October 17, 2012 · · Comments Off

Thomas Edison invented the phonograph in 1877, the first device that was capable of recording and reproducing sound. The device would soon become an important source of musical entertainment. Columbia Records, formed in 1888, for example — now a subsidiary label of Sony Music Entertainment — would boast a catalog 10 pages long of pre-recorded musical records by 1891.

As early as 1888, songwriters and composers would claim, unsuccessfully, that reproducing their songs on mechanical devices like the phonograph was copyright infringement.1 Courts rejected these claims, including the Supreme Court in 1908, but Congress eventually stepped in and recognized mechanical reproduction as one of the exclusive rights of copyright owners in the Copyright Act of 1909.

Recording artists would not be so successful in making the claim that they too were entitled to separate legal protection for their interpretation of musical compositions on recordings. As early as 1906, manufacturers of recorded media would seek copyright protection for their works.2 Repeated attempts in courts and legislatures would fall short; legal protection against “dubbing” and bootlegging sound recordings would not begin to appear until the late 60s, and only then in the states. By 1970, half of state legislatures prohibited sound recording piracy.3 Federal law eventually recognized copyright protection for sound recordings in 1972, but only for recordings made after that date, and only for reproduction, distribution, and derivative works — a public performance right in sound recordings continues to be denied to this day under US law, contrary to most other nations,4 except in the case of digital public performances.5

But recording artists would have sporadic successes in courts to protect their works before the arrival of federal copyright protection. One example is Metropolitan Opera Assn v Wagner-Nichols, a 1950 decision from the New York Supreme Court6 granting a preliminary injunction against a company engaged in unauthorized duplication of sound recordings.7 The court relied on the common law tort of unfair competition and equitable principles to reach its decision.

The language of the decision makes it worth a read. It serves as a reminder that, while copyright protection itself is solely a creature of statute, it is firmly rooted in principles of justice, fairness, and equity. After opening with a discussion of the facts of the case, the court writes:

In passing upon the question of the sufficiency of a complaint alleging unfair competition it is helpful to bear in mind the origin and evolution of this branch of law. It originated in the conscience, justice and equity of common-law judges. It developed within the framework of a society dedicated to freest competition, to deal with business malpractices offensive to the ethics of that society. The theoretic basis is obscure, but the birth and growth of this branch of law is clear. It is an outstanding example of the law’s capacity for growth in response to the ethical as well as the economic needs of society. As a result of this background the legal concept of unfair competition has evolved as a broad and flexible doctrine with a capacity for further growth to meet changing conditions.

Defendants had argued that unfair competition was limited to “palming off” someone else’s work as their own. Thus, since defendants weren’t claiming the recordings as their own, there was no unfair competition. The court discarded this argument, as well as the argument that defendants weren’t in direct competition with the Opera.

The modern view as to the law of unfair competition does not rest solely on the ground of direct competitive injury, but on the broader principle that property rights of commercial value are to be and will be protected from any form of unfair invasion or infringement and from any form of commercial immorality, and a court of equity will penetrate and restrain every guise resorted to by the wrong-doer.

The court next considers the public’s interest in applying the doctrine of unfair competition to this case, in a discussion that parallels discussions about the goals and purposes of copyright law.

The production of an opera by an opera company of great skill, involving, as it does, the engaging and development of singers, orchestra, the training of a large chorus and the blending of the whole by expert direction into a finished interpretative production would appear to involve such a creative element as the law will recognize and protect against appropriation by others.

***

The fostering and encouragement of fine performances of grand opera, and their preservation and dissemination to wide audiences by radio and recordings are in the public interest. The Metropolitan Opera, over a period of sixty years, has developed one of the finest, if not the finest, opera companies available to Americans. Through the media of recordings and broadcasts, an avenue of culture has been opened to vast numbers of Americans who have been able to enjoy the fruits of this great enterprise. To many, it is the only available source of grand opera. To refuse to the groups who expend time, effort, money and great skill in producing these artistic performances the protection of giving them a “property right” in the resulting artistic creation would be contrary to existing law, inequitable, and repugnant to the public interest. To hold that the broadcasts of these performances, making them available to a wider audience of Americans, deprives the Metropolitan Opera of all of its rights in this production and abandons the production to anyone to appropriate and exploit commercially, would indeed discourage the broadcasting of such operas and penalize not only the Metropolitan Opera but the public which now benefits from these broadcasts. Equity will not bear witness to such a travesty of justice; it will not countenance a state of moral and intellectual impotency. Equity will consider the interests of all parties coming within the arena of the dispute and admeasure the conflict in the scales of conscience and on the premise of honest commercial intercourse.

The court ultimately grants the injunction. It ends by noting:

The conclusion here reached is not an onslaught on the currents of competition; it does not impose shackles on the arteries of enterprise. It simply quarantines business conduct which is abhorrent to good conscience and the most elementary principles of law and equity.

 

Footnotes

  1. Kennedy v McTammany, 33 F. 584 (D. Mass. 1888). []
  2. Copyright Law Revision, Study No. 26: The Unauthorized Duplication of Sound Recordings, Subcommittee on Patents, Trademarks, and Copyrights (1961). []
  3. Capitol Records v Naxos, 830 NE 2d 250 (NY Ct of Appeals, 2005). []
  4. According to the Future of Music Coalition, “At least 75 nations, including most European Union member states, do have a performance right.” []
  5. 17 USC § 114. []
  6. Unlike the federal court system, where the Supreme Court is the highest level court, the New York Supreme Court is the lowest, trial level court. []
  7. 199 Misc. 786. []

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Last week, I took a look at Kirtsaeng v John Wiley & Sons, a case currently up for review at the Supreme Court, with oral arguments scheduled October 29th. There, the Court is faced with the following issue:

How do Section 602(a)(1) of the Copyright Act, which prohibits the importation of a work without the authority of the copyright’s owner, and Section 109(a) of the Copyright Act, which allows the owner of a copy “lawfully made under this title” to sell or otherwise dispose of the copy without the copyright owner’s permission, apply to a copy that was made and legally acquired abroad and then imported into the United States?

The case presents some tricky issues of statutory interpretation. Having read through many of the briefs, I wanted to look at several of these issues in more detail.

Does §602 only apply to non-owners?

As noted in my previous post, § 602(a)(1) prohibits importation of both “piratical” and “nonpiratical” works — it applies to both infringing copies and copies legally acquired abroad. Wiley and the US argue that Kirtsaeng’s interpretation of the first sale doctrine would render the latter superfluous: if a sale abroad defeats the §602 importation prohibition, when, if ever, would it operate to protect against nonpiratical works?

Kirtsaeng relies on Quality King to argue that §602 still retains meaning under its interpretation of the first sale doctrine. There, the Supreme Court gave three reasons in support. The second reason it gave was that “because the protection afforded by § 109(a) is available only to the ‘owner’ of a lawfully made copy (or someone authorized by the owner), the first sale doctrine would not provide a defense to a §602(a) action against any nonowner such as a bailee, a licensee, a consignee, or one whose possession of the copy was unlawful.”

I’m not convinced this interpretation is accurate. §602(a)(3) provides three exceptions to §602(a)(1), the second of which reads, “importation or exportation, for the private use of the importer or exporter and not for distribution, by any person with respect to no more than one copy or phonorecord of any one work at any one time, or by any person arriving from outside the United States or departing from the United States with respect to copies or phonorecords forming part of such person’s personal baggage.” This exception doesn’t explicitly refer to “ownership”, but it’s difficult to imagine a situation where it would apply to anyone but an owner. A “bailee” would not be importing a copy for his “private use”; a “consignee” must necessarily distribute the copy once it’s imported.

It is a basic principle of statutory interpretation that courts should give effect to every clause and word of a statute.1 If §602(a) does not apply to “owners”, it would not need an exception that applies to no one but owners.

And even if this interpretation is accepted, I’m not sure it would ultimately help Kirtsaeng. Unauthorized importation under §602(a) violates the copyright owner’s exclusive right to distribution.2 It is well-settled law that in copyright infringement cases, as with other areas of tort law, “any member of the distribution chain can be sued as an alleged joint tort-feasor.”3

Under Kirtsaeng’s interpretation, if §602 does not apply to owners, and the owner himself acquires a copy lawfully acquired overseas, the first sale doctrine does not prevent importation. But if someone besides the owner — a “bailee, a licensee, a consignee” — imports the copy without authorization, that party is liable for infringing the distribution right, and, by extension, any other member of the distribution chain, including the owner. And I would imagine, in most cases, a third party is doing the actual importation. That is, even if Kirtsaeng is correct, we’re back where we started at. An “owner” of a copy lawfully acquired overseas may not be personally liable for importation under the first sale doctrine, but he is still liable as a joint tortfeasor for the third party importer’s unauthorized distribution.

Is Importation a Sale or Disposition?

§109 gives “the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.” (Emphasis added). It doesn’t give any other rights to the owner of a particular copy — owning a DVD doesn’t mean you can make additional copies, or show it publicly for profit.4

So is §109 even relevant to §602? §602(a) prevents “importation into the United States.” Importation is not a sale, but is it otherwise a disposition? To “dispose” is defined as “to transfer to the control of another; to get rid of.” Typically, disposition of property can be accomplished by gift, bequest, devise, etc; under the law, it most commonly refers to a transfer of legal title of the property. This is distinguishable from a mere transfer of possession.5 A bailment, for example, involves the transfer of possession but not legal title, and so is distinguishable from a sale.6

In the same vein, importation does not necessarily involve a transfer of legal title — it is simply the act of “bringing an article into a country from the outside.”7 Any transfer of title that occurs is independent of this bringing. Read this way, where importing and selling are different types of acts, keeps the first sale doctrine and §602 in harmony, allows the market segmentation that Congress intended when it wrote §602, and avoids concerns over hypothetical downstream resellers raised by Kirtsaeng and his amici.

But the Supreme Court found an argument similar to this “unpersuasive” in Quality King. It said,

Strictly speaking, an importer could, of course, carry merchandise from one country to another without surrendering custody of it. In a typical commercial transaction, however, the shipper transfers “possession, custody, control and title to the products” to a different person, and L’anza assumes that petitioner’s importation of the L’anza shipments included such a transfer. An ordinary interpretation of the statement that a person is entitled “to sell or otherwise dispose of the possession” of an item surely includes the right to ship it to another person in another country.

This holding would seem to foreclose the same argument being made in Kirtsaeng, and as far as I can tell, no party or amicus has raised the issue. But I would suggest that there is a solid argument the Supreme Court got it wrong in Quality King. The Court held that importation is merely an incident to a sale or disposition. But importation is a distinct act from any sale or disposition. You can, for example, buy or sell food without restraint, but you can’t open a restaurant to buy and sell food without the proper licensing and permits. Those licensing and permits, incidents of the state’s power to regulate health and safety, are not improper restraints on the alienability of property.

Likewise, you can sell or dispose of a lawfully acquired copy of a copyrighted work. §602 prohibits the importation of copies into the US without the copyright owners authorization, an incident of Congress’s Constitutional authority to secure copyright owners’ exclusive rights. Conflating the act of importation with a disposition, as the Court did in Quality King, seems erroneous. The right to sell or dispose of an item does not “surely include[] the right to ship it to another person in another country” if Congress specifically passed a law saying it doesn’t. Keeping the two separate and distinct, however, gives effect to the language of both §109 and §602 (and other provisions in the Copyright Act) while remaining true to Congress’s intent.

Footnotes

  1. Yule Kim, Statutory Interpretation: General Principles and Recent Trends, CRS Report for Congress, No. 97-589 (2008). []
  2. “Importation into the United States, without the authority of the owner of copyright under this title, of copies or phonorecords of a work that have been acquired outside the United States is an infringement of the exclusive right to distribute copies or phonorecords under section 106, actionable under section 501. 17 USC §602(a)(1).” []
  3. Costello Pub. v Rotelle, 670 F.2d 1035, 1043 (DC Cir. 1981), quoting Stabilisierungsfonds Fur Wein v Kaiser Stuhl Wine Distributors, 647 F.2d 200 (DC Cir 1981); but see Enesco v Jan Bell Marketing, 992 F.Supp. 1021 (ND Ill. 1998), holding subsequent distributor cannot be held liable under §602. []
  4. Reinforcing this interpretation is the fact that §109 provides additional exceptions to owners of particular copies. §109(c) and (e) provide that the owner of a particular copy can publicly display that copy and the owner of a coin-operated video game machine can publicly perform and display that video game respectively. See also Columbia Pictures v Redd Horne, 749 F.2d 154, 159-60 (3rd. Cir. 1984). []
  5. See, for example, UMG Recordings v Augusto, 628 F.3d 1175, 1180 (9th Cir. 2011), “not every transfer of possession of a copy transfers title.” []
  6. Sturm v Boker, 150 US 312, 329-30 (1893). []
  7. Cunard SS v Mellon, 262 US 100,122 (1923). []

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October 12, 2012 · · Comments Off

A Deeper Bond: A ‘Mad Men’ Insight On Revaluing Music — ReValue Music takes a cue from the scene from the first season of AMC’s Mad Men to ask how artists can help change the perceived value of music. “It is largely up to you, as the independent artist, to establish the way your audience determines the value of your work. Music is not a download. It is not a gadget or a widget. It is not a temporary utility that will only serve a limited purpose and then be disposed of. As an artist, you are not selling your latest track or album; you are selling something amazing, almost magical. You are selling a transcendent tapestry of sound that somehow facilitates the deepest of connections to one’s self and to others.”

Let the vinyl spin: my journey into record collecting — Along those same lines, Cameron Schaefer, of Vinyl + Cocktails, discusses how “dying of musical thirst in an ocean of MP3s,” led him to embrace reconnecting with music in the analog medium. Not that everyone need become vinyl purists, but well worth the read.

Lessons in Stealing Like an Artist — The Copyright Alliance’s Sandra Aistars points to a recent NY Times piece on fair use and creativity, highlighting poet Austin Kleon’s book Steal Like an Artist. Says Aistars, “The key according to Kleon, however, is not to copy or to imitate, but to transform what you steal so that you make it your own, and then send it back out into the world for others to embrace and react to.”

How Much do Google and Facebook Profit From Your Data? — Ars Technica reports on PrivacyFix, a new add-on for Firefox and Chrome, that calculates how much value your browsing behavior benefits the two tech giants. I haven’t personally tried it yet, but it sounds helpful, especially since it also lets you know which websites are tracking your behavior and feeding it back to the sites. PrivacyFix also apparently offers tips and techniques to help you adjust your privacy settings on Google and Facebook.

YouTube to serve niche tastes by adding channels — Google is spending $200 million this year promoting original programming on YouTube (as well as an undisclosed amount for production). Cat videos don’t pay the bills.

Sherman helps RIAA lighten up — An entertaining profile of RIAA CEO Cary Sherman over at Variety.

A Lesson from Steve — Chris Castle offers a few words to mark the one year anniversary of Jobs’ passing. “Not surprisingly, Steve’s choice to embrace the copyright of others has led to enormous financial reward for his company and his employees.  He took an already great company and made it greater–ultimate vindication for the ‘Newton,’ if you ask me–and he also put a lot of money into the hands of artists.”

WhoSampled Wins EMI Innovation ChallengeWhoSampled, an incredibly comprehensive database of songs that have been sampled and songs that have used samples, beat out other music apps to win EMI’s Innovation Challenge in London earlier this week.

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On October 29th the Supreme Court will hear oral arguments in Kirtsaeng v John Wiley and Sons, Inc. The case concerns the US Copyright Act’s importation provisions in 17 USC § 602 and the first sale doctrine. Since it’s a copyright case, that means it’s never too early to start overreacting. Jennifer Waters of MarketWatch leads the pack with her article, Your right to resell your own stuff is in peril, appearing last week. Waters writes, “Tucked into the U.S. Supreme Court’s busy agenda this fall is a little-known case that could upend your ability to resell everything from your grandmother’s antique furniture to your iPhone 4.”

Could it? Let’s take a look at Kirtsaeng in more detail.

First Sale and § 602

Among the rights given to copyright owners is the exclusive right “to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending.”1 This right is limited by the “first sale doctrine”, first recognized by the Supreme Court in 19082 and then codified in the Copyright Act of 1909. Since the Copyright Act of 1976, the first sale doctrine has resided in 17 USC § 109(a), which reads:

Notwithstanding the provisions of section 106 (3), the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.

Put another way, a copyright owner’s exclusive right to distribute a particular copy of a work (but not her right to reproduce, display, perform, etc. it) ends at the first sale.

The Copyright Act of 1976 also included provisions that made unauthorized importation of copyrighted works an infringement of the distribution right, codified at 17 USC § 602(a)(1):

Importation into the United States, without the authority of the owner of copyright under this title, of copies or phonorecords of a work that have been acquired outside the United States is an infringement of the exclusive right to distribute copies or phonorecords under section 106, actionable under section 501.

While the provision that follows this prohibits the importation of copies “the making of which either constituted an infringement of copyright, or which would have constituted an infringement of copyright if this title had been applicable,”3 § 602(a)(1) applies to both “piratical” and “nonpiratical” copies; so long as they have been “acquired outside the United States”, only the copyright owner of the work can import or authorize their importation.

The motive behind § 602 was to give copyright owners more protection against the “grey market.” Like most other businesses and industries, copyright owners engage in market segmentation to decrease risk and maximize revenues. Many copyright holders practice geographic market segmentation, contracting with distributors in local markets who provide works adapted to the particular needs of that market. Prior to the 1976 Copyright Act, US copyright law only prohibited the importation of piratical goods, with the understanding that copyright owners could still segment markets through exclusive contracts with their foreign distributors. But this was seen as inadequate, as it didn’t prevent third parties from acquiring works in other countries and importing them into the US, since there would be no privity between these third parties and the original copyright owner. So, Congress expanded the importation provisions to also include nonpiratical works.

The first sale doctrine and § 602 are fine in isolation, but put together and things get tricky. If a copy is sold in a foreign country and then imported to the US without the copyright owner’s permission, does the first sale doctrine apply, effectively rendering § 602 superfluous?

Grey Market Case Law

Since the enactment of the 1976 Copyright Act, courts have wrestled with this interplay between § 602 and the first sale doctrine. The results have actually been very consistent.

The first line of cases, of which Kirtsaeng would fall under, involves copies manufactured outside the US under the authority of the copyright owner, but imported into the US without authorization.

One of the first cases to raise this issue and reach the appellate level came just a few years after the Copyright Act of 1976 went into effect. In Columbia Broadcasting v Scorpio Music Distributors, Scorpio had bought approximately 6,000 copies of recordings copyrighted by Columbia from an importer who had acquired them from a company in the Philippines acting as the exclusive manufacturer and distributor of the recordings in that country.4 Scorpio argued that it was protected by the first sale doctrine because, even though the recordings were manufactured outside the US, they had already been sold, thus exhausting the copyright owner’s exclusive right to distribution, including the § 602 bar on importation.

The District Court disagreed with Scorpio, holding that the first sale doctrine only “grants first sale protection to the third party buyer of copies which have been legally manufactured and sold within the United States and not to purchasers of imports such as are involved here.” The Third Circuit affirmed the court’s decision on appeal, without opinion.5

The Ninth Circuit has consistently held the same through a series of cases. First, in 1991, in BMG Music v Perez, the court held that “the words ‘lawfully made under this title’ in § 109(a) grant first sale protection only to copies legally made and sold in the United States.”6 Three years later, the Circuit declined to overturn or distinguish BMG Music in Parfums Givenchy v Drug Emporium.7 Then again in Denbicare USA v Toys ‘R’ Us, the court reiterated that the first sale doctrine “applies to copies made abroad only if the copies have been sold in the United States by the copyright owner or with its authority.”8

A number of district courts have also held that the first sale doctrine is not a defense for unauthorized importation when copies are made lawfully outside the US.9

In 1998, the Supreme Court resolved a different line of cases dealing with the interplay between § 602(a) and the first sale doctrine in Quality King Distributors v L’anza Research.10 There, the question was whether § 602(a) barred the importation of goods that had originally been manufactured in the US — making a “round trip” journey. The Court held, in a unanimous decision, that it did not, overturning the Ninth Circuit’s earlier decision, but consistent with other courts that had faced the issue.11

However, in dicta, the Court said, “§ 602(a) applies to a category of copies that are neither piratical nor ‘lawfully made under this title.’ That category encompasses copies that were ‘lawfully made’ not under the United States Copyright Act, but instead, under the law of some other country.” In addition, Justice Ginsburg concurred, adding, “we do not today resolve cases in which the allegedly infringing imports were manufactured abroad.”

The Ninth Circuit revisited the situation where copyrighted works are first manufactured abroad in 2008, in Omega v Costco.12 Costco, which had sold Omega watches originally obtained from overseas distributors, argued that the Quality King decision overturned the 9th Circuit’s precedent regarding the first sale doctrine’s application to § 602(a) when the goods are not manufactured in the US. The court disagreed.

The case was appealed, and the Supreme Court granted cert. But rather than weigh in, the Court, with Justice Kagan recused, came to a tie, affirming the Ninth Circuit’s decision by default without issuing an opinion.13 Many had expressed concerns that Omega was benefiting from the Copyright Act’s importation provisions by affixing a tiny copyrighted logo on the back of ordinarily uncopyrightable watches. It should be noted that Omega eventually lost on this point; after the case returned from the Supreme Court to the District Court, the court granted Costco’s motion for summary judgment, saying, “Omega misused its copyright of the Omega Globe Design by leveraging its limited monopoly in being able to control the importation of that design to control the importation of its Seamaster watches.”

In short, considering the above and the Second Circuit’s decision in Kirtsaeng, every court that has interpreted § 602(a) since it was enacted over 30 years ago has come to the same conclusion: the first sale doctrine does not extinguish the exclusive right to import copyrighted works that have been manufactured in foreign countries.14

Kirtsaeng

Let’s turn now to Kirtsaeng. Supap Kirtsaeng, originally from Thailand, attended college and graduate school in the US beginning in 1997. To help defray the costs of his education, he engaged his family back home to purchase Thai versions of English language textbooks, which were cheaper than US versions, and ship them to him, where he resold them on eBay.15 Kirtsaeng later would testify that this venture netted him approximately $900,000 in revenue.

Among the books Kirtsaeng resold were several published by John Wiley & Sons. Wiley sued Kirtsaeng in 2008, claiming, among other things, infringement of its distribution right. The case went to trial, and a jury found Kirtsaeng liable for willful copyright infringement, awarding statutory damages of $600,000 to Wiley. Kirtsaeng appealed.

On appeal, the Second Circuit was tasked with the question of “whether the first sale doctrine, 17 U.S.C. § 109(a), applies to copies of copyrighted works produced outside of the United States but imported and resold in the United States.” Noting the tension between the first sale doctrine and § 602(a)(1), the court relied on the text of §109(a), the structure of the Copyright Act, and the Supreme Court’s opinion in Quality King.

The court found no help from the statute’s text, calling it “utterly ambiguous.” The Copyright Act’s structure and Quality King, however, convinced the court to hold that “the phrase ‘lawfully made under this Title’ in § 109(a) refers specifically and exclusively to copies that are made in territories in which the Copyright Act is law, and not to foreign-manufactured works.” It rejected Kirtsaeng’s alternative interpretations of the phrase, noting that § 602(a)(1) would be virtually meaningless “in the vast majority of cases if the first sale doctrine was interpreted to apply to every copy manufactured abroad that was either made ‘subject to protection under Title 17,’ or ‘consistent with the requirements of Title 17 had Title 17 been applicable.’” Since the books imported by Kirtsaeng had been manufactured outside the US, the Second Circuit upheld the district court’s decision that the first sale doctrine did not provide Kirtsaeng with a defense to his unauthorized importation.

Judge Garvan Murtha dissented from the Second Circuit’s decision, disagreeing with the court’s analysis. After engaging in his own analysis of the Copyright Act, as well as looking at the policy behind the first sale doctrine, he found that “Nothing in § 109(a) or the history, purposes, and policies of the first sale doctrine limits it to copies of a work manufactured in the United States,” concluding that the doctrine does apply to foreign manufactured copies.”

Now that the case is at the Supreme Court, one of the major issues is how to interpret the phrase “lawfully made under this title” in the first sale doctrine. Kirtsaeng argues that it means a copy had been made in accordance with the Copyright Act, meaning a sale in a foreign country counts as a “first sale”, exhausting the copyright owners authority to prohibit importation. Wiley argues that it instead means a copy has been made in the United States, since the Copyright Act does not apply extraterritorially.

I’ll refrain from predicting the outcome of the case so early on, but let’s take a look at some of the factors that favor each party.

Factors favoring John Wiley & Sons

Case law. As noted above, every court that has considered this question, including two other Circuit Courts, has reached the same result as Wiley seeks. In addition, the Supreme Court has indicated in dicta that it would agree with the result the Second Circuit reached.

Legislative history. The House Report on the Copyright Act of 1976, HR 94-1476, seems clear in its support of the interpretation embraced by the Second Circuit:

Section 602, which has nothing to do with the manufacturing requirements of section 601, deals with two separate situations: importation of “piratical” articles (that is, copies or phonorecords made without any authorization of the copyright owner), and unauthorized importation of copies or phonorecords that were lawfully made. The general approach of section 602 is to make unauthorized importation an act of infringement in both cases, but to permit the United States Customs Service to prohibit importation only of “piratical” articles.

The Copyright Office also agreed that this was the purpose of § 602 during its drafting, as the US points out in its brief:

The Copyright Office ultimately endorsed legislation that would expand the importation restrictions to encompass “foreign copies that were made under proper authority.” The Register explained that the provision would bar importation if, “for example, … the copyright owner had authorized the making of copies in a foreign country for distribution only in that country.”

Treatises. Legal treatises are given much weight by courts, and all the major copyright treatises today interpret the Copyright Act the same way as Wiley. Nimmer writes that the Act should be “interpreted to bar the importation of gray market goods that have been manufactured abroad.”16 Patry states that the Act prohibits the importation of copies that “were not ‘lawfully made under this title,’ i.e., were not made in the United States.”17 Goldstein says, “the first sale defense is unavailable to importers who acquire ownership of gray market goods made abroad.”18

Factors favoring Kirtsaeng

Costco‘s 4-4 split. Though the Supreme Court did not issue an opinion in Costco, there was something that four of the Justices disagreed with in the Ninth Circuit’s opinion. That’s good news for Kirtsaeng, but whether that area of disagreement ultimately favors him remains to be seen. Oral arguments may shed some light on this.

Growing judicial discomfort? A review of the case law suggests, at least in some courts, increased skepticism with the accepted interpretation of § 602 and concern over its effect on the first sale doctrine (though the latter point has yet to be tested in court, as explained below). The most recent example is Judge Murtha’s dissent in this very case at the Second Circuit. In Pearson Education v Liu, the Southern District Court of New York flat out rejected the accepted interpretation, saying, “the Court provisionally is of the view that nothing in § 109(a) or the history, purposes, and policies of the first-sale doctrine, limits the doctrine to copies of a work manufactured in the United States.” But it deferred to the Supreme Court’s dicta in Quality Kings, saying, “While this Court would not limit the doctrine to copies manufactured in the United States, the case for this interpretation of § 109(a) is not so overwhelming as to justify disregarding the Supreme Court’s views.”

When does the first sale doctrine kick in?

What has attracted the most attention to this case, it seems, is the question of what happens, under the currently accepted interpretation of § 602, to “downstream” owners of copies manufactured abroad but imported without authorization. If the first sale doctrine only applies to works manufactured in the US, does that mean that copyright owners retain exclusive distribution rights over any goods manufactured abroad? Kirtsaeng, in fact, presents this question as the issue in front of the Supreme Court.

Warns Kirtsaeng:

“For goods made anywhere else, the panel majority granted copyright owners eternal control over all further sales, rentals, or gifts, all the way down the stream of commerce. This rule means that Random House could block resales of books and close down public libraries and flea markets and Paramount Pictures and Sony Records could prohibit resales of DVDs and CDs and shut down rental businesses like Netflix—so long as these manufacturers concentrate production abroad.

The ramifications extend far beyond publishers and other content providers. This rule applies with equal force to any product with a copyrightable component—a household product with a label, apparel with a fabric design, a watch with an insignia, a camera or microwave with software on the inside or packaging on the outside, a car with an on-board computer, and so on. Any producer who sends jobs overseas will be rewarded with the manufacturer’s Holy Grail—the power to lock up, extract exorbitant rents from, or discriminate in any secondary market, from multibillion dollar retailers of new products (like Costco and Target) to large dealers in used goods (like used car dealers, Goodwill, and the Salvation Army) to flea markets and garage sales and their modern-day online analogs (such as eBay).

Kirtsaeng paints a powerful picture, but it ignores the fact that the Second Circuit’s decision is not novel, but consistent with every other court decision in the past 30 years, and none of the hypothetical horribles presented has occurred since the enactment of § 602 in 1978. Essentially the argument is: affirming three decades of practice and precedent will result in sudden and dramatic changes.

Nevertheless, courts have yet to resolve the issue of downstream distribution. Both Wiley and the United States, appearing as amicus, address the issue in their defense of the accepted interpretation of § 602.

In its brief, Wiley first points out that:

Kirtsaeng’s strategy appears designed to deflect attention away from his own conduct—the unauthorized importation of copies made abroad for distribution only in foreign countries—and instead onto a hypothetical scenario where the copyright owner makes the copy abroad but authorizes its sale in the United States. The experience of the last 30 years would seem to foreclose Kirtsaeng’s argument: Even though it has long been settled that Section 109(a) generally does not apply to foreign copies, Kirtsaeng has not identified a single manufacturer that has ever attempted to move its facilities abroad to avoid the first-sale doctrine.

Turning to the question of how the first sale doctrine applies to goods manufactured abroad, Wiley stops short of arguing that the Supreme Court needs to resolve that issue here. But it does admit that it could be a factor and seems open to the idea that once a copyrighted work is lawfully imported, the first sale doctrine applies to subsequent sales:

To be sure, the Ninth Circuit, in response to hypotheticals similar to those raised by Kirtsaeng, concluded that even foreign-made copies can be subject to Section 109(a) if the copyright holder has authorized their sale in the United States. It is unclear why the court needed to adopt this exception to Section 109(a): If the copyright owner authorizes a U.S. sale of a foreign-made copy, principles of implied license or estoppel would preclude it from asserting control over subsequent sales. But in any event, this Court can leave open whether (as one of Kirtsaeng’s own amici argues) “lawfully made under this title” could be read to include foreign-made copies that are subject to an authorized sale in the United States. The critical word is “made.” The right to “reproduce” a “cop[y]” is one of the exclusive rights granted to copyright owners under Section 106 of the Copyright Act. If Congress had intended “made” in Section 109(a) to mean “produced,” it could simply have said so; the words “produce” and “reproduce” appear throughout the Copyright Act. One reading of Section 109, therefore, is that to make a copy means not only to exercise the right to “produce” that copy, but also to exercise the right “to distribute copies . . . to the public.” “‘Lawfully made under this title’ would then mean either lawfully manufactured (caused to exist) or placed in commerce (caused to occur or appear) in the United States.” On that reading, a copy is “made under [Title 17]” when either the U.S. “produc[tion]” right is exercised—by making the copy in the United States—or the U.S. “distribut[ion]” right is exercised—by distributing the copy in the United States.

The United States, in its brief, also rejects the idea that barring the importation of nonpiratical works without authorization would result in the negation of the first sale doctrine for any copies made outside the US. Like Wiley, the US first notes that Kirtsaeng “identifies no instance in which a copyright owner has actually sought to exercise such control.” It then argues:

when a copyright holder has authorized goods to be imported into the United States and/or sold within this country, applying a “first sale” or “exhaustion” principle as an implicit limitation on the copyright holder’s exclusive right to “distribute” would be consistent with the current text of the Copyright Act and faithful to the doctrine’s historical underpinnings. By contrast, Congress enacted Section 602(a)(1) to ensure that an authorized sale outside the United States does not exhaust the copyright holder’s right to control subsequent importation.

This question will likely play a big role during oral arguments, but it remains to be seen whether the Supreme Court ultimately rules on it. It’s certainly a tough question, and the Court can’t rewrite the law to make it easier. I agree that a ruling from the Court that the first sale doctrine should apply once a copy has been lawfully imported would be beneficial, if only to confirm what has been the practice for the past three decades, but actually stating that in a way that gives effect to all the relevant provisions of the Copyright Act is something that would require a bit more thinking.

Footnotes

  1. 17 USC § 106(3). []
  2. Bobbs-Merrill Co v Straus, 210 US 339. []
  3. 17 USC § 602(a)(2). []
  4. 569 F.Supp. 47 (ED Pa, 1983). []
  5. 738 F.2d 421 (1984). []
  6. 952 F.2d 318 (9th Cir. 1991). The court also rejected a First Amendment defense raised by Perez. []
  7. 38 F.3d 477 (9th Cir. 1994). []
  8. 84 F.3d 1143 (9th Cir. 1996). []
  9. Pearson Education v Liu, 656 F.Supp. 2d 407 (SDNY 2009); Microsoft v Big Boy Distribution, 589 F.Supp.2d 1308 (SD Fla. 2008); Swatch SA v New City, 454 F.Supp.2d 1245 (SD Fla 2006); TB Harms v Jem Records, 655 F.Supp. 1575 (D.NJ 1987); Hearst Corp. v Stark, 639 F.Supp. 970 (ND. Cali 1986) (the court also rejected defendant’s argument that § 602 violated the First Amendment). []
  10. 523 US 135 (1998). []
  11. See, for example, Sebastian Intern. v Consumer Contacts (PTY), 847 F.2d 1093 (3rd. Cir. 1988; Summit Technology v High-Line Medical Instruments, 922 F.Supp. 299, 312 (CD Cali 1996). []
  12. 541 F.3d 982 (9th Cir. 2008). []
  13. 131 S.Ct. 565 (2010). []
  14. I’ve been unable to find a case holding otherwise. See also Summit Technology v High-Line Medical Instruments, 922 F.Supp. 299, 312 (CD Cali 1996): “Reviewing the case law, the courts appear to be in agreement in one respect: ‘sales abroad of foreign manufactured United States copyrighted materials do not terminate the United States copyright holder’s exclusive distribution rights in the United States under §§ 106 and 602(a).’” []
  15. According to the Second Circuit, Kirtsaeng had “consulted ‘Google Answers’ … to ensure that he could legally resell the foreign editions in the United States.” []
  16. 2 Nimmer on Copyright § 8.12[B][6][c] at 8-134.34 to 8-134.35. []
  17. 4 William F. Patry, Patry on Copyright § 13:44, at 13-98 (2012). []
  18. 2 Paul Goldstein, Goldstein on Copyright § 7.6.1, at 7:144 (3d ed. Supp. 2012). []

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Currently, the four major US broadcasters are involved in litigation with satellite service provider Dish Networks. Judging by some of the stories online, you might think that the broadcasters are claiming that the Dish features in question infringe copyright solely because they allow viewers to skip commercials.1

But that’s not what’s happening here. Though these lawsuits are still in their early stages, I thought it would be worth taking a closer look at them.

The Broadcaster Business Model

TV broadcasters generally earn revenues from a number of ways. First, broadcasters sell advertising on over-the-air broadcasts of programs, which are viewed for free by viewers. They also receive fees from cable systems, satellite services, and other multichannel video programming distributors, each of whom retransmit broadcast programming to their own customers.

Additional revenues are made in secondary markets. For example, broadcasters may license programming to cable and satellite systems to be provided for video-on-demand (VOD) services, they may distribute programming to websites like Hulu, and they may rent or sell “ultra-premium” (commercial-free) programs through sites like iTunes, Amazon, and Netflix.

Dish Network’s Service

In March 2012, Dish Networks began offering its new “Hopper” DVR to subscribers for a monthly fee. Like traditional DVR’s, the set top device allows subscribers to record television programs for later viewing. But Dish added two new features.

The first, PrimeTime Anytime (“PTAT”), according to Dish, “automatically records all the shows on the four major networks in HD (ABC, CBS, NBC and FOX) Monday through Saturday from 8-11 p.m. and Sundays from 7-11:00 p.m. EST when enabled.” These recordings are available for eight days after broadcast and don’t take up any space on the viewer’s personal DVR.

The second, Auto Hop, automatically removes commercials from the PTAT recorded shows. As Dish explains, “When you are ready to watch your recorded PrimeTime Anytime content, simply open the PrimeTime Anytime or DVR menu screen. You will see a small Hopper (red kangaroo) icon beside each show that you may watch commercial-free. When you select a show with the Hopper icon, a pop-up message will appear on screen that asks whether you want to enable Auto Hop. Choose ‘yes,’ and simply sit back and watch your show commercial-free. Choose ‘no,’ and watch your show with the commercials intact.”

The Litigation

On May 24, 2012, Fox sued Dish Network in the Central District of California (Los Angeles) for breach of contract and copyright infringement. NBC and CBS filed similar copyright claims later that day in the same court.2 Only twenty-nine minutes before Fox filed its lawsuit against Dish in Los Angeles, Dish Network filed a declaratory relief action against Fox, CBS, NBC, and ABC in the Southern District of New York seeking a declaration that Dish was not infringing the networks’ copyrights.

What followed was a bit of judicial juggling. On July 9, the New York court ruled that the lawsuit filed by Dish in New York was an improper anticipatory filing and dismissed all the claims that were already pending in Los Angeles against Dish — that would be Fox’s copyright and contract claims as well as CBS’s and NBC’s copyright claims.

In September, the Los Angeles court transferred CBS’s copyright claim to New York where Dish’s declaratory relief contract claim against CBS is still pending.3

After the July 9 order, NBC amended its Los Angeles complaint to include contract claims. NBC and Dish currently have cross-motions pending in Los Angeles and New York as they continue to fight over the venue of NBC’s copyright and contract claims.

ABC has answered Dish’s complaint in New York and counterclaimed alleging copyright and contractual claims similar to the ones alleged by the other broadcasters in Los Angeles.

Fox’s Preliminary Injunction

While there are similar issues involved in each case, the first substantive ruling in these various lawsuits is likely to come from the litigation involving Fox. In late August, Fox moved for a preliminary injunction against Dish. The court heard arguments from both sides on September 21st, and a decision is likely to come soon.

Fox and Dish entered into a Retransmission Consent Agreement (“RTC”) in 2002. The Agreement allows Dish to retransmit Fox programming to its subscribers, subject to certain limitations. Fox alleges that Dish’s PTAT service and Autohop feature violates these limitations. These violations give rise to its breach of contract claim against Dish, but they also give rise to its copyright infringement claim, since a licensee who acts outside the scope of his license can be liable for copyright infringement.4

In addition, Fox argues that Dish violates its exclusive right to reproduction by making unauthorized copies, through both PTAT and Autohop, and its exclusive right to distribution by distributing these works to its subscribers.5

In other words, Fox is not arguing that “skipping commercials is copyright infringement”; it is alleging that Dish made and distributed copies of its works without permission — the heart of copyright infringement — and also that its services exceeded the scope of the existing agreement between the two companies.

Dish’s Response: We’re Just Like Cablevision

In response, Dish raises a host of arguments to rebut Fox’s claims. Primarily, it seeks to characterize PTAT and Autohop as indistinguishable from a DVR system; it is the customer, and not Dish, making any copies, thus freeing Dish from any liability for breaching its contract or infringing copyright. Dish characterizes Fox’s arguments as variations on the theme that the “sky is falling.”6

Perhaps part of the reason Dish was so keen in having these cases adjudicated in New York was to take advantage of the Second Circuit’s precedent in Cartoon Networks v CSC Holdings (the “Cablevision” case).

I’ve written about Cablevision before, but to recap the salient points — Cablevision was sued after rolling out a remote DVR feature (“RS-DVR”) for its subscribers. The Second Circuit rejected the broadcasters’ claim of direct infringement for the reproductions of their works made through the RS-DVR system, holding that the copies are “made” by Cablevision’s customers, not Cablevision itself. The court did so by reasoning that “volitional conduct” is “an important element of direct liability.”

Note, however, that in Cablevision, the court did not create a blanket rule; it explicitly noted that it “need not decide today whether one’s contribution to the creation of an infringing copy may be so great that it warrants holding that party directly liable for the infringement, even though another party has actually made the copy.” The court also did not consider whether Cablevision could face secondary liability for its RS-DVR system, as that theory of liability was “expressly disavowed by plaintiffs.”

Nevertheless, Dish is banking on a favorable comparison between its PTAT service and Cablevision’s RS-DVR. In its opposition to Fox’s motion for a preliminary injunction, Dish argues that, as in Cablevision, Dish’s customers are making copies, not Dish. This argument is obviously bolstered if it is made in a court where Cablevision is binding precedent. In response, Fox notes that Dish determines what programs are recorded, when they are recorded, and how they are accessed; the only act of “volition” by the customer is a “trivial ‘flip of the switch’” to activate the service.

Dish’s Response: We’re Just Like Sony

Moving past the direct infringement and contract claims, Dish relies on the Supreme Court’s decision in Sony v Universal City Studios to rebut secondary liability claims.

Dish argues that, “In short, home video recording equipment is legal” under Sony. This is not a new argument, as many have argued since Sony that the decision created a broad “safe harbor” against secondary liability.7

But I would argue that Sony’s holding is far narrower. The doctrine of contributory infringement places liability on a third party who materially contributes to infringement and has knowledge of the infringing activity.8 Sony held that impute the necessary knowledge to a device manufacturer based solely on the design of the device, so long as the device is capable of substantial noninfringing uses.

This is precisely how the Supreme Court later interpreted Sony in its 2005 decision in MGM v Grokster:

Sony‘s rule limits imputing culpable intent as a matter of law from the characteristics or uses of a distributed product. But nothing in Sony requires courts to ignore evidence of intent if there is such evidence, and the case was never meant to foreclose rules of fault-based liability derived from the common law.

Indeed, the Court there went on to hold that evidence that Grokster induced infringement satisfied the knowledge prong of contributory infringement. And Sony itself noted that in cases where there is an ongoing relationship between a device’s manufacturer or distributor, as opposed to a relationship that ends at the point of sale, the rule does not apply.9

Sony also does not apply to vicarious liability, where a third party can be held liable for infringement if he receives a direct financial benefit attributed to infringement and has the right and ability to supervise the direct infringers.10

These last two points are relevant here since the broadcasters have each alleged claims of inducement and vicarious liability against Dish. But setting these aside, is Dish even protected from liability for contributory infringement under Sony?

The Sony court, after all, held that the Betamax at issue was capable of substantial noninfringing uses for two reasons: first, it held that some broadcasters — ones who had not sued Sony — tacitly allow time-shifting of their programming, and, second, the plaintiffs “failed to demonstrate that time-shifting would cause any likelihood of nonminimal harm to the potential market for, or the value of, their copyrighted works” — leading to the Court’s conclusion that, on these facts, such time-shifting would be fair use.

Dish certainly cannot show the first — its PTAT service only copies programming from the four broadcasters who have sued here. And I’m not persuaded that Dish can show that any time-shifting enabled by its service, if the court accepts Dish’s characterization of its service as enabling time-shifting, doesn’t cause nonminimal harm to the potential market for Fox’s works. Its service directly competes with Fox’s licensed VOD options and guts its ad-based broadcasting model.

What’s next

Both Fox and Dish supply other arguments, and the other broadcasters have yet to weigh in on pretrial motions; it remains to be seen what issues will emerge as predominant.

But the bottom line is that none of the broadcasters are asserting that skipping commercials by itself amounts to direct copyright infringement. Fox notes repeatedly in its reply brief that it is not arguing that skipping commercials is infringement, nor is it seeking to overturn Sony’s decision on personal time-shifting or restrict the use of DVR’s. It is Dish’s alleged copying, in conjunction with automated removal of advertising, that gives rise to the contract and copyright claims. I’ll have more on these cases as they continue to develop.

Footnotes

  1. See, for example, Fox sues Dish over commercial skipping, claims copyright infringement, where Cory Doctorow, as is typical, makes one erroneous claim after the other; TV Networks Say You’re Breaking The Law When You Skip Commercials; Why Fox thinks that skipping commercials is like robbing a bank. []
  2. The Fox plaintiffs include Fox Broadcasting Company, Fox Television Holdings Inc and Twentieth Century Fox Film Corporation. The NBC plaintiffs include NBC Studios LLC, NBCUniversal Media LLC, Open 4 Business Productions LLC and Universal Network Television LLC. The CBS plaintiffs include CBS Broadcasting Inc, CBS Studios Inc and Survivor Productions LLC. The ABC defendants/counterclaimants include ABC, Inc, American Broadcasting Companies, Inc, and Disney Enterprises, Inc. For simplicity’s sake, I’ll refer to the plaintiffs by their marquee names. []
  3. The CBS-Dish contract had a forum selection clause designating New York. []
  4. Sun Microsystems v Microsoft, 188 F.3d 1115, 1121 (9th Cir. 1998). []
  5. Fox also argues that, in the alternative, Dish is liable as a secondary infringer under the doctrines of inducement, vicarious liability, and contributory infringement. []
  6. This phrase is mentioned no less than three times in Dish’s Opposition to the Motion for Preliminary Injunction, perhaps not surprisingly, since one of Dish’s attorneys is Mark Lemley, who wrote an entire paper built around the phrase. []
  7. See, for example, Brett M. Frischmann, Peer-to-Peer Technology as Infrastructure: an Economic Argument for Retaining Sony’s Safe Harbor for Technologies Capable of Substantial Noninfringing Uses, 2005 Journal of the Copyright Society of the USA 329 (2005), characterizing Sony as creating a rule “which precludes secondary liability in situations where a technology is “capable of substantial noninfringing uses”; Pamela Samuelson, Three Reactions to MGM v. Grokster, 13 Mich. Telecomm. & Tech. L.Rev. 177 (2006), referring to “Sony safe harbor”; Randal Picker, Rewinding Sony: The Evolving Product, Phoning Home, and the Duty of Ongoing Design, U Chicago Law & Economics, Olin Working Paper No. 241 (2005), “The great virtue of Sony’s substantial noninfringing use test is that it creates an innovation safe harbor”; A&M Records v Napster, 114 F.Supp.2d 896, 915-16 (ND Cali. 2000), affirmed 239 F.3d 1004, 1019 (9th Cir. 2001), court rejects Napster’s argument that it is protected under Sony precedent; []
  8. Gershwin Publishing v Columbia Artists Management, 443 F.2d 1159, 1162 (2nd Cir. 1971). []
  9. Sony at 437-38. []
  10. MGM v Grokster, 380 F.3d 1154, 1164 (9th Cir. 2004). []

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YouTube revamps content ID, defaults to DMCA in case of unresolved disputes — Leading the news this week is Google’s decision to add some flexibility to its Content ID appeals process. According to Google, “When the user files an appeal, a content owner has two options: release the claim or file a formal DMCA notification.” It remains to be seen what the effect of this move will be, but, just for the record, Jonathan Bailey called it.

New paper on ISP liability: how to reconcile US and EU approaches? — The 1709 Blog points to an informative new paper comparing the US’s DMCA and the EU’s E-commerce Directive, both of which set up rules controlling liability for online service providers.

The Internet: Now just another special interest — Behind the shiny new Internet Association is the same old lobbying, as Lydia DePillis of The New Republic reports.

Internet Astroturf 3.0 — Scott Cleland offers a who’s who of groups “united in the common belief that users and groups of any kind should not have to pay, or ask for permission, to use others’ intellectual property online, because permission and payment to use intellectual property limits the sharing, creativity and innovation of others.”

Amanda Palmer’s Accidental Experiment with Real Communism — The New Yorker’s perspective on recent events involving Palmer. “Ideally, you don’t even know you are working at all. You think you are keeping up with friends, or networking, or saving the world. Or jamming with the band. And you are. But you are also laboring for someone else’s benefit without getting paid. And this, it turns out, was exactly Amanda Palmer’s hustle.”

HSI seizes 686 websites selling counterfeit medicine to unsuspecting consumers — The US ICE’s Homeland Security Investigations announced this week the seizure of nearly seven hundred domain names connected with the online illicit sale of fake drugs. The seizures are part of a larger global effort which so far has resulted in 79 arrests, the seizure of 3.7 million doses of counterfeit drugs, and the takedown of approximately 18,000 websites. No word yet on how much this will break the internet.

Protecting Creative and Intellectual Property on the Internet — Independent filmmaker Adam Lipsius recounts his experience with online piracy and the challenges it poses to similar creators. He ends by noting, “it is respect for all craftsmen and conjurers and job creators — and the expectation that society will protect their ability to profit legitimately from their work — that’s at stake when setting the balance on copyright protection in our digital era.”

NYC 2012 Conference: Keynote Speaker; Registration Open! — Bill Rosenblatt announces some of the panels and speakers who have been confirmed for the December 5th conference in NYC, and the event sounds promising. Registration is now open and discounted before November 1.

 

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Like many couples, Brian Edwards and Thomas Privitere of New York celebrated their engagement by taking engagement photos. They hired photographer Kristina Hill in March 2010 and shared the photos on a blog that documented their upcoming wedding for friends and family.

This past summer, the now-married couple learned that an anti-gay organization known as “Public Advocate of the United States” (“PAUS”) had misappropriated one of the photos, showing the two kissing, to use as the background for, in the words of the Denver Post, “ugly campaign fliers” in Colorado, advocating against a candidate who had supported civil unions in that state. A second mailing, directed at another candidate, was also mailed out by the group.

Last week, Hill, Edwards, and Privitere filed a lawsuit against PAUS, alleging copyright infringement and appropriation of personality and likeness. The photograph, they argued, was not only exploited without permission, it was done to advocate for a position they are diametrically opposed to.

Mike Masnick recently wrote about the case — Why it’s tempting, but troubling, to use copyright as a stand in for moral rights — admitting that the use is likely infringing, but like with any enforcement of creator’s rights, found reason to criticize the lawsuit. Said Masnick:

 I’m worried about the implications here. Copyright in the US is an economic right, not a moral one. Other countries may have “moral rights” or “droit moral” on photographs, but we don’t in the US. And it is clear that the copyright complaint is really entirely about the moral rights issue as it relates to copyright. There is no economic impact at issue here, because there is no economic interest in this image. There does not appear to be any plan or intent to license the image or exploit it economically in any way.

And, so, I worry when we start using moral rights arguments to defend a copyright claim, no matter how strongly I support the moral argument being advanced by the plaintiff.

This is reminiscent of his reaction decrying the Ninth Circuit’s decision in Monge v. Maya Magazines a few weeks ago, where the court held that fair use didn’t protect a tabloid that had published, without permission, private wedding photos that had been stolen from a couple.

Masnick is correct insofar as US Copyright law doesn’t protect “moral rights.” In copyright law, “moral rights” is a term of art, with a specific meaning. Also referred to as “droits moraux”, the term encompasses certain noneconomic rights, such as the right to attribution and a right of integrity.1 Generally speaking, these rights are not recognized in the US.2

But in a broader context, Masnick is incorrect. Copyright does recognize noneconomic interests — and the economic interests it recognizes go beyond a simple economic interest in commercial exploitation. Copyright, after all, gives creators the right to control a work, or “the right to say no“, and this right can often serve as a proxy to broader moral rights. In a sense, moral rights are “baked into” US copyright law.

We can turn to the courts to see what I mean.

The Copyright Act gives copyright owners the exclusive right “to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending.”3 This right of distribution, among other things, gives authors the right of first publication.

The right of first publication, long an absolute in the common law (though that has been tempered in recent decades), is anything but an economic right. Rather, as the Supreme Court noted in Harper & Row v Nation Enterprises, “The right of first publication implicates a threshold decision by the author whether and in what form to release his work.”4 The Court noted earlier that “Publication of an author’s expression before he has authorized its dissemination seriously infringes the author’s right to decide when and whether it will be made public.”

This example shows that author’s right to control her work through copyright is just as vital as her right to remuneration. This right extends beyond just first publication. The Second Circuit wrote in Castle Rock Entertainment v Carol Publishing Group:

Although Castle Rock has evidenced little if any interest in exploiting this market for derivative works … the copyright law must respect that creative and economic choice. “It would … not serve the ends of the Copyright Act — i.e., to advance the arts — if artists were denied their monopoly over derivative versions of their creative works merely because they made the artistic decision not to saturate those markets with variations of their original.”5

Courts have also been clear that this right to control only applies as protection against commercial exploitation. In Sony Corp v Universal City Studios (the “Betamax” case), the Supreme Court stated, “Even copying for noncommercial purposes may impair the copyright holder’s ability to obtain the rewards that Congress intended him to have.”6 It goes on to point out that these rewards are not limited to monetary payments:

The copyright law does not require a copyright owner to charge a fee for the use of his works, and as this record clearly demonstrates, the owner of a copyright may well have economic or noneconomic reasons for permitting certain kinds of copying to occur without receiving direct compensation from the copier. It is not the role of the courts to tell copyright holders the best way for them to exploit their copyrights.

Other courts have endorsed this characterization of the rewards due authors.

In a 2000 case, the Ninth Circuit noted that the defendant’s distribution or an unauthorized version of plaintiff’s work harmed plaintiff’s “goodwill by diverting potential members and contributions.” It disagreed with defendant’s argument that plaintiff’s failure to exploit the work showed that the work had no economic value that unauthorized dissemination would adversely affect. Said the court, “Even an author who had disavowed any intention to publish his work during his lifetime was entitled to protection of his copyright, first, because the relevant consideration was the ‘potential market’ and, second, because he has the right to change his mind.”7

This is obviously a very brief survey of how copyright law is not limited to purely economic rights. It isn’t “troubling”, as Masnick puts it, nor is it in any way novel, to use copyright to protect an image even though there is no “plan or intent to license the image or exploit it economically in any way.” What’s more troubling, in my opinion, is to strip the law of its humanity, place a dollar sign on everything, and view harm through the lens of a financial ledger. Copyright is more than just a right to remuneration; it “is deeply rooted in our conception of ourselves as individuals with at least a modest grade of singularity, some degree of personality.”8 “It is also a source of human liberties.”9

Footnotes

  1. The Berne Convention, for example, provides for protection of moral rights in Article 6bis: “Independently of the author’s economic rights, and even after the transfer of the said rights, the author shall have the right to claim authorship of the work and to object to any distortion, mutilation or other modification of, or other derogatory action in relation to, the said work, which would be prejudicial to his honor or reputation.” []
  2. The Visual Artists Rights Act of 1990 (VARA), codified under 17 USC § 106A, grants some moral rights to visual artists under certain circumstances; see also Gilliam v American Broadcasting Companies, 538 F.2d 14 (2nd Cir. 1976). []
  3. 17 USC § 106(3). []
  4. 471 US 539, 553 (1985). []
  5. 150 F.3d 132, 145-46 (2nd Cir. 1998). []
  6. 464 US 417, 450 (1984). []
  7. Worldwide Church of God v Philadelphia Church of God, 227 F.3d 1110, 1119 (9th Cir. 2000). []
  8. Mark Rose, Authors and Owners: The Invention of Copyright,  pg. 142 (Harvard University Press 1993). []
  9. Ralph Oman, Going Back to First Principles: the Exclusive Rights of Authors Reborn, 8 J. HIGH TECH. L. 169, 182 (2008). []

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Today’s guest post comes from Copyhype contributor Devlin Hartline.

One topic of debate in copyright is over whether simply “making available” a file on a peer-to-peer network is itself a violation of the distribution right.1 The courts have been split on the issue.2 Professor Peter S. Menell explains the controversy:

Interpreting “distribute” narrowly, some courts have held that copyright owners must prove that a sound recording placed in a share folder was actually downloaded to establish violation of the distribution right. Other courts held that merely making a sound recording available violates the distribution right. The ramifications for copyright enforcement in the Internet age are substantial. Under the narrow interpretation, the relative anonymity of Internet transmissions in combination with privacy concerns make enforcement costly and difficult. A broad interpretation exposes millions of file-sharers to potentially crushing statutory damages.3

The popular copyright treatise Nimmer on Copyright has played an important role in the debate. The treatise was first published in 1963 by the late Professor Melville Nimmer. Since 1985, his son Professor David Nimmer (“Nimmer”) has taken over the task of editing and updating it. It’s hard to exaggerate how influential Nimmer on Copyright has been in shaping copyright jurisprudence. A quick, informal search on Westlaw turns up 3,301 state and federal cases that have cited it. That is compared to 1,444 cites for Goldstein on Copyright and 236 cites for Patry on Copyright, two other leading copyright treatises.

Several courts have consulted Nimmer on Copyright when analyzing whether “making available” constitutes distribution. As recently as 2011, the treatise took the position that infringement of the distribution right requires actual dissemination of copies of a work to the public.4 But in the latest edition, Nimmer has changed his tune—the treatise now states that “making available” is distribution simpliciter. After a detailed examination of the legislative history of the current Copyright Act, Nimmer now concludes that “the distribution right was formulated precisely so that it would extend to making copyrighted works available, rather than mandating proof of actual activities of distribution.”5

Thomas-Rasset and “Making Available”

The “making available” issue took center stage in the famous Jammie Thomas-Rasset case. In 2006, certain recording companies sued Thomas-Rasset for willful copyright infringement. One of the claims was that she had violated the distribution right by merely “making available” twenty-four copyrighted song files on the KaZaA peer-to-peer network. An investigator working for the plaintiffs found that the song files were available in a KaZaA share folder for others to download, but it could not be determined whether other users had in fact downloaded the files.

The district court instructed the jury that the “act of making copyrighted sound recordings available for electronic distribution on a peer-to-peer network, without license from the copyright owners, violates the copyright owners’ exclusive right of distribution, regardless of whether actual distribution has been shown.”6 The jury found Thomas-Rasset liable for willful copyright infringement, awarding the plaintiffs statutory damages of $9,250 per song, for a total of $222,000. The next day, the court entered judgment on the jury’s verdict.

Thomas-Rasset then moved for new trial, or in the alternative, for remittitur. Months later, the district court sua sponte asked the parties to submit briefs on the issue of whether its jury instruction on “making available” was a manifest error of law. Several amici, including the EFF, Public Knowledge, and the MPAA, were permitted to file briefs as well. The plaintiffs and their supporters argued that the jury instruction on “making available” was proper, while Thomas-Rasset and her supporters argued that “making available” is not distribution. After thorough analysis, the district court sided with Thomas-Rasset.

The district court noted that while the Eighth Circuit had not addressed the “making available” issue in the peer-to-peer context, the court of appeals had nonetheless considered and rejected the “making available” argument in a different context in National Car.7 In that case, the appellate court grappled with the issue of whether a state law claim for breach of contract was preempted by the Copyright Act. The district court below had held that a licensee’s unauthorized use of licensed software to process third-party data was equivalent to distribution of copies of that software.

The Eighth Circuit rejected the notion that use of a software program for the benefit of third parties constituted distribution of the software. The court of appeals turned to Nimmer’s treatise for the proposition that the distribution right “grants the copyright owner the exclusive right publicly to sell, give away, rent or lend any material embodiment of his work.”8 It concluded that “even with respect to computer software, the distribution right is only the right to distribute copies of the work. As Professor Nimmer has stated, infringement of the distribution right requires an actual dissemination of either copies or phonorecords.”9

Finding that the Eighth Circuit’s opinion in National Car was binding precedent, the district court in the Thomas-Rasset case held that liability “for violation of the exclusive distribution right . . . requires actual dissemination.”10 The district court then granted Thomas-Rasset’s motion for a new trial on the ground that the jury instruction on the “making available” issue was legal error that substantially prejudiced her rights. The new trial was of no help to Thomas-Rasset. Even without the “making available” instruction, the jury again found her liable for willful copyright infringement of the twenty-four song files.

The Thomas-Rasset story demonstrates nicely the influence that Nimmer on Copyright has had in the “making available” debate. The Eighth Circuit in National Car relied on the treatise in finding that violation of the distribution right requires actual dissemination of copies of a work to the public. In turn, the district court in the Thomas-Rasset case followed suit in concluding that merely “making available” a work on a peer-to-peer network does not violate the distribution right. But what’s to be made of the fact that Nimmer has now changed his tune on the “making available” issue?

Nimmer’s New Tune

In his recent journal article, Professor Peter S. Menell (“Menell”) surveys the voluminous legislative history leading up the passage of the 1976 Copyright Act, and he shows that Congress did in fact intend to establish that “making available” is distribution. Menell examines the significant errors in interpreting the scope of the distribution right made in the treatises, scholarship, and court decisions. And then in a footnote, he mentions that he was able convince Nimmer to change his tune:

The discussion that follows is based upon the version of Nimmer on Copyright that was available to jurists and practitioners through August 2011. After reading this article, Professor Nimmer asked me to co-author a complete revision of the sections of Nimmer on Copyright relating to the scope of the distribution right and the definition of “publication.”11

The latest edition of Nimmer’s treatise does indeed adopt Menell’s findings on the “making available” issue. (Relatedly, Menell and Nimmer have created two multimedia presentations of their discoveries that I highly recommend: Part I: In Search of the Lost Ark and Part II: The Elephant in the Room.) Nimmer on Copyright now notes that the courts that have looked at the “making available” puzzle have all failed to consider the relevant evidence of Congress’s intent:

The point of commonality among these opinions is that none of them went back to examine the rich trove of legislative materials from the early to mid 1960s and early 1970s explicating Congress’s intent in shifting terminology from the 1909 rights to publish and vend to the 1976 Act’s right to “distribute,” and at the same time expanding the definition “publication” to include offers to distribute.12

Under the 1909 Copyright Act, there was no right to distribute. Instead, copyright owners had the rights to publish and to vend. The right to publish was universally understood to encompass all public offerings of a work, i.e., “making available” copies of a work to the public. Nimmer observes that no court “recognized a requirement to prove actual distribution of copies, and even gratuitous offers of a work to the public fell within the right to publish.”13 That “making available” copies of a work to the public constituted publication was well-settled at the time the revisions for the modern Copyright Act were considered.

Determination of what constituted publication under the 1909 Act was of critical importance because a work was deemed to have lost its common law copyright protection the moment it was published. Moreover, if a work was published without the obligatory copyright notice, that work fell into the public domain and received no statutory copyright protection. Since the penalty for publishing a work without copyright notice was so harsh, judges advanced some questionable distinctions into the jurisprudence. The drafters of the 1976 Act introduced the right to distribute in an attempt to shed these dubious vestiges.

Nimmer explains:

The drafters of the current Act wished to avoid the tremendous accumulation of common law interpretation that had thus arisen over how to define “publication.” For that reason, they chose a new term, “distribution,” as an omnibus term that would encompass all acts then qualifying as “publication,” without the technical exceptions that had accreted through the common law process of various rulings.14

Thus, the introduction of the right to distribute in the 1976 Act was intended not only to incorporate the preexisting publication right, which included “making available” copies of a work to the public, but it was also intended to broaden the publication right by eliminating the problematic exceptions that had been introduced into the doctrine by the judiciary.

As Nimmer summarizes:

The distribution right accorded by Section 106(3) is to be interpreted broadly, consonant with the intention expressed by its drafters. It extends to the offer to the general public to make a work available for distribution without permission of the copyright owner. No consummated act of actual distribution need be demonstrated in order to implicate the copyright owner’s distribution right.15

So under Nimmer’s contemporary analysis, the district court in the Thomas-Rasset case had it wrong when it concluded that nowhere in the legislative history does “Congress state that distribution should be given the same broad meaning as publication.”16 Not only did Congress intend that distributions should encompass all publications, the new distribution right was specifically created to be broader than the antecedent publication right. Similarly, the district court in the Thomas-Rasset case had it backwards when it held that “all distributions to the public are publications, but not all publications are distributions to the public.”17

Given the widespread influence of his treatise, it seems inevitable that others will follow Nimmer in his conclusion that “the act of making available sound recordings for downloading by the public through file-sharing networks suffices to show actionable copyright infringement.”18 But only time will tell how many others change their tunes as well.

Follow me on Twitter: @devlinhartline

Footnotes

  1. 17 U.S.C.S. § 106(3) (Lexis 2012) (“the owner of copyright under this title has the exclusive rights to do and to authorize any of the following: *** (3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending”). []
  2. See, e.g., Atl. Recording Corp. v. Howell, 554 F.Supp.2d 976 (D. Ariz. 2008); London-Sire Records, Inc. v. Doe 1, 542 F.Supp.2d 153 (D. Mass. 2008); Motown Record Co., LP v. DePietro, No. 04-cv-2246, 2007 WL 576284 (E.D. Pa. Feb. 16, 2007); Warner Bros. Records, Inc. v. Payne, No. 06-ca-051, 2006 WL 2844415 (W.D. Tex. July 17, 2006); Atl. Recording Corp. v. Anderson, No. 06-cv-3578, 2008 WL 2316551 (S.D. Tex. Mar. 12, 2008); Universal City Studios Productions LLLP v. Bigwood, 441 F.Supp.2d 185 (D. Me. 2006); UMG Recordings, Inc. v. Alburger, 2009 U.S. Dist. LEXIS 91585 (E.D. Pa. Sept. 29, 2009). []
  3. Peter S. Menell, In Search of Copyright’s Lost Ark: Interpreting the Right to Distribute in the Internet Age, 59 J. Copyright Soc’y U.S.A. 1 (2011). []
  4. Nimmer on Copyright § 8.11[A], at 8-149 (2007) (“Infringement of [the distribution right] requires an actual dissemination of either copies or phonorecords.”). []
  5. 2-8 Nimmer on Copyright § 8.11[D][4][c]. []
  6. Capitol Records, Inc. v. Thomas, 579 F.Supp.2d 1210, 1213 (D. Minn. 2008) (internal quotations omitted). []
  7. National Car Rental Sys. v. Computer Assocs. Int’l, 991 F.2d 426 (8th Cir. 1993). []
  8. Id. at 430 (quoting 2 Nimmer on Copyright § 8.11[A], at 8-123) (emphasis in original; internal quotations omitted). []
  9. Id. at 434 (quoting 2 Nimmer on Copyright § 8.11[A], at 8-124.1) (emphasis in original; internal quotations and brackets omitted). []
  10. Thomas, 579 F.Supp.2d at 1226. []
  11. Menell, 59 J. Copyright Soc’y U.S.A. at 20 n.90. []
  12. 2-8 Nimmer on Copyright § 8.11[D][1]. []
  13. 2-8 Nimmer on Copyright § 8.11[B][4][d] (emphasis in original). []
  14. 2-8 Nimmer on Copyright § 8.11[A]. []
  15. 2-8 Nimmer on Copyright § 8.11[B][4][d]. []
  16. Thomas, 579 F.Supp.2d at 1219. []
  17. Id. at 1220. []
  18. 2-8 Nimmer on Copyright § 8.11[D][4][c]. []

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The subject of copyright, or the protection of literary property is one of great importance to the whole world. Every human being, great and small, high and low, gentle and simple, male and female, is interested in this matter. Legislators have treated it as a question of conflicting interest between authors and publishers on the one hand, and the public or the consumers of books on the other; authors, particularly when young, too frequently look upon it as a question of conflicting interest between themselves and the publishers; and consumers through their representative legislators, have endeavoured to secure to themselves the blessing of cheapness, by injurious enactments.

How times have changed!

… One other word to those who fear to do justice, lest monopoly should ensue: it is admitted that a person shall have a perpetual property in the work of his hands, a labour which gives him healthy days, cheerful evenings, and quiet nights; he builds a house for his own benefit; he lives and dies in it, and transmits it to his heirs or assigns forever; and you do not call this monopoly, and you are right: another person devotes himself to literature, and writes books for the benefit of his fellow mortals, (for if they give neither pleasure nor profit, they will not sell;) he labours day and night with his head and pen, a work that gives neither healthy days, nor cheerful evenings, nor quiet nights; his spirit is forced to grapple daily in desperate struggle with the inertia of its earthy tabernacle, in order to gain the mountain height of severe thought; and thus with wear and tear of mind and body, he produces, not a house useful only to himself, but a moral, or religious, or imaginative, or scientific book, that may increase the happiness of thousands yet unborn; and yet this honest labourer is not to have a complete property in his labour’s product, for fear of monopoly!

His case is precisely the same as that of the maker of houses, who cannot get a monopoly rent, because other men make more houses, as soon as he demands too much. So, when an author who has produced a book for which the demand is great, is unwise enough to ask too high a price, another author, (perhaps greater than he,) will write another book on the same subject, and thus demolish his ideal monopoly.

Philip H. Nicklin, Remarks on Literary Property (Phila. 1838).

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September 28, 2012 · · Comments Off

Is it time to repair the DMCA? — That’s the question posed by Jonathan Bailey, who notes, as does a recent Trichordist piece, how far from the original intent of the 1998 law we’ve come. Bailey suggests five ways to repair the DMCA: 1) Improve transparency, 2) Reward sites that are proactive, 3) Punish sites that do less, 4) Get more serious about bad takedown notices, and 5) Streamline the sending and processing of notices.

Digitalmusic.org launches music API directory — Digitalmusic.org, the digital wing of the National Association of Recording Merchandisers, recently launched an API directory as part of its suite of developer services that “was created to help address the issue of connecting developers with the quality content providers and services that can be the building blocks of their business.” The organization has been hard at work helping aspiring entrepreneurs build successful digital music-related services; this October it is also hosting an Entertainment Startup Academy in Washington, D.C

How much do artists make on YouTube — Over at Vox Indie, Ellen Seidler, points to a recent NPR story examining how much the video site compensates musicians. Notes Seidler, “Bottom line, musicians and filmmakers whose work is routinely uploaded to YouTube without permission can make some money from it. Time for Google to tell us exactly how much they are making. Anything less than full transparency is unacceptable.”

Justin Timberlake, Myspace owners discuss new relaunch — The internet was abuzz earlier this week after Myspace teased a completely new look and site in a video. Here, the site’s owners, including investor Timberlake, discuss the reboot of the once popular social networking site. While many are wondering whether a new UI and features will save the site, it should be noted that Myspace has already been quietly rebuilding; back in February, it announced that it was adding around 40,000 new users a day

The Tech World Gets a New Trade Association, Or “How to Read a DC Press Release” — With the official launch of the Internet Association this week, Bytegeist’s Jane Hamsher takes a closer look at the official announcement. Hamsher notes, “Nobody asked the rather obvious question: why an industry that spent $129 million on lobbying in 2011 needs yet another lobbing shop, especially when the Net Coalition already exists.”

Kickstarter Will Not Save Artists From the Entertainment Industry’s Shackles — A provocative article from Evgeny Morozov that looks at a recent academic study about the effect the fundraising site has had on the culture industry, particularly documentary filmmaking. According to the study’s author, campaign and issue-driven films are more likely to find success through this method of funding than other types of films, while films that involve significant legal risks (“an undercover investigation of the oil industry”, to use Morozov’s example) are less likely to be made through crowdfunding.

Maybe the Internet only wants one of everything — “How many search engines are there? For most of us, there’s only one — and it makes major news headlines even for putting a cute design on its logo.  How many general-purpose social networks do you use? Probably just one — or maybe you use them both, because technically, they actually do different things. Where do you crowdfund something? Duh. Where do you buy physical and now many digital objects? Mostly from here.”

.

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