Literary Property 260 (1944). [↩]
In order to copy a work, one must have seen the work. In a copyright infringement case, access to the work is one of the elements the plaintiff must prove, see, e.g., Ferguson v. National Broadcasting, 584 F.2d 111 (5th Cir. 1978). [↩]
As the Second Circuit has stated, substantial similarity “requires that the copying [be] quantitatively and qualitatively sufficient to support the legal conclusion that infringement (actionable copying) has occurred. The qualitative component concerns the copying of expression, rather than ideas [, facts, works in the public domain, or any other non-protectable elements]…. The quantitative component generally concerns the amount of the copyrighted work that is copied.” Castle Rock Entertainment v. Carol Publishing Group, 150 F.3d 132, 138 (1998), quoting Ringgold v. Black Entertainment Television, Inc., 126 F.3d 70, 75 (2d Cir. 1997). [↩]

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