Cross-posted on the Law Theories blog.

One often hears the argument from copyright opponents that copyright is a privilege and not a right. Rick Falkvinge says that copyright is a “government-granted market-distorting privilege” that limits the property rights of others. Stephan Kinsella argues that copyrights are “grants of monopoly privilege by the state” that allow its holder to petition the courts for redress. Mike Masnick claims that it’s “hogwash” not to recognize that copyright is a “monopoly privilege.” Crosbie Fitch believes that copyright grants authors “unethical privileges” over others.

Many claim as well that fair use is a right and not a privilege. Patricia Aufderheide and Peter Jaszi argue that Shepard Fairey had the “fair use right” to make his famous Obama poster. The late Professor L. Ray Patterson claimed that the “statutory right of fair use” is often ignored.1 Professor Lawrence Lessig laments that “[y]ou either pay a lawyer to defend your fair use rights or pay a lawyer to track down permissions so you don’t have to rely upon fair use rights.” The list goes on.

The baseline, so the argument goes, is that we have the right to do whatever we want with our property, including the right to make copies. Copyright changes this by giving authors the privilege to prevent us from copying. Thus, copyright takes away my right to copy by granting an author the privilege to stop me. Moreover, the argument continues, despite the privilege given to authors, we have the right to make fair use of a work. This line of reasoning, to borrow Masnick’s term, is “hogwash.”

In this post, I’ll explain why copyright opponents have it exactly backwards when they claim that copyright is a privilege and fair use is a right. At the outset, I note that these terms can have various, nontechnical meanings that possibly overlap. For example, Black’s Law Dictionary defines “right” to mean, inter alia, a “privilege,” and it defines “privilege” to mean, inter alia, a “right.”2 But copyright opponents are not using these terms interchangeably; they are using them in contradistinction to each other. In other words, they are saying that right and privilege are mutually exclusive terms. It’s this technical usage of these terms that I’ll address.

Bell’s “Intellectual Privilege”

Perhaps the biggest proponent of the copyright-as-privilege claim is Professor Tom Bell. In his book entitled Intellectual Privilege (draft available here), Bell makes the argument that “copyright more closely resembles a privilege—a special statutory benefit—than it does a right, general in nature and grounded in common law, deserving the title of ‘property.’”3 He claims that “calling copyright a ‘privilege’ follows legal and popular usage, past and present.”4 In support of this broad assertion, Bell cites the 6th edition of Black’s Law Dictionary in a footnote. He conspicuously doesn’t quote the actual text from Black’s in that footnote, perhaps because it in fact defines copyright as a “right.” Black’s provides:

Copyright. The right of literary property as recognized and sanctioned by positive law. An intangible, incorporeal right granted by statute to the author or originator of certain literary or artistic productions, whereby he is invested, for a specified period, with the sole and exclusive privilege of multiplying copies of the same and publishing and selling them.5

Black’s isn’t saying that copyright is a privilege in contrast to a right. Instead, the dictionary merely reflects the fact that, as discussed below, a rightholder has the privilege to exercise the right that he holds. What makes it a right is that he has a legally enforceable claim against another who copies without permission. As we’ll see, copyright owners, just like all rightholders, have both rights and privileges.

Bell notes that both courts and commentators “have often described copyright as a legal privilege.”6 In support, he cites Eldred v. Ashcroft where Justice Stevens in dissent refers to “copyright privileges,” Sony v. Universal where Justice Stevens writing for the majority refers to the “copyright privilege,” and Watson v. Buck where Justice Black writing for a unanimous Court refers to “copyright privileges.”7 No doubt there are many other such references in the case law and commentary. But are those references really making the point that copyright is a privilege and not a right? Not at all.

Justice Stevens in Eldred also refers to copyright as granting “exclusive rights” and “federal rights.”8 Similarly, in Sony, Justice Stevens frames the question presented as whether “the rights conferred upon respondents by the Copyright Act” have been violated, and then he goes on to discuss the “exclusive rights” granted by copyright at length.9 And in Watson, Justice Black refers to copyrights as “property rights.”10 Bell’s argument that these Justices considered copyrights to be privileges as opposed to rights is severely undercut by the fact that the very same Justices in the very same opinions also called them rights.

Bell argues that “copyright represents a statutory exception to our common law rights.”11 It is only with the introduction of copyright, he contends, that our “natural and common law rights” to copy are limited.12 Thus, according to Bell, the rule is that we may copy, and the exception is copyright. In this way, he continues, copyright is not a right, but rather it is “an anti-property right” that limits what we can do with our property.13 Bell’s theory is that this copyright exception gives to authors a privilege that relieves them of the duty they would otherwise have to allow others to copy their works.

Bell ponders whether his version of privilege comports with “Wesley Hohfeld’s influential one,”14 referencing the late Professor Hohfeld whose well-known law review article discussing the difference between rights and privileges has been extremely influential in legal thinking since its publication one century ago.15 Erroneously, Bell concludes that he is being “more true to Hohfeld’s project” than those who consider copyright to be a right.16 To understand how Bell is turning Hohfeld on his head and confusing the difference between a right and a privilege in the Hohfeldian sense, we have to take a step back and look at Hohfeld’s fundamental “jural relations.”

Hohfeld’s “Jural Relations”

Laymen typically use the word “property” to refer to a thing with respect to which legal relations between persons exist. Lawyers, on the other hand, generally use the word “property” to refer to the legal relations that exist between persons with respect to a thing. The aforementioned Professor Hohfeld developed an analytical framework for discussing these legal relations—or as he called them, “jural relations.” Hohfeld identified eight fundamental jural relations: right, privilege, power, immunity, duty, no-right, liability, and disability. With these building blocks, we can precisely define the legal relations that exist between persons with respect to a given thing.

Hohfeld’s system of jural relations has been very popular amongst jurists over the last century. For example, the savants at the American Law Institute adopted Hohfeld’s system in the Restatement (First) of Property, first published in 1936. A quick search on Westlaw shows that Hohfeld’s original 1913 paper and his follow-up 1917 paper together have been cited over a thousand times in the case law and commentary.17 For a great explanation of Hohfeld’s system of jural relations, I recommend this primer from the Chicago-Kent College of Law.

Hohfeld arranged the jural relations into different pairs, called “jural correlatives.” Each pair of jural correlatives looks at a given jural relation from opposing points of view. For example, if O and P have a jural relation between them, we can look at that jural relation either from O’s point of view or from P’s point of view. These jural correlatives arise together, meaning that the existence of one necessarily implies the existence of the other. Hohfeld’s jural correlatives for rights and privileges are: rightduty and privilegeno-right. Thus, as between O and P, if O has a right, then P has a duty, and if O has a privilege, then P has a no-right.

A right is “a legally enforceable claim of one person against another, that the other shall do a given act or shall not do a given act.”18 The person against whom the right exists has the correlative duty, which is the legally enforceable obligation on the part of the duty-holder to do or not to do the given act. For example, if O has the right to exclude P from entering his land, then P has the correlative duty not to enter O’s land. If P violates his duty and enters O’s land, O then has a legally enforceable claim against P, and O can summon the power of the state to prevent P from entering his land.

A privilege is “a legal freedom on the part of one person as against another to do a given act or a legal freedom not to do a given act.”19 The person against whom the privilege exists has the correlative no-right, which is the absence of a legally enforceable claim against the privilege-holder to do or not do the given act. For example, if O has the privilege to enter P’s land, then P has the no-right to exclude O from his land. If O exercises this privilege and enter P’s land, P then has no legally enforceable claim against O, and P cannot summon the power of the state to prevent O from entering his land.

It should also be noted that not only can a rightholder prevent another from doing or not doing a given act, but he himself has the privilege of doing or not doing the given act. Thus, a rightholder holds both a right and a privilege. For example, if O has the right to exclude P from entering his land, O then also has the privilege of entering his own land. As Hohfeld explains:

[I]f X has a right against Y that he shall stay off the former’s land, the correlative (and equivalent) is that Y is under a duty toward X to stay off the place. *** [W]hereas X has a right or claim that Y, the other man, should stay off the land, he himself has the privilege of entering on the land; or, in equivalent words, X does not have a duty to stay off.20

While the person against whom a right exists has a duty of noninterference with respect to the rightholder,21 the person against whom a privilege exists does not have such a duty with respect to the privilege-holder. Thus, if O grants to P the privilege of entering his land, O then has no duty of noninterference towards P, and O may interfere with P’s attempts to exercise his privilege of entering O’s land.

Hohfeld colorfully illustrates the point:

A. B. C. and D, being the owners of the salad, might say to X: “Eat the salad, if you can; you have our license to do so, but we don’t agree not to interfere with you.” In such a case the privileges exist, so that if X succeeds in eating the salad, he has violated no rights of any of the parties. But it is equally clear that if A had succeeded in holding so fast to the dish that X couldn’t eat the contents, no right of X would have been violated.22

And as one commentator explains:

If X’s privilege of entering the land, in relation to Y, consists only in X being under no duty to Y not to enter the land, this means solely that X is not in breach of a duty to Y if he enters the land; nothing is implied by this to prevent Y making it impossible to enter the land—by using threats or violence, by building walls, constructing moats filled with piranha fish . . . .23

The takeaway from this is that a right gives the rightholder a legally enforceable claim against another that he shall do or not do a given act, and the person against whom the right exists has the correlative duty to do or not do the given act. A privilege, on the other hand, negates a duty to do or not do a given act that the duty-holder would otherwise have, relieving him of the liability that he would have for doing or not doing the given act but for the privilege. While the person against whom the privilege exists has the correlative no-right, that is, the absence of a legally enforceable claim against the privilege-holder for doing or not doing the given act, there is no duty of noninterference with respect to the privilege-holder, and the no-right-holder may interfere with the privilege-holder’s attempts to exercise his privilege.

Why Copyright is a Right

Professor Bell cleverly frames things to arrive at his conclusion that copyright is a privilege and not a right. The baseline, as Bell correctly notes, is that in the absence of copyright everyone would be able to copy as they please, and it is only with the introduction of copyright that this baseline changes. Bell then erroneously claims that this ability to copy as one pleases in the absence of copyright is a right. Thus, according to Bell, in the absence of copyright, O has the right to copy P’s work, and P has the correlative duty to permit O to copy his work. Copyright changes this, Bell continues, by granting P a privilege which negates his duty to permit O to copy his work.

It’s simple to dispense with Bell’s claim that copyright is a privilege. It is true that, absent copyright, people can freely copy a given work. The fault in Bell’s argument is in equating this ability to copy freely in the absence of copyright with a right. If it were a right, then others would be under the correlative duty to permit the rightholder to copy a given work, and the rightholder would have a legally enforceable claim against those that breach this duty. But clearly no such duty exists. What cause of action would this supposed rightholder have against another who interferes with his attempt to copy a given work? No such cause of action exists since no one has a duty to permit another to copy a given work.

Nor does copyright grant a copyright owner a privilege. If copyright were merely a privilege, then that would relieve the copyright owner of the duty that he otherwise would have to permit another to copy his work—but again, there is no such duty to permit another to copy his work. Moreover, a privilege does not give its holder a legally enforceable claim against another who does or does not do a given act. Whence does Bell think a copyright owner’s claim against another who copies his work arises if the owner has merely a privilege? Without a right to exclude another from copying his work, there is no legally enforceable claim against another who so copies. And if a copyright owner is merely a privilege-holder, whence does Bell think the duty arises in another not to copy the copyright owner’s work? Without a right, there is no such correlative duty. Yet clearly such a duty does exist.

Two examples demonstrate the point. Take, for instance, Professor Hohfeld’s journal article from 1913 that I linked to on the University of Texas (“UT”) server. Being a century old, Hohfeld’s article is in the public domain, and it is therefore not protected by copyright. According to Bell, being that there is no copyright protection for the article, O has the right to copy this article, and others, including UT, have the duty to refrain from interfering with O as he exercises his right. Thus, according to Bell, UT has the duty to permit O to copy the article. If UT were to password-protect access to the article, thereby interfering with O’s exercise of his right to copy it, O would have a legally enforceable claim against UT for breaching its duty of noninterference with respect to O’s right to copy the article. Obviously there is no such duty on UT’s part, and UT can grant access to the article to everyone in the world except for O if it so chooses without facing any liability.

Take another example, but this time with the work in question being under copyright. Say I write an original manuscript by hand on paper. By virtue of the work being fixed in a tangible medium, I am automatically granted a copyright in the work by the Copyright Act. Bell’s view is that this copyright has only granted me a privilege which relieves me of the duty I would otherwise have to respect another’s right to copy my work as he pleases. But what accounts for the fact that I have a legally enforceable claim against another who copies my work? And what accounts for the duty that another has to not copy my work? If copyright merely grants me a privilege, then there would be no such duty on the part of another to not copy my work, and I would have no legally enforceable claim against another that copies my work. Clearly copyright has given me something more than a mere privilege.

Thus, Professor Bell is mistaken to claim that his view of copyright-as-privilege is true to Professor Hohfeld’s explication of the fundamental jural relations. The proper way to view this is see that, as the Constitution and the Copyright Act acknowledge, copyrights are grants of exclusive rights.24 Copyrights are rights because they give the rightholder a legally enforceable claim against another who copies his work, and they create in another the correlative duty to not copy the copyright owner’s work.

Why Fair Use is a Privilege

Along these same lines, it’s clear that fair use is a privilege and not a right. If fair use were a right, then the fair user would have a legally enforceable claim against another that he should do or not do a given act. The other would then owe the fair user the correlative duty to do or not do the given act, and he would have a duty of noninterference with respect to the fair user. But fair users have no such claim and are owed no such duty. Fair use instead is merely a privilege. It permits the fair user to do an act—copying—that but for the privilege would give rise to liability. The privilege negates the duty the fair user would otherwise have with respect to the copyright owner, and the copyright owner has the correlative no-right, that is, the absence of a legally enforceable claim to hold the fair user liable for his copying. That fair use is a privilege accounts for the fact that it operates as an affirmative defense and not as an affirmative right.25

Thus, if O is the author of a work, O has certain exclusive rights in that work which give him a legally enforceable claim against P should P copy the work. P, in turn, owes O the correlative duty to not copy the work, and if P breaches this duty, he can then be held liable by O for the infringement. But not all copying by P infringes O’s exclusive rights. P has the privilege of making fair use of O’s work, and this privilege negates the duty to not copy O’s work that P would otherwise have. This privilege on P’s part creates the correlative no-right on O’s part which negates O’s legally enforceable claim against P. But for P’s privilege, O could hold P liable for the copying, but P’s fair use privilege arms P with a perfect defense to a claim of infringement.

As a mere privilege-holder, a fair user has no legally enforceable claim against another that he should do or not do a given act—only a rightholder has such a claim. Moreover, as a mere privilege-holder, a fair user is owed no duty of noninterference by another as he attempts to exercise his privilege. Thus, others may interfere with the would-be fair user’s attempts to make fair use of a given work. That it is not impermissible for the would-be fair user to make fair use of a given work is not the same as being guaranteed that he may do so. This is demonstrated in the passage from Hohfeld quoted above about the salad—I may grant you a license to eat my salad, which would absolve you of any liability should you do so, but your privilege to eat my salad does not come with any guarantees that I will make the salad available to you. “Not impermissible does not equate to guaranteed.”26

That a fair user has no legally enforceable claim, i.e., a right, to make fair use of a given work is demonstrated in the Second Circuit’s opinion in Universal v. Corley.27 There, the appellants argued that the DMCA anti-circumvention provisions interfered with their alleged constitutional right to make fair use of a DVD. The court of appeals rejected the argument: “We know of no authority for the proposition that fair use, as protected by the Copyright Act, much less the Constitution, guarantees copying by the optimum method or in the identical format of the original. . . . Fair use has never been held to be a guarantee of access to copyrighted material in order to copy it by the fair user’s preferred technique or in the format of the original.”28 I think the answer is much simpler than that. Since fair use is merely a privilege, the fair user is owed no duty of noninterference by others. A rightholder, or anyone else for that matter, can make the exercise of a would-be fair user’s privilege as easy or as difficult as he likes—even impossible if he so wishes.

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Footnotes

  1. L. Ray Patterson, Copyright in the New Millennium: Resolving Conflict between Property Rights and Political Rights, 62 Ohio St. L.J. 703, 704-05 (2001). []
  2. See Black’s Law Dictionary (9th ed. 2009). []
  3. Tom W. Bell, Intellectual Privilege: A Libertarian View of Copyright 108 (2010) [hereinafter “Bell”]. []
  4. Id. []
  5. Black’s Law Dictionary (6th ed. 1990) (emphasis added). []
  6. Bell at 110. []
  7. See Eldred v. Ashcroft, 537 U.S. 186, 233 (2003) (Stevens, J., dissenting); Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 421 (1984); Watson v. Buck, 313 U.S. 387, 404 (1941). []
  8. See Eldred, 537 U.S. at 223, 231-32, and 241 (Stevens, J., dissenting). []
  9. See Sony, 464 U.S. at 420, 433, 436, and 447. []
  10. See Watson, 313 U.S. at 404. []
  11. Bell at 110. []
  12. Id. []
  13. Id. at 110-11 (emphasis in original). []
  14. Id. []
  15. See Wesley Newcomb Hohfeld, Some Fundamental Legal Conceptions As Applied in Judicial Reasoning, 23 Yale L.J. 16 (1913) [hereinafter “Hohfeld”]. []
  16. Bell at 113. []
  17. See Hohfeld; Wesley Newcomb Hohfeld, Fundamental Legal Conceptions as Applied in Judicial Reasoning, 26 Yale L.J. 710 (1917). []
  18. Restatement (First) of Property § 1 (1936); see also Black’s Law Dictionary (9th ed. 2009) (A “right” is a “legally enforceable claim that another will do or will not do a given act; a recognized and protected interest the violation of which is a wrong.”). []
  19. Id. at § 2; see also Black’s Law Dictionary (9th ed. 2009) (“A privilege grants someone the legal freedom to do or not to do a given act. It immunizes conduct that, under ordinary circumstances, would subject the actor to liability.”). []
  20. Hohfeld at 32 (emphasis in original). []
  21. See, e.g., O’Brien v. Leidinger, 452 F.Supp. 720, 726 (E.D. Va. 1978) (“Whenever there exists a right in any person, there also exists a correlative duty in some other person or persons not to abridge or interfere with the exercise of that right.”). []
  22. Hohfeld at 35 []
  23. Andrew Halpin, Rights and Law: Analysis and Theory 35 (1997). []
  24. See, e.g., U.S. Const. art. I, § 8, cl. 8 (West 2013) (Congress has the power “[t]o promote the Progress of Science . . . by securing for limited Times to Authors . . . the exclusive Right to their . . . Writings . . . .”) (emphasis added); 17 U.S.C.A. § 106 (West 2013) (copyright grants “the owner of a copyright . . . the exclusive rights to do and to authorize” certain listed activities such as to make or to distribute copies) (emphasis added); (17 U.S.C.A. § 107 (West 2013) (fair use is one of the “[l]imitations on exclusive rights” of authors.) (emphasis added). []
  25. See, e.g., Harper & Row Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 561 (1985) (“The drafters resisted pressures from special interest groups to create presumptive categories of fair use, but structured the provision as an affirmative defense requiring a case-by-case analysis.”); H.R. Rep. 102-836, *3 (“Fair use is an affirmative defense, and as such is relevant only after a copyright owner has made out a prima facie case of infringement.”); Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 590 (1994) (“Since fair use is an affirmative defense, its proponent would have difficulty carrying the burden of demonstrating fair use without favorable evidence about relevant markets.”). []
  26. David R. Johnstone, Debunking Fair Use Rights and Copyduty Under U.S. Copyright Law, 52 J. Copyright Soc’y U.S.A. 345, 369-70 (2005) (internal quotations omitted). []
  27. Universal City Studios, Inc. v. Corley, 273 F.3d 429 (2d Cir. 2001). []
  28. Id. at 459. []

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Control is Fundamental to Copyright Theory — Devlin Hartline continues a discussion began last week when some criticized the assertion, made during Thursday’s copyright review hearing, that copyright is about control. Says Hartline, “All property law involves determining how much control to give to rightholders, and copyright is no exception. Copyright law presents its own unique considerations, no doubt, and the task of Congress is difficult as it determines where to strike the balance that it deems proper between the competing sets of claims as to what is best for the public good. But when considering where to strike this balance, it should be remembered that what is good for authors is often also good for the public.”

Department of Commerce releases report on Copyright Policy, Creativity, and Innovation in the Digital Economy — I have a summary of the Department of Commerce Internet Policy Task Force’s Green Paper, released on Wednesday, over at Idea/Expression. “The purpose of the Green Paper is to review the development of copyright policy as it has responded to new technologies in recent decades, assess the current challenges facing copyright law, and provide a set of recommendations to address some of those challenges,” and will likely play an important role in copyright policy discussions going forward.

Getting Creative With the G.D.P. — “We have undervalued creativity and research,” notes the New York Times, as it reports on a significant change to how the G.D.P. is calculated. The Bureau of Economic Analysis will now give greater economic weight to a variety of creative works and intellectual property, to better reflect the value they generate for the economy. The change, which will be applied retroactively as well, will boost the size of the G.D.P. by tens of billions of dollars.

Steal a Little: Piracy & the Economy — More goodness from David Newhoff, who rebuts a recent assertion that we shouldn’t worry about infringement because the money not spent on creative works can be spent on other things. Well, sure, but that could be said about anything.

8 Takeaways from today’s IP Subcommittee Hearing — Chris Castle gives a good rundown of some of the highlights of Thursday’s hearing on technology and innovation in front of the House Judiciary Committee Subcommittee on Courts, Intellectual Property, and the Internet.

Why Telling Artists To Stop Selling Music & Just Make Money Through Live Shows Is Ridiculous — “Giving away all your music for free and trying to make your living via other revenue streams can be a valid approach. Except that I don’t know of any musicians actually doing that. The ones who do make all their music available for free are also selling it and some are doing just fine without touring at all. As a one size fits all solution, it still seems to be the fantasy mostly of people in the tech world, which is weird because one size fits all doesn’t work in their world either.”

Claeys on Aerial Trespass — Lawrence Lessig began his book Free Culture with the story of how commercial airflight was initially hampered by overly restrictive property rules; landowners had dominion over airspace above their land, creating nearly insurmountable obstacles to creating flight patterns. The implication being that this is analogous to the development of the internet and intellectual property. Now take a guess about how inaccurate the aerial trespass fable is.

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Innovation in America: The Role of Copyrights — Yesterday, the House Judiciary Committee Subcommittee on Courts, Intellectual Property, and the Internet held its latest hearing in its ongoing review of copyright law. The hearing page includes links to the written testimony of each witness as well as video of the hearing (you have to skip ahead to about the 27:30 mark before things actually start). The hearing, which focused on how copyright and creative industries drive innovation, was unfortunately cut short because of an earlier-than-anticipated floor vote.

Literary Property: Copyright’s Constitutional History and Its Meaning for Today [PDF] — An absolutely fantastic and thorough look at the role of Noah Webster and James Madison in establishing copyright law at the very beginnings of the United States. As authors Randolph May and Seth Cooper of the Free State Foundation note in their intro, “Recognizing copyright in the fundamental law of the land conveys its importance as a means of promoting progress in science and useful arts, as well as in commerce. And by recognizing an individual’s rights to the fruits of his or her labor, copyright not only promotes progress and commerce, but also secures a space for individual entrepreneurship free from government control or taking.”

Need for Copyright Protection Hits Home — Prop maker and first time author Eric Hart says, “The book is not a commodity that’s interchangeable with other books out there – nor did it appear magically one day. Its publication was not inevitable. I had to work to get it written. So is it unreasonable to ask that my work is protected and that protection is respected?”

Ad Networks Adopt Notice and Takedown for Ads on Pirate Sites — Bill Rosenblatt takes a look at the cooperative agreement between several large internet advertising agreements announced earlier this month. Discussed are some of the agreement’s major shortcomings — not included are the ad networks causing the most trouble, for example (and, I would add, the agreement ignores completely other major players in the online advertising ecosystem such as ad exchanges). Rosenblatt also offers several recommendations that could make the agreement more effective.

Google’s Impact on Journalism — “The ways in which Google uses its dominance in search to monetize, by corralling and aggregating (without permission) the content of others, is a story that is long in telling.  But a common feature, as stated in a White Paper submitted to the FTC in 2011 by The Media Institute, is that Google’s ‘main search page biases Google News results over results of news organizations and other publishers.’”

David Lowery’s uphill fight against commodification — “His particular bugaboos: advertiser-supported piracy, the culture of free content and streaming services that pay a fraction of a penny per song played. In some circles, that makes Lowery a reality-denying crank caught on the wrong side of history. . . But he’s more like an entrepreneur trying to take his goods to market on his own terms, and he’s frustrated by the many forces aligned to prevent that from happening. And he’s not anti-Internet. He’s anti-One-Size-Fits-Allnet.”

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Cross-posted on the Law Theories blog.

In an issue of first impression at the appellate court level, the Fourth Circuit last week held that a clickwrap agreement could satisfy Section 204(a)’s requirement that “[a] transfer of copyright ownership” be “in writing and signed by the owner of the rights conveyed . . . .”1 The opinion is available on the court’s website, and I have uploaded a copy to Scribd.2

The court of appeals held that, in light of the E-SIGN Act,3 if a website’s terms of use stipulate that ownership of the copyright in a photograph is transferred to the website operator when a website user uploads a photograph to the website, then a website user who clicks “yes” to agree to the terms of use and then uploads a photograph to the website has thereby transferred ownership of the copyright in the photograph to the website operator. The unanimous appellate panel held that the acts of clicking “yes” and uploading the photograph serve to fulfill Section 204(a)’s requirement that the transfer of copyright ownership be memorialized in a signed writing.

Section 204(a)’s Writing Requirement

Section 204(a)’s writing requirement is like a statute of frauds in that it serves “the usual evidentiary and cautionary functions of all statutes of frauds,” but it also performs “the additional purpose of describing the bounds of intangible rights that cannot be seen or felt.”4 The requirement of a signed writing “is not only designed to protect people against false claims of oral agreements,” but it also serves “to make the ownership of property rights in intellectual property clear and definite, so that such property will be readily marketable.”5 Section 204(a) ensures that in transactions involving the “transfer of the in rem exclusive rights created by copyright law,” there are “clear chains of title and clear delineation of the open-ended subdivisions of exclusive rights permitted under the 1976 Act.”6 In other words, the signed writing contemplated by Section 204(a) is “copyright’s equivalent of a deed.”7

Chief Judge Alex Kozinski colorfully explains the purpose of the writing requirement:

Common sense tells us that agreements should routinely be put in writing. This simple practice prevents misunderstandings by spelling out the terms of a deal in black and white, forces parties to clarify their thinking and consider problems that could potentially arise, and encourages them to take their promises seriously because it’s harder to backtrack on a written contract than on an oral one.

Copyright law dovetails nicely with common sense by requiring that a transfer of copyright ownership be in writing. Section 204 ensures that the creator of a work will not give away his copyright inadvertently and forces a party who wants to use the copyrighted work to negotiate with the creator to determine precisely what rights are being transferred and at what price. Most importantly, section 204 enhances predictability and certainty of copyright ownership—Congress’ paramount goal when it revised the Act in 1976. Rather than look to the courts every time they disagree as to whether a particular use of the work violates their mutual understanding, parties need only look to the writing that sets out their respective rights.

Section 204′s writing requirement is not unduly burdensome; it necessitates neither protracted negotiations nor substantial expense. The rule is really quite simple: If the copyright holder agrees to transfer ownership to another party, that party must get the copyright holder to sign a piece of paper saying so. It doesn’t have to be the Magna Charta; a one-line pro forma statement will do.8

By its terms, Section 204(a) applies to “[a] transfer of copyright ownership.” Section 101, in turn, tells us that such a transfer includes “an assignment, mortgage, exclusive license, or any other conveyance, alienation, or hypothecation of a copyright . . . .”9 Thus, the writing requirement applies to assignments, exclusive licenses, or any other transfer of copyright ownership such as a mortgage, pledge, or encumbrance.

The question arises whether electronic communications such as emails can fulfill Section 204(a)’s writing requirement. One district court, analyzing a series of emails in which the details of an exclusive license were negotiated, held that there was no signed writing:

Plaintiff has not provided this Court with evidence of a signed writing granting him an exclusive license to market the sound recordings. Instead, Plaintiff argues that the parties’ exchange of e-mails evidences the agreement. The exchange of e-mails, however, does not satisfy the statutory requirement of a written instrument signed by the Defendants. Thus, Defendants could not have transferred ownership of the sound recordings to Plaintiff through an exclusive license.10

So how did the Fourth Circuit arrive at its conclusion that merely accepting a website’s terms of use and uploading a photograph to the website can result in the necessary signed writing under Section 204(a)? The key lies in the E-SIGN Act, a federal law which, generally speaking, “mandates that no signature be denied legal effect simply because it is in electronic form.”11 But is assenting to a website’s terms of use wherein a website user agrees to transfer his ownership in a copyright to the website operator really the same thing as signing an agreement to transfer the copyright?

The District Court Proceedings

The underlying dispute in this case is between two competing real estate listing businesses, Metropolitan Regional Information Systems, Inc. (“MRIS”) and American Home Realty Network, Inc. (“AHRN”). Plaintiff MRIS, located in Maryland, maintains a database of property listings to which real estate brokers and agents subscribe. These subscribers upload their listings to the MRIS database, and they agree via acceptance of the website’s terms of use to assign ownership of the copyrights in whatever photographs they upload to MRIS. Defendant AHRN, located in California, operates a nationwide real estate search engine. MRIS alleges that AHRN displayed real estate listings that contained copyrighted photographs from the MRIS database, and it filed suit claiming direct and indirect copyright infringement by AHRN.

In the district court, defendant AHRN moved to dismiss the complaint for failure to state a claim, arguing that plaintiff MRIS did not own the copyrights in the photographs sued upon since the assignments between it and its subscribers were not memorialized in a signed writing as mandated by Section 204(a). Citing the E-SIGN Act, the district court disagreed.12

The E-SIGN Act provides:

Notwithstanding any statute, regulation, or other rule of law . . . with respect to any transaction in or affecting interstate or foreign commerce—

(1) a signature, contract, or other record relating to such transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form; and

(2) a contract relating to such transaction may not be denied legal effect, validity, or enforceability solely because an electronic signature or electronic record was used in its formation.13

“Electronic signature,” in turn, is defined by the Act as “an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.”14

The assignment of the copyrights in the photographs is governed by the terms of use on the MRIS website, the relevant section of which provides:

All images submitted to the MRIS Service become the exclusive property of Metropolitan Regional Information Systems, Inc. (MRIS). By submitting an image, you hereby irrevocably assign (and agree to assign) to MRIS, free and clear of any restrictions or encumbrances, all of your rights, title and interest in and to the image submitted. This assignment includes, without limitation, all worldwide copyrights in and to the image, and the right to sue for past and future infringement.15

The district court held that the “TOU constitutes credible evidence that MRIS’s users intended to assign their copyrights to MRIS through the electronic submissions of photographs, which would satisfy the relevant provisions of ESIGN.” Having determined that the writing requirement was fulfilled, the district court then granted plaintiff MRIS’s motion for a preliminary injunction, finding that it had a likelihood of success on the merits since it “appears to have obtained these copyrights by assignment when the photographs were uploaded to the MRIS Database by subscribers.”16

AHRN subsequently filed a motion to reconsider the preliminary injunction order that had been entered against it, again challenging the validity of the copyright transfers between MRIS’s subscribers and MRIS. Siding with MRIS, the district court reiterated its earlier holding that “the TOU and the subscribers’ electronic submissions of photographs, properly considered an ‘electronic signature’ under E–SIGN, evidence the parties’ full and complete agreement to transfer the copyrights MRIS seeks to enforce in this case.”17 Thus, the district court found that, even though MRIS’s subscribers only indicated their assent to MRIS’s terms of use insofar as the copyright assignments were concerned, this assent also indicated an “intent to sign the record” under the E-SIGN Act. But is assenting to the terms of a contract the same thing as intending to sign the contract?

The Fourth Circuit Opinion

On appeal, the reasoning of the Fourth Circuit’s opinion tracks that of the district court below.18 The court begins by noting that Section 204(a)’s writing requirement is different from a statute of frauds in that, “[r]ather than serving an evidentiary function and making otherwise valid agreements unenforceable, under § 204(a) a transfer of copyright is simply not valid without a writing.”19 Furthermore, continues the court, “a qualifying writing under Section 204(a) need not contain an elaborate explanation nor any particular magic words, but must simply show an agreement to transfer copyright.”20

Before proceeding to the merits of the copyright transfers at issue, the court of appeals cites Second and Ninth Circuit precedent discussing the impropriety of allowing third parties to challenge the validity of a copyright transfer where there is no dispute between the assignor and assignee. Recall that here MRIS’s subscribers assigned their copyrights to MRIS, and the only party challenging those assignments is AHRN—as far as we know, both MRIS and its subscribers believe the transfers to be valid. The court notes that MRIS did not raise the argument that AHRN could not attack its assignments indirectly, and then it proceeds to analyze AHRN’s attack on the merits. One wonders how the court would have reacted had MRIS actually made the argument that it is improper for a third party to challenge the validity of a copyright assignment that is not doubted by either the assignor or assignee.

The court of appeals then goes on to cite the relevant provisions of the E-SIGN Act, notably the definition of “electronic signature” mentioned above which includes “an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.” The court reasons that since Section 7001(b) of the E-SIGN Act seeks to “limit, alter, or otherwise affect” any statutory “requirement that contracts or other records be written, signed, or in nonelectronic form,” and since “Section 204(a) requires transfers to be ‘written’ and ‘signed,’” it follows “that Congress intended the provisions of the E–Sign Act to ‘limit, alter, or otherwise affect’ Section 204(a).”21 Moreover, the court continues, copyright transfers do not fall into any of the enumerated exceptions to the E-SIGN Act found in Section 7003.

The appellate panel cites with approval the only other case it can find that applies the E-SIGN Act to Section 204(a),22 noting that the district court there “reasoned that allowing the transfer of copyright ownership via e-mail pursuant to the E–Sign Act accorded with, rather than conflicted with,” the purpose of the writing requirement.23 Additionally, the court of appeals looks to another context, the Federal Arbitration Act, where the E-SIGN Act has been applied to find a “written provision” to exist in an email or a website’s terms of use.24 Strangely, the court of appeals does not explain how the cases it cites, which found a written document to exist in the electronic context, apply to the situation which is present here, which mandates a signed and written document. The court of appeals notes that invalidating the copyright transfers here “would thwart the clear congressional intent embodied in the E–Sign Act,” and it thus holds “that an electronic agreement may effect a valid transfer of copyright interests under Section 204 of the Copyright Act.”

Craigslist and Beyond

The issue of whether assent to a website’s terms of use could fulfill Section 204(a)’s writing requirement became relevant in a recent dispute involving Craigslist. Back in July of 2012, Craigslist sued 3Taps, PadMapper, and others for copyright infringement.25 Like MRIS, Craigslist claimed to have exclusive rights to user-generated content on account of its terms of use which users accepted via a clickwrap agreement, and it alleged that the defendants were infringing its copyrights by unlawfully scraping, copying, and distributing this copyrighted content. In an order this past April denying in part the defendants’ motion to dismiss, the district court found that Craigslist did in fact have an exclusive license to certain user-generated content—despite there being no signed writing memorializing the transfer.

The district court started its analysis by noting that “the primary issue for the user-created individual posts is whether Craigslist has acquired a sufficient license or ownership interest to assert the copyright.”26 The court then states that “[t]ransferring an exclusive license requires a writing,” and it quotes Section 204(a) as providing that “[a] transfer of copyright ownership . . . is not valid unless . . . in writing.”27 Remarkably, the district court completely ignores the statute’s requirement that the writing be “signed” by the copyright owner. Having read the requirement of a signed writing out of the statute, the court goes on to find that the terms of use agreed to by Craigslist’s users fulfill the writing requirement of Section 204(a) and grant to Craigslist an exclusive license to certain user-generated content. One would hope that this mistake is corrected by the district court down the road.

I bring up the court’s error in Craigslist to highlight what I think to be the error in the district court’s and the Fourth Circuit’s reasoning in construing the terms of use agreed to by MRIS’s subscribers here—the courts are reading out of Section 204(a) the requirement that the writing be “signed.” The E-SIGN Act defines an “electronic signature” to include “an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.”28 The “parties’ intent is crucial.”29 Both the district court and the Fourth Circuit have conflated the intent to agree to a website’s terms of use with the intent to indicate that agreement by signing a writing. In the context of agreeing to a website’s terms of use, all signings indicate assent thereto, but not all assents take the form of a signing.

In other words, by clicking “yes” and agreeing to the terms of use, a user has clearly assented to the terms of use, but I find it a stretch to say that the user has intended to sign his name to that effect—not without more. While the result certainly comports with the policy rationale behind Section 204(a)’s writing requirement, it does not fit with the clear import of the statutory text. The simple solution, to me, seems to be for websites to have a box where a user can input his digital signature signaling his assent to the transfer. Another possibility would be to have the terms of use state that by clicking “yes,” the website user is assenting to the terms of use and affixing his electronic signature.30 That would clearly fulfill the requirement of a signed writing under the Copyright Act and the E-SIGN Act. That said, it will be interesting to see how other courts deal with this relatively novel legal issue when presented with it.

Follow me on Twitter: @devlinhartline

Footnotes

  1. 17 U.S.C.A. § 204(a) (West 2013) (“A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.”). []
  2. For some reason, Scribd sometimes changes the font and makes documents difficult to read. When this happens, I have found that downloading the file and opening it up, rather than reading it from within the Scribd website, fixes the formatting issues. []
  3. See Electronic Signatures in Global and National Commerce Act, Pub. L. 106-229, 114 Stat. 464; codified at 15 U.S.C. §§ 7001-31. []
  4. Christopher M. Newman, A License Is Not A “Contract Not to Sue”: Disentangling Property and Contract in the Law of Copyright Licenses, 98 Iowa L. Rev. 1101, 1140 n.167 (2013) (internal quotations and citations omitted). []
  5. Schiller & Schmidt, Inc. v. Nordisco Corp., 969 F.2d 410, 412 (7th Cir. 1992) (discussing Section 101’s requirement of a signed writing in the context of a work made for hire). []
  6. Newman, 98 Iowa L. Rev. at 1140. []
  7. Id. []
  8. Effects Associates, Inc. v. Cohen, 908 F.2d 555, 557 (9th Cir. 1990) (internal citations and quotations omitted; paragraph break added). []
  9. 17 U.S.C.A. § 101 (West 2013) (“A ‘transfer of copyright ownership’ is an assignment, mortgage, exclusive license, or any other conveyance, alienation, or hypothecation of a copyright or of any of the exclusive rights comprised in a copyright, whether or not it is limited in time or place of effect, but not including a nonexclusive license.”). []
  10. Ballas v. Tedesco, 41 F.Supp.2d 531, 541 (D.N.J. 1999); this opinion predates the E-SIGN Act, which went into effect on October 1, 2000. []
  11. 3-10 Nimmer on Copyright § 10.03[A][1]. []
  12. See Metro. Reg’l Info. Sys., Inc. v. Am. Home Realty Network, Inc., 888 F.Supp.2d 691 (D. Md. 2012), modified on clarification, 904 F.Supp.2d 530 (D. Md. 2012). []
  13. 15 U.S.C.A. § 7001(a) (West 2013). []
  14. 15 U.S.C.A. § 7006(5) (West 2013). []
  15. Metro. Reg’l Info. Sys., Inc., 888 F.Supp.2d at 708. []
  16. Id. at 710. []
  17. Metro. Reg’l Info. Sys., Inc. v. Am. Home Realty Network, Inc., 904 F.Supp.2d 530, 539 (D. Md. 2012). []
  18. See Metro. Reg’l Info. Sys., Inc. v. Am. Home Realty Network, Inc., Case No. 12-2102, 2013 WL 3722365 (4th Cir. July 17, 2013). []
  19. Id. at *8 (internal citations and quotations omitted). []
  20. Id. (internal citations and quotations omitted). []
  21. Id. at *9. []
  22. See Vergara Hermosilla v. Coca-Cola Co., Case No. 10-21418, 2011 WL 744098 (S.D. Fla. Feb. 23, 2011), aff’d sub nom., Hermosilla v. Coca-Cola Co., 446 F.App’x 201 (11th Cir. 2011). []
  23. Metro. Reg’l Info. Sys., Inc., 2013 WL 3722365 at *9. []
  24. See 9 U.S.C. § 2. []
  25. See Craigslist Inc. v. 3Taps Inc., Complaint, Case No. 12-03816, 2012 WL 3011009 (N.D. Cal. July 20, 2012). []
  26. Craigslist Inc. v. 3Taps Inc., Order Granting in Part and Denying in Part Motions to Dismiss, Case No. 12-03816, 2013 WL 1819999, *6 (N.D. Cal. Apr. 30, 2013). []
  27. Id. at *7 (internal quotations omitted; ellipses in original.). []
  28. 15 U.S.C.A. § 7006(5) (West 2013) (emphasis added). []
  29. Pepco Energy Servs., Inc. v. Geiringer, Case No. 07-04809, 2010 WL 318284, *2 (E.D.N.Y. Jan. 21, 2010) (unpublished opinion). []
  30. See Berry v. Webloyalty.com, Inc., Case No. 10-01358, 2011 WL 1375665, *7 (S.D. Cal. Apr. 11, 2011), opinion vacated and remanded on other grounds, Case No. 11-55764, 2013 WL 1767718 (9th Cir. Apr. 25, 2013). []

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July 19, 2013 · · Comments Off

Will People On the Internet Ever Stop Stealing Each Other’s Shit? — “As more and more people get used to the idea that we’re all content creators, they’ll care more and more about developing both norms of conduct and technological solutions that help curtail content theft—that allow content to be easily accessed and shared, but with proper attribution and perhaps with a system for generating revenue under certain circumstances.”

Thom Yorke Vs Spotify: Why Doesn’t Spotify Speak Out Against Ad Funded Piracy? — The Trichordist notes, “it’s also important to remember that despite our disagreements over the revenue distribution models of Spotify and Pandora these are legal and licensed services… One of the primary reasons Spotify pays so little is because so many more pay nothing at all.”

Will Cariou v. Prince case be heard by the US Supreme Court? — The Second Circuit denied a petition for rehearing in the trailblazing case for transformative fair use. Cariou’s lawyer has indicated he would next file an appeal with the Supreme Court. The Court has not weighed in on the fair use doctrine in nearly twenty years.

Aereo heading to the US Supreme Court? — Recent developments in the Aereo/Aereokiller line of cases also nudge the issue a little bit closer to the Supreme Court.

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Jonathan Swift once wrote that satire is a mirror “wherein beholders do generally discern everybody’s face but their own.” To be successful, satire must be subtle.

So it’s disappointing to see Techdirt, the long-running satire of copyright skepticism, forget this lesson.

Yesterday, the site ran a story on HBO’s Latest DMCA Abuse: Issues Takedown To Google Over Popular VLC Media Player. The joke here is that copyright skeptics ignore the vast scale of legitimate copyright claims to focus on the handful of errors and outliers in order to make a blunt “copyright bad” argument. That this sort of thing is the problem with the DMCA, not the tens of thousands of bad faith sites that use the law as a shield to profit off the works of others. But in trying to lampoon this viewpoint, Techdirt overplays its hand.

The story here involves a DMCA notice sent to Google on behalf of HBO. Included in the notice is one link to a page ostensibly offering a legitimate copy of the open source video program VLC rather than an infringing copy of an HBO work. But a quick look at the notice reveals hundreds of other links that do lead to infringing HBO works — nearly 1,600 in total. Assuming the VLC link accurately describes the files content, that’s an accuracy rate of over 99.9% in the entire notice. Yet Techdirt claims it shows the DMCA agent “isn’t being very careful.” 99.9% accuracy, described by Techdirt as “incredibly sloppy.”

Anyone with half a mind would quickly recognize that no one who was serious would make such a claim. Even those in on the joke would have a hard time maintaining a willful suspension of disbelief.

It’s a shame too, because ordinarily, Techdirt’s satire is very effective. Its construction of an entirely incoherent First Amendment doctrine is masterful. The running gag where minor points are consistently contradicted — for example, “the Librarian of Congress, which you might notice is a part of the legislative branch, not the executive branch” vs. “the Librarian of Congress (who technically is a part of the executive branch, working for the President)” — rewards close readers. Here’s hoping Techdirt finds its groove again.

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Chiang on the Property Theory of Copyright’s First Amendment Exemption — Lawrence Slolum highlights law prof Tun-Jen Chiang’s recent article Rehabilitating the Property Theory of Copyright’s First Amendment Exemption. Highly recommended for anyone interested in copyright and free speech issues. “A continuing controversy in copyright law is the exemption of copyright from First Amendment scrutiny. The Supreme Court has justified the exemption, based on the history and the intentions of the Framers, but this explanation is unpersuasive on the historical facts. There is an alternative explanation: copyright is property, and private property is generally exempt from scrutiny under standard First Amendment doctrine.”

White House must strengthen foundation of US innovation — Tennessee Rep. Marsha Blackburn shares some thoughts on copyright. “America has always been a society that rewards good ideas and protects property rights in a free-market capitalist system, not one premised on permission-less innovation where others can free-ride or take someone’s creation without even asking.”

The Power of Repeated Listening — Jeremy Schlosberg discusses how appreciation of good albums grows over repeated listens and how there’s a danger of forgetting this as we become increasingly surrounded by ever more and newer stuff to catch our attention. Great stuff.

Nimmer on Copyright: Celebrating 50 Years — Video from the U.S. Copyright Office event last May, held as part of its Copyright Matters series. David Nimmer discusses the influential treatise, started by his father, the late Melville Nimmer, half a century ago. Nimmer is joined by other copyright luminaries who share insights on the impact of Nimmer on Copyright.

A Guide to Music Performance Royalties, Part 1 — News about disputes over royalties between Pandora and musicians is often accompanied by misunderstandings about the different rights and royalties at play. Chris Castle offers a helpful primer on these topics. Also check out the Trichordist’s take, The Digital Royalty Fight: A Primer for Business Journalists. Part 1.

Copyright and the Creative Process — David Newhoff: “While planning the production of goneElvis, I wanted to use my friend Martin Ruby’s cover of ‘Tonight’s the Night,’ famously recorded by The Shirelles, but I was turned down by the publishers when I requested the license for which I could not of course pay. It seems the tendency these days is to view this kind of obstacle as unfair or muting the creative process of the next generation; but this attitude is a mistake, and I’d venture that almost any serious artist will agree. Because I couldn’t have what I thought I wanted in the first place, I ended up with something much better simply because I was forced to go look for it.”

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This past March, the Supreme Court considered in Kirtsaeng v. John Wiley & Sons “whether the words ‘lawfully made under this title’ restrict the scope of §109(a)’s ‘first sale’ doctrine geographically.” It ultimately held that they do not — copyright’s first sale doctrine has no geographic limitation. But since then, many have looked beyond Kirtsaeng’s narrow and fact-specific holding to find what they believe to be endorsement of broad, and potentially troubling to creators, expansions to the first sale doctrine.

Digital First Sale

Almost immediately, some speculated that Kirtsaeng would have an impact on “digital first sale”, especially given the fact that a decision in Capitol Records v. ReDigi dealing with that very issue was pending in the Southern District Court of New York (ReDigi operated a service allowing users to buy and sell “used” mp3s).1 For example, Joe Wikert, of TOC, wrote the same day that “the Kirtsaeng ruling can only help ReDigi’s case and that’s a good thing for anyone who wants the ability to resell their digital goods,” though he was far from the only one to share this view.2 But the court in ReDigi didn’t see anything in Kirtsaeng‘s general remarks about first sale that rendered the provisions at issue ambiguous, and it would hold that ReDigi did not have a valid first sale defense — the first sale doctrine only applies to the distribution of particular, lawfully made, copies of a work, while ReDigi was distributing new, unlawfully made, reproductions of copies.

Sales vs. Licensing

More recently, a software reseller has sought solace in Kirtsaeng‘s first sale language for a different issue in Adobe v. Kornrumpf, currently on appeal to the Ninth Circuit.

Adobe was in the practice of licensing OEM versions of its software — such as Photoshop Elements 8 — to be sold exclusively in conjunction with hardware equipment. According to court records, Kornrumpf acquired copies of these OEM products and resold them separately. Adobe sued, alleging infringement of its exclusive distribution rights since Kornrumpf had not lawfully acquired title to the software.

The court ruled in favor of Adobe, finding that the software was licensed, not sold. The decision was a fairly straightforward application of the test developed by the Ninth Circuit in Vernor v. Autodesk: “[A] software user is a licensee rather than an owner of a copy where the copyright owner (1) specifies that the user is granted a license; (2) significantly restricts the user’s ability to transfer the software; and (3) imposes notable use restrictions.” Since the evidence demonstrated that Adobe clearly met each of these elements, the first sale doctrine did not apply, and Kornrumpf was liable for infringing Adobe’s exclusive distribution right.

But Kornrumpf appealed, with a novel argument: the Supreme Court’s decision in Kirtsaeng limits the scope of Vernor. Specifically, he argues that the Court held that “market division is not a valid aim of copyright”, that it held “courts should not be burdened with enforcing restrictions on the alienability of chattels”, and that it reaffirmed “the venerable common-law aversion to restraints on alienability in the copyright context.”

As in ReDigi, these are essentially policy arguments, as they are not supported by the legal conclusions of Kirtsaeng.

Reaffirming Traditional First Sale Doctrine

In fact, if anything, Kirtsaeng reaffirmed the point that the first sale doctrine is inapplicable when copies have been licensed rather than sold. In responding to the argument that its interpretation of the first sale doctrine would render copyright’s importation provisions superfluous, for example, the Court says that, to the contrary, the provisions “would still forbid importing … copies lawfully made abroad … where … any … licensee, consignee, or bailee sought to send them to the United States.” [Emphasis added.]

What’s more, if there is anything that is venerable, it is copyright law’s tradition of recognizing a distinction between transferring title of a copy of a work through a sale and licensing a work. Going back to what is considered the origin of the first sale doctrine in U.S. copyright law, the 1908 Supreme Court case Bobbs-Merrill v. Straus, one can see this distinction already established. As the Supreme Court said there:

The precise question, therefore, in this case is, does the sole right to vend (named in § 4952) secure to the owner of the copyright the right, after a sale of the book to a purchaser, to restrict future sales of the book at retail, to the right to sell it at a certain price per copy, because of a notice in the book that a sale at a different price will be treated as an infringement, which notice has been brought home to one undertaking to sell for less than the named sum? We do not think the statute can be given such a construction, and it is to be remembered that this is purely a question of statutory construction. There is no claim in this case of contract limitation, nor license agreement controlling the subsequent sales of the book. [Emphasis added].

So it would seem that Kornrumpf, like ReDigi, will have trouble convincing courts to accept its first sale arguments. Nevertheless, these two cases exemplify a recent push, intensified by the Kirtsaeng decision, to inflate the first sale doctrine beyond its due boundaries. No doubt its proponents will raise the issue as Congress reviews the Copyright Act. Why is this troubling?

The Benefits of Traditional First Sale

For starters, a meaningful ability to license works benefits both consumers and creators. Many have observed that there is a general shift from ownership models to access models, especially with music and films.3 Licensing facilitates these new models, by allowing a more granular grant of rights than sales can provide. This gives consumers a diversity of options to read, watch, or listen, at a range of price points.

Put another way, think of it in terms of ordinary goods. For example, you can buy a car, enter into a long-term lease, rent a car for a short period, or take a cab. No one would argue that a framework that only allows outright sale of cars is preferable to this system. The same is true with real property: you can buy a house, lease an apartment, or book a hotel room. It would be an incredibly inefficient system if only the first of these was possible.

As far as digital first sale goes, there are issues with treating digital works like physical goods. There really isn’t such a thing as a “used” digital file — the file is absolutely identical to a “new” file and will remain identical indefinitely. This means “used” digital files are exact substitutes for “new” digital files and would compete directly with them.4 Obviously, there are limited issues regarding transferability and alienability that may arise, such as providing mechanisms for passing along digital files to heirs. But forcing digital works to act more like physical objects is clearly not an ideal solution.

The “First Sale License”

Which seems to be the thinking underlying much of the push for expanding first sale in the digital world: we should ignore the beneficial characteristics of the internet and arbitrarily force it to operate like a brick and mortar store. In many ways, first sale is the square peg in the future’s round hole.

Either of these — preference of sales over licensing or digital first sale — would be detrimental to creators and consumers. But the negative effects are multiplied when taken together. Most of today’s popular and innovative services — Spotify, Netflix, Audible, to name just a few — would be unlikely to exist under a system where any transfer of digital works are presumptively sales, and once transmitted they can be resold. Even copyleft systems like Creative Commons and open source software would be in trouble since they are built on copyright licensing.

In there place would be services that would operate under a “first sale license”,5 setting up convoluted systems that would allow them to provide access to songs, movies, ebooks, and other digital works without permission from or payment to creators. Imagine a streaming service that provides on-demand access to the universe of recorded music. Identical to, say, Spotify, but this service is premised on the conceit that a user “buys” a “used” song when it begins playing and then “sells” it back automatically when the song is finished. In this fashion, the service can claim it does not need permission from creators nor does it need to pay any applicable performance royalties. I don’t think such a service is outside the realm of possibilities — and if you don’t think some company will go through the effort to build a Rube Goldberg-like contrivance to take advantage of perceived loopholes in copyright law, well, I’ve got a thousand tiny antennas in Brooklyn to sell you.

Footnotes

  1. Kilpatrick, Townsend & Stockton LLP, “No first-sale doctrine for digital music files“, Lexology (April 8, 2013): “ReDigi had nothing to do with foreign manufacture/sale, and importation of copyrighted goods, but because the Supreme Court’s decision changed the meaning of the first-sale doctrine in the eyes of many, there was speculation that the decision might cause the Southern District to apply a comparably broad reading of the first-sale doctrine”. []
  2. See also Maria Scheid, “The First Sale Doctrine and the Sale of Digital Goods in Light of Kirtsaeng and ReDigi“, Copyright Corner (April 23, 2013): “the Supreme Court’s decision in Kirtsaeng is particularly important because it reaffirms the basic notion that one has physical ownership of the things that you buy. A court may hold this broad rationale to be equally applicable to digital goods, meaning consumers should be able to resell their digital goods under the protection of the first sale doctrine”; Daniel Gervais, “Digital Kirtsaeng: The first-sale doctrine and online content“, Blouin Beat (April 3, 2013), “ReDigi and others, relying on Kirtsaeng, will say that there is no valid reason to distinguish physical copies from online copies. When someone is done with a copy they should have the right to transfer it to someone else. They have copyright policy (as explained by a majority of the Supreme Court in Kirtsaeng) on their side.” []
  3. See, for example, Steve Jobs Was Wrong — Consumers Want To Rent Their Music, Not Own ItFuture of Music Biz: Ownership vs. Access with Ted Cohen, Founder of TAG StrategicSpotify CEO: Music access, not ownership, is the future. []
  4. Accord Register of Copyrights, DMCA Section 104 Report, U.S. Copyright Office, pp. 82-83 (August 2001):

    Physical copies of works degrade with time and use, making used copies less desirable than new ones. Digital information does not degrade, and can be reproduced perfectly on a recipient’s computer. The “used” copy is just as desirable as (in fact, is indistinguishable from) a new copy of the same work. Time, space, effort and cost no longer act as barriers to the movement of copies, since digital copies can be transmitted nearly instantaneously anywhere in the world with minimal effort and negligible cost. The need to transport physical copies of works, which acts as a natural brake on the effect of resales on the copyright owner’s market, no longer exists in the realm of digital transmissions. The ability of such “used” copies to compete for market share with new copies is thus far greater in the digital world.

    []

  5. Analogous to the “DMCA license” that some online service providers claim allows them to build business models around copyrighted works without permission, so long as the works are uploaded by users and the service provider responds to DMCA takedown notices. []

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June 28, 2013 · · Comments Off

Can we afford online piracy? — That’s the question Ellen Seidler asks, looking at a recent LA Times op-ed that argues that “online piracy is not something to be celebrated, but rather an activity that ultimately undermines our art and those who toil to make it (not just the well-paid executives).”

Who will stop Google? — Lately it seems like every week a new story pops up that pulls aside the veneer of innovation and do-goodery in the tech world to reveal its self-centered, autocratic core. This article from Salon links to many of these stories and adds to the narrative. “Imagine that it’s 1913 and the post office, the phone company, the public library, printing houses, the U.S. Geological Survey mapping operations, movie houses, and all atlases are largely controlled by a secretive corporation unaccountable to the public. Jump a century and see that in the online world that’s more or less where we are.”

A Surprising Theme at National Small Business Week: Intellectual Property? — “The week serves as a stark reminder of just how important small businesses are. We know the statistics: half of Americans work for, or own a small business, and small businesses create just about two out of every three new jobs in America each year. Something else I heard this week, however, was a message around small businesses that I didn’t know–that we need to focus on protecting our work and our businesses. Protecting our intellectual property.”

Capitol Records v. ReDigi — If you recall, earlier this year, the SDNY ruled that “used mp3″ service ReDigi was infringing on Capitol Records’ reproduction rights in a closely watched case. Last week, the court denied ReDigi’s attempt to appeal the decision, saying there was no need to review the decision prior to judgment. Discovery will continue in the litigation.

Defense of Marriage Act (DOMA) Goes Down — Copyright Goes Up — Perhaps surprisingly, the U.S. Supreme Court’s much anticipated decision in US v. Windsor, striking down a portion of DOMA, has ramifications in the copyright world. Specifically, as this article notes, those provisions directed at “statutory heirs” in the Copyright Act, such as the termination of transfers provision, since the definition of statutory heirs includes a copyright owner’s surviving spouse.

Historic Treaty Adopted, Boosts Access to Books for Visually Impaired Persons Worldwide — WIPO successfully concluded a landmark treaty this week which would require limitations and exceptions that permit the reproduction and making available of published works in accessible formats for the visually impaired. “It also provides for the exchange of these accessible format works across borders by organizations that serve the people who are blind, visually impaired, and print disabled. It will harmonize limitations and exceptions so that these organizations can operate across borders. This sharing of works in accessible formats should increase the overall number of works available because it will eliminate duplication and increase efficiency. Instead of five countries producing accessible versions of the same work, the five countries will each be able to produce an accessible version of a different work, which can then be shared with each of the other countries.”

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June 21, 2013 · · Comments Off

Rick Carnes, Eddie Schwartz and Fair Trade Music Project Speaks Out for Silenced Songwriters–Please sign the petition! — The songwriters have spoken out to raise awareness of other songwriters arrested and imprisoned throughout the world for the messages they have conveyed. “Freedom of expression is the life blood of all creators. There is a disturbing trend in many parts of the world to snuff out political opposition by denying songwriters the ability to express themselves through their songs. This is why the Fair Trade Music Project adopted protection of free speech as one of its five principles. Without basic freedom of expression it’s not just music that suffers… people suffer as well,” said Carnes.

The Small Businesses Behind the Big (and Small) Screen — To celebrate the 50th year of National Small Business Week, Creative America takes a look at just a few of the 95,000 businesses that support film and television in the U.S. Roughly 80% of these businesses are small businesses, employing fewer than 10 people.

Where Patton Oswalt is Right and Wrong about Plagiarism — Jonathan Bailey takes a look at the comedian’s recent remarks about plagiarism. “In short, even if you are naturally talented, it’s a lot of work to be a creative. Many people, however, won’t see it that way. This impacts how they interact with your work in many different ways, including making it easier to justify infringement, plagiarism and other activities.”

Fear and Loathing of Silicon Valley — “The fallacy of the tech industry is that we think our ‘change the world/connect the world’ intentions are enough, or at least that they should shield us from reproach, much like our gated communities of Ubers, Airbnbs, and TaskRabbits. We revel in our massive concentration of wealth, private-public transportation, private tech-heavy schools, and the underlying ideology that the government is stupid. We are exempt.”

Pandora’s Boxing: Too Many Punches have Left it Vulnerable to a Knockout — The Internet radio service has seemingly been on a path to squander its goodwill at every turn since the introduction last fall of the Internet Radio Fairness Act, which asked Congress to dramatically cut royalties recording artists get under the compulsory license. Mark Rogowsky takes a look at Pandora’s troubles over at Forbes, while also noting, “The company’s problem, then, is that its bad at making money not that it pays too much.”

Study Finds That Wealthier People Steal More Music… — Even though we’re constantly told that piracy results from people who can’t afford legal options.

Technical review of draft legislation on copyright exceptions — The UK Intellectual Property Office today released a set of proposed copyright exceptions to solicit public comment. The technical review is a part of that country’s copyright reform process, which began with the publication of Digital Opportunity — commonly known as the “Hargreaves Report” — in November 2010. This set of exceptions include amendments to educational exceptions; expanding exceptions for research, libraries, and archives to include sound recordings, films, and broadcasts; and a new exception “to copy the work as part of a technological process of analysis and synthesis of the content of the work for the sole purpose of noncommercial research.”

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