Copyright Uncertainty

By , August 15, 2011.

Is copyright law too uncertain?

That certainly seems to be the prevailing view. Any number of copyright critics point to the uncertainty of the law — especially for online users, who are in closer contact with copyright issues than any previous generation has been — as one of its biggest flaws.

As attorney Steven Horowitz notes in a forthcoming article, the conventional argument is that this uncertainty “deters lawful uses of copyrighted works.” But, as you may guess from the title of the article, Copyright’s Asymmetric Uncertainty, copyright is only uncertain depending on the perspective. Those issues important to copyright holders, says Horowitz, are clear; issues important to copyright users are not so clear.

I was struck by how closely Horowitz’s distinction between what is clear and what is unclear in copyright law mirrors the distinction between creative and consumptive infringement that I had I previously wrote about — though, upon reflection, it might be more accurate to label these two categories “creative appropriation” and “consumptive appropriation”; use of a copyrighted work either creatively or consumptively is not necessarily infringement.

While there is plenty of overlap, in general, the line between creative appropriation and creative misappropriation (or infringement), relies largely on substantive doctrines of copyright law: the idea/expression distinction, substantial similarity, and fair use. Broadly speaking, the new work is compared to the original work. The line between consumptive appropriation and infringement, however, is governed by more regulatory provisions; a comparison between the two works is unnecessary since this type of appropriation typically consists of verbatim or near verbatim copies of the original work.

This isn’t just arbitrary line-drawing. As I said in my original post on the subject, recognizing this distinction is important to discussions of copyright law because each category has its own separate issues. “Uncertainty” is one of those issues: while there may be confusion over the rules that govern creative uses of copyrighted works, that is not the case when dealing with outright piracy of existing works.

Horowitz explains copyright’s asymmetric uncertainty by first discussing what issues are most important to copyright holders:

Although there are many who would produce expressive works irrespective of copyright protection, those whose production depends on copyright care most about three features of the law. They want (1) a reliable entitlement, (2) prohibiting at least pure or close copying of their work, which is (3) protected by remedies sufficient both to deter copying and to compensate for any losses that result from it. These are the core protections that ensure meaningful incentives to produce copyrightable expression, for without them a copyright holder might have to compete against others who sell identical copies of his own work. Such competition against perfect substitutes would drive down the price toward the near-zero marginal cost of the copy, leaving him without the ability to profit from the work or to recoup the costs of its production. Uncertainty in these three salient features of the law would spell trouble for copyright holders, but fortunately the features are predictable in practice.

In other words, copyright holders are most concerned with consumptive appropriation of their works. That shouldn’t come as a surprise.

That’s not to say copyright holders are not concerned with creative appropriation of their works — I think it goes without saying that the level of this concern varies widely from person to person. Some copyright holders strictly police against most creative appropriations, some may evaluate each use on a case-by-case basis — perhaps asserting their rights against commercial uses but not worrying about noncommercial uses — and some may welcome (or even encourage) such uses.

But most copyright holders’ primary concern is about control over how and where their complete works are copied and distributed.

Horowitz next looks at the issues of importance to copyright users:

Most affected by copyright’s uncertainty are the potential users of copyrighted works, those who want to use a work in ways not intended or expected by the copyright holder. For example, users may mix pieces of prior works together or write new stories using characters from old ones. The intent of the user is not to produce or sell verbatim copies of a preexisting work but to put some portion of a work to a new purpose. The potential user is most concerned with whether his expressive activity will constitute infringement and if so whether the remedies for infringement will be proportional to the harm caused—in other words whether his liability has a reasonable ceiling. Copyright makes answering both of these questions difficult. A potential user cannot predict with confidence whether a contemplated use will be deemed infringing or whether the damages will be manageable or devastating.

Most of copyright’s uncertainty falls within the scope of creative appropriation, not consumptive appropriation. One would think, then, that it wouldn’t be an issue when discussing piracy.

But what happens is that the uncertainty criticism is used as an across-the-board attack on copyright — as though piracy cannot be addressed until courts or Congress figure out, for example, a fair use rule that is both applicable to a wide variety of situations and easy enough for a fifth grader to understand. Any uncertainty that exists primarily in the area of creative appropriation shouldn’t be used as an argument against reasonable efforts to curb the harms of consumptive misappropriation.

The PROTECT IP Act applies to sites that have “no significant use other than engaging in, enabling, or facilitating the reproduction, distribution, or public performance of copyrighted works, in complete or substantially complete form, in a manner that constitutes copyright infringement.” Similarly, the Commercial Felony Streaming Act only applies to criminal infringement, where the willfulness requirement forecloses its application to most creative infringements. Doctrines like fair use, substantial similarity, and the idea/express distinction play little role in the application of proposed laws like these.

Friday’s Endnotes – 08/12/11

By , August 12, 2011.

“The law, like the marketplace, applauds innovators. It rewards the trend-setters, the market-makers, the path-finding non-conformists who march to the beat of their own drums. To foster such creativity, statutes and common law rules accord to inspired pioneers various means of recompense and incentives.” 1Louboutin v. Yves Saint Laurent, Decision and Order, No. 11 Civ. 2381 (SDNY Aug. 10, 2011).

Please help UK indie labels harmed in PIAS warehouse fire — One of the many casualties of this week’s riots in London was a warehouse containing inventory for a large number of independent record labels. Many lost large portions of their entire physical inventory. The Create Digital Music blog has additional information on official and third-party efforts to assist the labels and artists affected.

Creative America is seeking stories from those affected by content theft — The new grassroots organization writes: “Don’t forget to share your story about how content theft has affected you or a project you’ve worked on. Email us your story at stories@creativeamerica.org along with your name and studio and/or union affiliation for our upcoming new website and our Facebook and Twitter feeds!”

Authors and press publishers worry about making a living in the digital age — Future of Copyright takes a look at these worries, specifically as explored by Robert Levine in his new book Free Ride and German economist Torben Stühmeier.

New Website for the National IPR Coordination Center — ICE announces a redesigned website for the Center, which coordinates enforcement efforts, investigations, and training between 17 different federal agencies charged with protecting IP rights.

Zediva ‘suspending’ operations; many legal alternatives remain — The streaming site has officially shut down its operations following a federal court imposing a preliminary injunction against it. The MPAA notes the wealth of services where movie fans can watch films online, from iTunes to Netflix, Amazon, Vudu, and VOD offerings from cable and satellite providers.

The Numbers Behind a CreateSpace Bestseller — CreateSpace, a subsidiary of Amazon.com, provides Print On Demand services for authors. How much can writers sell through it? Author Lee Goldberg reports that he was #4 on the fiction bestseller chart at CreateSpace in July … and he had sold 204 copies.

Waiting for Kirtsaeng: the Still Unresolved Tension Between Sections 602 and 109 of the Copyright Act — Last year’s 4-4 split in Costco v. Omega did little to provide guidance for those involved with grey market goods and parallel imports. Andrew Berger looks at three separate cases pending in the 2nd Circuit that must resolve the issues the Supreme Court punted on.

The Greatest Anti-Plagiarism Video I’ve Seen — Entertaining video aimed at educating college students about the dangers of plagiarism. “A Plagiarism Carol” is in Norwegian, but includes English subtitles.

Why Free is so Misunderstood — Faza looks at the strange subset of pundits who champion the “economics of free” as though it were some sort of religious tenet. The reality is that the ideas of loss leaders, promotional giveaways, and giving away the razors and selling the blades have been around for centuries. Creators shouldn’t ignore these ideas, but they also shouldn’t rush into giving away their work because it’s the latest craze.

Hargreaves IP Review – the Response — The Copyright Alliance presents a guest blog from PPL’s Dominic McGonigal looks at the latest UK IP Review, the Hargreaves Report. He notes that the UK’s efforts to reform copyright law are beginning to seem like Groundhog Day: “Another review of IP. Another Report. Another set of Recommendations.”

References

References
↑1 Louboutin v. Yves Saint Laurent, Decision and Order, No. 11 Civ. 2381 (SDNY Aug. 10, 2011).

Rojadirecta: Barking up the Wrong Tree?

By , August 09, 2011.

Of the 100+ domain names seized by ICE since it began Operation in Our Sites last summer, only one has raised a challenge. Rojadirecta, which allegedly catalogs hundreds of links, primarily to live sporting events streaming online, has enlisted no less than six lawyers in its effort to prevent its domain names from being forfeited by the US government.

On Friday, Rojadirecta’s petition for release of seized property was denied by the court. 1The petition was actually filed by Puerto 80 Projects, the company that owns the Rojadirecta site. To keep things simple, I’ll refer to both the site and the site’s owners and operators as Rojadirecta for this article. On the same day, it filed its motion to dismiss in the Government’s forfeiture proceeding against its domain name. The Government’s response is due by August 26th, and Rojadirecta’s reply to the response is due September 2nd.

Was the court correct in refusing to release the domain name to Rojadirecta? Will Rojadirecta succeed in getting the Government’s forfeiture complaint dismissed?

The short answer to these questions are, in my opinion, yes and no. For the gory legal details, read on.

Petition to Release Seized Property

Civil forfeiture is based on the idea that property can be “guilty” — a strange idea, but not a new one. 2See Calero-Toledo v. Pearson Yacht Leasing Co., 416 US 663, 680-684 (1974) where the Supreme Court traces the history of forfeiture laws since Biblical times. But other than the defendant being property rather than a person, a civil forfeiture proceeding largely mirrors any other civil lawsuit. It begins with a complaint filed in court, proceeds through motions practice and discovery, and (if it makes it this far) ends in trial and judgment.

In a previous post, I wrote how the petition to release seized property largely mirrors the procedure of a criminal defendant being released on bail pending trial. Viewed this way, it’s easy to see why Rojadirecta didn’t succeed with its petition. Essentially, Rojadirecta’s lawyers made two arguments: “our client should be released on bail because he’s innocent” and “our client should be released on bail because he was wrongfully arrested.”

Those are certainly valid arguments, just not in this context.

As I detailed in my previous post, a petition like this is only granted if a claimant is suffering a substantial hardship due to the seizure. Most deprivations of property will cause some level of hardship, obviously; Congress added this procedure to reach those situations where the seizure would be devastating — situations like “preventing the functioning of a business, preventing an individual from working, or leaving an individual homeless.” 318 USC § 983(f)(1)(C).

Rojadirecta failed to argue any of these.

It did argue, in part, that its users were suffering a substantial hardship due to the seizure because their First Amendment rights had been infringed. The court rejected this argument, causing some to scratch their heads, since it sounds like the court is saying it doesn’t think a loss of First Amendment rights is a substantial hardship.

That’s not what the court is saying, however. Infringement of free speech certainly causes substantial, if not irreparable, hardship. But the definition of “substantial hardship” in this particular statute is far more limited than the general meaning of the phrase. In addition, Congress didn’t intend to include free speech violations under this statute because those rights are already protected.

Claimants can challenge the legality of a seizure during the forfeiture proceeding itself or through existing procedures — for example, a Bivens action or a motion to suppress. 4US v. PlayboyMonthly.com, United States’ Motion to Dismiss Claimant’s Counterclaims, No. 8:10-cv-1214-T-27TBM (MD Fla. 2010); US v. $80,633, 512 F.Supp.2d 1196 (MD Ala. 2007). The 983(f) petition is an additional layer of procedural protection on top of existing procedures, designed for a specific purpose. Rojadirecta simply raised this issue in the wrong place.

Judging by the brevity of the order, the denial of Rojadirecta’s petition was, as I had predicted, an easy call for the court to make.

Rojadirecta’s Motion to Dismiss

A motion to dismiss will be granted if the complaint is insufficient on its face.

Civil forfeiture complaints are governed by the Supplemental Rules in the Federal Rules of Civil Procedure, which state in part that the Government must “state sufficiently detailed facts to support a reasonable belief that the government will be able to meet its burden of proof at trial.” “However,” as one court explains, “the Government is not required to allege in the complaint all of the facts and evidence at its disposal.”

It is sufficient for the Government to simply plead enough facts for the claimant to understand the theory of forfeiture, to file a responsive pleading, and to undertake an adequate investigation. The issue is one of pleading, not proof at trial. And it is for this reason that “[n]o complaint may be dismissed on the ground that the Government did not have adequate evidence at the time the complaint was filed to establish the forfeitability of the property.” 5US v. $22,173.00 in US Currency, 716 F. Supp. 2d 245, 248-49 (SDNY 2010.

What does the Government have to show to establish the forfeitability of property?

Federal civil forfeiture statutes, including those applying to criminal copyright infringement, are subject to CAFRA, the Civil Asset Forfeiture Reform Act of 2000. Under CAFRA, the Government must show that the defendant property is subject to forfeiture by a preponderance of the evidence. When the defendant property is alleged to be an instrumentality of a crime, the Government must also show that there is a substantial connection between the property and the alleged crime.

If the Government can show both, the only way a claimant can win is by rebutting the showing of a substantial connection or raising an affirmative defense to the forfeiture — the claimant is an “innocent owner” of the property, for example. Under CAFRA, an innocent owner is one who “did not know of the conduct giving rise to forfeiture; or upon learning of the conduct giving rise to the forfeiture, did all that reasonably could be expected under the circumstances to terminate such use of the property.” 6Van Hofe v. US, 492 F.3d 175, 179-80 (2nd Cir. 2007).

18 USC § 2323(a)(1)(B) subjects the following to forfeiture: “Any property used, or intended to be used, in any manner or part to commit or facilitate the commission of an offense referred to in subparagraph (A).” Subparagraph (A) refers to criminal copyright infringement offenses, including those set out in 17 USC § 506, which states:

(1) In general.— Any person who willfully infringes a copyright shall be punished as provided under section 2319 of title 18, if the infringement was committed—

(A) for purposes of commercial advantage or private financial gain;

(B) by the reproduction or distribution, including by electronic means, during any 180–day period, of 1 or more copies or phonorecords of 1 or more copyrighted works, which have a total retail value of more than $1,000; or

(C) by the distribution of a work being prepared for commercial distribution, by making it available on a computer network accessible to members of the public, if such person knew or should have known that the work was intended for commercial distribution.

Facilitation “occurs when the property makes the prohibited conduct less difficult or more or less free from obstruction or hindrance.” 7In re 650 Fifth Avenue and Related Properties, Memorandum Opinion and Order, No. 1:08-cv-10934-RJH (SDNY March 30, 2011). As one court noted, “It is ‘[i]rrelevant whether the property’s role in the crime is integral, essential or indispensable.’ A single incident of facilitating criminal activity is sufficient to trigger forfeiture.” 8US v. LAM, No. 3:07-CR-374, Memorandum Opinion (ED Va. March 28, 2011).

Notice what is not required in civil forfeiture proceedings.

First, the Government does not have to prosecute or convict anyone of the underlying crime to seek forfeiture of property that facilitates that crime. 9See, for example, Van Hofe at 179, US brought civil in rem forfeiture action against residence used to facilitate commission of drug crime without indicting and prosecuting owners personally; Austin v. US, 509 U.S. 602, 627 (1993) (Scalia, J. concurring in part and concurring in judgment), conviction irrelevant to forfeiture proceeding; The Palmyra, 25 US 1, 15 (1827), “no personal conviction of the offender is necessary to enforce a forfeiture in rem in cases of this nature”; US v. One Parcel of Real Estate Located at 7715 Betsy Bruce Lane Summerfield, 906 F. 2d 110,111-12 (4th Cir. 1990), “In civil forfeiture cases, property is subject to forfeiture ‘even if its owner is acquitted of — or never called to defend against — criminal charges.'”

Second, the forfeiture proceeding is not directed at the site operators of Rojadirecta, but at the domain name itself. 10See Calero-Toledo v. Pearson Yacht Leasing Co., 416 US 663 (1974). The culpability of the site’s owners is irrelevant. 11See US v. Cherry, 330 F.3d 658, n.16 (4th Cir. 2003). In fact, the civil forfeiture has been described as an “essential tool” when the government “can prove that the property was involved in a crime, but cannot prove who the wrongdoer was.” 12Stefan D. Cassella, Overview of Asset Forfeiture Law in the United States, United States Attorneys’ Bulletin, Vol. 55, vol. 6, pg. 17 (November 2007).

With this in mind, let’s turn to Rojadirecta’s general argument supporting its motion to dismiss. It states, “the Complaint, which focuses entirely on Puerto 80’s actions, fails to allege facts that, if proven, would suffice to show that Puerto 80’s operation of the Rojadirecta site constitutes criminal copyright infringement.”

As we’ve just seen, the Government’s forfeiture complaint doesn’t have to allege such facts. In other words, Rojadirecta is barking up the wrong tree with its entire argument. The question of whether or not the operators of Rojadirecta are directly or indirectly liable for criminal copyright infringement — as well as the question of whether or not criminal copyright infringement even allows for indirect liability — is completely unrelated to the question of whether the domain name can be forfeited for facilitating the commission of a criminal copyright offense.

I doubt, then, that Rojadirecta can succeed with its motion to dismiss. Its argument doesn’t apply to the Government’s claim that its property was used to facilitate the commission of criminal copyright infringement.

Limits on Forfeiture

Some have wondered what limits the Government from seizing just about any web site’s domain name, considering the seemingly broad reach of civil forfeiture law. I’ve previously discussed some of the legal limitations preventing a seizure free-for-all; I want to briefly mention one more.

The Eighth Amendment’s prohibition of excessive fines places limits on civil forfeiture. The 2nd Circuit analyzes property forfeiture for excessiveness by considering the following:

(1) the harshness, or gross disproportionality, of the forfeiture in comparison to the gravity of the offense, giving due regard to

(a) the offense committed and its relation to other criminal activity,

(b) whether the claimant falls within the class of persons for whom the statute was designed,

(c) the punishments available, and

(d) the harm caused by the claimant’s conduct;

(2) the nexus between the property and the criminal offenses, including the deliberate nature of the use and the temporal and spatial extent of the use; and

(3) the culpability of each claimant.

It adds, “Determining the excessiveness of a civil in rem forfeiture is necessarily fact-intensive and the ‘quantum, in particular, of pecuniary fines neither can, nor ought to be, ascertained by any invariable law.’ Given the impossibility of establishing a formula for an excessive fine with surgical precision, this framework provides a useful template for the fact-finding process and the ultimate excessiveness inquiry.” 13Van Hofe at 186.

A more detailed look at how this inquiry works in practice is beyond the scope of this article.

References

References
↑1 The petition was actually filed by Puerto 80 Projects, the company that owns the Rojadirecta site. To keep things simple, I’ll refer to both the site and the site’s owners and operators as Rojadirecta for this article.
↑2 See Calero-Toledo v. Pearson Yacht Leasing Co., 416 US 663, 680-684 (1974) where the Supreme Court traces the history of forfeiture laws since Biblical times.
↑3 18 USC § 983(f)(1)(C).
↑4 US v. PlayboyMonthly.com, United States’ Motion to Dismiss Claimant’s Counterclaims, No. 8:10-cv-1214-T-27TBM (MD Fla. 2010); US v. $80,633, 512 F.Supp.2d 1196 (MD Ala. 2007).
↑5 US v. $22,173.00 in US Currency, 716 F. Supp. 2d 245, 248-49 (SDNY 2010.
↑6 Van Hofe v. US, 492 F.3d 175, 179-80 (2nd Cir. 2007).
↑7 In re 650 Fifth Avenue and Related Properties, Memorandum Opinion and Order, No. 1:08-cv-10934-RJH (SDNY March 30, 2011).
↑8 US v. LAM, No. 3:07-CR-374, Memorandum Opinion (ED Va. March 28, 2011).
↑9 See, for example, Van Hofe at 179, US brought civil in rem forfeiture action against residence used to facilitate commission of drug crime without indicting and prosecuting owners personally; Austin v. US, 509 U.S. 602, 627 (1993) (Scalia, J. concurring in part and concurring in judgment), conviction irrelevant to forfeiture proceeding; The Palmyra, 25 US 1, 15 (1827), “no personal conviction of the offender is necessary to enforce a forfeiture in rem in cases of this nature”; US v. One Parcel of Real Estate Located at 7715 Betsy Bruce Lane Summerfield, 906 F. 2d 110,111-12 (4th Cir. 1990), “In civil forfeiture cases, property is subject to forfeiture ‘even if its owner is acquitted of — or never called to defend against — criminal charges.'”
↑10 See Calero-Toledo v. Pearson Yacht Leasing Co., 416 US 663 (1974).
↑11 See US v. Cherry, 330 F.3d 658, n.16 (4th Cir. 2003).
↑12 Stefan D. Cassella, Overview of Asset Forfeiture Law in the United States, United States Attorneys’ Bulletin, Vol. 55, vol. 6, pg. 17 (November 2007).
↑13 Van Hofe at 186.

Copyhype Turns One Year Old

By , August 08, 2011.

On August 8, 2010, I wrote the first post for Copyhype.

When I began this site exactly one year ago, I wasn’t sure what to expect from it. I find copyright law fascinating and enjoy writing about it. I also felt there was room in the blogosphere for thoughtful legal analysis of copyright issues, analysis that doesn’t necessarily require you to have a law degree to understand.

I don’t know if I’ve achieved that, but I have been genuinely surprised and encouraged by this blog’s reception. I want to thank all my readers, those who’ve commented here, and those who’ve linked here. I also want to thank everyone who has followed me on Twitter and Facebook.

Some stats: In the first year, Copyhype has had over 40,000 visits from 142 countries.

The most popular posts in the first year have been:

  1. Kind of Bamboozled: Why ‘Kind of Bloop’ is not a Fair Use
  2. Demonizing Copyright
  3. Is Copyright Infringement Theft
  4. Fears of Felony Streaming Bill Overblown
  5. The “Fallacy of Intellectual Property” Fallacy

Since August 8, 2010, I’ve written 104 posts with a total of 163,728 words. If this was a book, assuming an average of 250 words per page, then it would be 655 pages long.

New stuff: I’ve added a page for online copyright resources. They include many resources I use when writing for this site, as well as ones I’ve culled from previous articles. You may also notice a few cosmetic changes on the page. Nothing major, I just wanted to spruce things up a bit after a year.

What’s in store for the next year of this site? You tell me! Let me know if there are news items or issues you would like to see addressed, or subject matters you’d like to see more of. I love hearing from readers.

With that said, I’m excited to enter the second year of Copyhype, and I hope to continue to improve the quality of coverage and analysis that this site is becoming known for. Thanks for a great first year!

Friday’s Endnotes – 08/03/11

By , August 05, 2011.

“[I]t is virtually axiomatic that the public interest can only be served by upholding copyright protections…” 1Order granting preliminary injunction against Zediva, quoting Apple Computer v. Franklin Computer Corp, 714 F.2d 1240, 1255 (3rd Cir. 1983).

Federal Judge Grants Injunction Against Zediva — A major setback for the unlicensed streaming service this week as the motion picture studios were granted the preliminary injunction they sought. In A Rose By Any Other Name, the 1709 Blog notes that this was thoroughly unsurprising. Zediva’s “loophole” wasn’t a novel interpretation; others have tried and failed as far back as 1984.

With Final Filings, Parties in GSU E-Reserve Case Await Verdict — Higher ed has been closely watching the copyright infringement suit between academic publishers and Georgia State University regarding its e-reserve practices. Publishers Weekly reports on the post-trial developments before the upcoming verdict.

Myths About Fair Use — Patricia Aufderheide, writing at Inside Higher Ed, discusses seven myths about fair use and the academic world. Good read for anyone in education. Especially good: “Myth #5: Sure, fair use is on the books, but it’s too risky — even if I’m right, I could get sued.”

Copyright Infringement IS Theft, You Filthy Pirates — The Humble Indie Bundle is a group of independently developed video games. It’s sold under a “pay-what-you-want” model (minimum price: one cent), with proceeds going to various charities. Yet, the games are still pirated. This eloquent rant is aimed at those who attempt to justify this kind of theft.

Pirate Economics — The Cynical Musician gives us an economic analysis of online piracy.

The Grammar of Copyright — Jonathan Bailey talks about the proper use and spelling of the word “copyright”. It’s an interesting topic, as the word can be either a noun or a verb. Anyone who has spent time reading or writing about the subject knows the word is frequently misused; and no wonder, even I sometimes have to pause to figure out if I’m using it correctly.

UK Proposals to Modernize UK Copyright Act — Sookman also takes a look at the UK government’s adoption of a number of recommendations from the Hargreaves Report. He also notes that the fact that the blocking of infringing sites was not adopted is not as big a deal as it has been made out to be.

UK Copyright caselaw update: the Lucasfilm, BT, ITV and Meltwater cases — Barry Sookman summarizes the four major cases that came out of the UK last week. Great article for getting caught up in one sitting.

On Location: Picture Shop Frames a Hollywood Future (via MPAA Blog) — The LA Times profiles a California business that provides picture frames and other items for TV and film productions. The story highlights the role small businesses play in the entertainment industry.  “Catering to Hollywood has become an increasingly vital source of income to small business owners like Cruz, who have been buffeted by a deep recession and an anemic recovery that has kept may consumers from buying discretionary items like picture frames. ‘If it wasn’t for the film and TV business, we would be in hot water,’’ said Cruz, who generates 75% of her annual sales — more than $500,000 a year -– by supplying frames to set decorators on such TV shows as ‘CSI’ and HBO’s ‘True Blood’ and movies including ‘Spider-Man 3,’ ‘Funny People’ and the upcoming December release ‘The Girl with the Dragon Tattoo.'”

Facebook’s Complete Guide to Building a Band Page — The social networking site has released a 40 page guide designed to helping musicians get the most out of Facebook pages and Facebook integration with their websites. Though it’s geared specifically toward musicians, most of the information is helpful to other creative professionals and small businesses.

MTV’s standard Real World contract — The Village Voice got their hands on a copy of a contract used for participants in MTV’s The Real World. Read it in all its glory. Be sure to check out paragraph 41 on page 17: Real World cast members are responsible for clearing permissions on all copyrighted music, photos, and video that they perform or use when on camera.

References

Marvel v. Kirby: Work for Hire and Copyright Termination

By , August 03, 2011.

Last Thursday, a district court ruled against the estate of Jack Kirby in its attempt to reclaim the copyright on his creations. (Full opinion here).

If you’re a comic fan, you don’t need to be told who Jack Kirby (1917-1994) is. The artist was a key figure at Marvel during the Silver Age of Comic Books, helping create many iconic characters that are as popular today as they were over 40 years ago.

On September 16, 2009, Kirby’s heirs served Marvel Comics with termination notices for 45 Kirby comics published by Marvel between 1958 and 1963, including comics that introduced many iconic characters like Spider-man, the X-Men, Iron Man, the Mighty Thor, the Avengers, the Fantastic Four, and the Incredible Hulk. 1Marvel is no stranger to this type of litigation — in 2003, it settled a similar suit with creator Joe Simon over rights to Captain America, and has faced challenges to various other characters, including an ongoing dispute with Gary Friedrich, creator of Ghost Rider; see also In re Marvel Entertainment Group, 254 BR 817 (D. Dela. 2000) which covered a dispute over various characters. Marvel filed for declaratory relief on January 8, 2010, claiming that the comics were works made for hire, making the termination notices invalid. Kirby’s heirs counterclaimed. 2This litigation spawned an earlier decision, Marvel Worldwide v. Kirby, 756 F.Supp. 2d 461 (SDNY Nov. 22, 2010), where the court dismissed several of Kirby’s counterclaims.

On cross motions for summary judgment, the Southern District Court of New York sided with Marvel, ruling that the Kirby works were works for hire under the Copyright Act of 1909. Kirby’s estate has announced that it intends to appeal this ruling.

Litigation like this inevitably can lead to strong reactions among comic fans. The District Court commendably begins its opinion by making an effort to separate the emotional aspects of this case from the pragmatic:

At the outset, it is important to state what this motion is not about. Contrary to recent press accounts and editorials, this case is not about whether Jack Kirby or Stan Lee is the real “creator” or Marvel characters, or whether Kirby (and other freelance artists who created culturally iconic comic book characters for Marvel and other publishers) were treated “fairly” by companies that grew rich off the fruit of their labor. It is about whether Kirby’s work qualifies as work-for-hire under the Copyright Act of 1909, as interpreted by the courts, notably the United States Court of Appeals for the Second Circuit. If it does, then Marvel owns the copyright in the Kirby Works, whether that is “fair” or not. If it does not, then the Kirby Heirs have a statutory right to take back those copyrights, no matter the impact on a recent corporate acquisition or on earnings from blockbuster movies made and yet to be made.

Work for Hire

Copyright protection initially vests with the author or creator of the work. The exception to this rule is when the work is a “work made for hire” — in that case, the employer or entity commissioning the work is considered the author under the law.

Whether a particular work is a work made for hire depends on which copyright act applies to it. Works made before January 1, 1978 are governed by the Copyright Act of 1909, works made after are governed by the Copyright Act of 1976. Sometimes courts have to look at both Acts in one case. 3For example, in Playboy v. Dumas, 53 F.3d 549 (2nd Cir. 1995), the works at issue were made between 1974 and 1984.

This point is key since each Act has a different definition of what makes a work a work for hire.

The 1909 Act only mentions the doctrine once: “[i]n the interpretation and construction of this title … the word ‘author’ shall include an employer in the case of works made for hire.” 417 USC § 26 (1976) (repealed). The Act doesn’t define “employer” or “works made for hire” separately. Courts generally applied the work for hire doctrine only in cases involving a traditional employer/employee relationship until the mid-1960s. 5Playboy at 554.

However, courts also recognized that work for hire can apply when a work is commissioned — the creator is an independent contractor rather than a traditional employee. 6Yardley v. Houghton Mifflin Co, 108 F.2d 28 (2d Cir 1939); Grant v. Kellogg Co, 58 F.Supp. 48 (SDNY 1944); Dielman v. White, 102 F. 892 (CCD Mass 1900). In 1965, the 9th Circuit first expressed what became known as the “instance and expense” test for works made for hire:

[W]e believe that when one person engages another, whether as employee or as an independent contractor, to produce a work of an artistic nature, that in the absence of an express contractual reservation of the copyright in the artist, the presumption arises that the mutual intent of the parties is that the title to the copyright shall be in the person at whose instance and expense the work is done. 7Lin-Brook Builders Hardware v. Gertler, 352 F.2d 298, 300.

The “instance and expense” test was adopted by other Circuits, most notably the 2nd Circuit, where a majority of copyright cases are litigated. 8See  Brattleboro Publishing Co v. Winmill Publishing, 369 F.2d 565, 567-68 (2d Cir 1966); Murray v. Gelderman, 563 F.2d 773, 775 (5th Cir 1977). Under this test, courts find a work made for hire when “the motivating factor in producing the work was the employer who induced the creation” and the employer has the right to “direct and supervise the manner in which the writer performs his work”. 9Playboy at 554.

The work made for hire doctrine under the 1976 Act is more specific and limited. The Act defines a “work made for hire” as:

(1) a work prepared by an employee within the scope of his or her employment; or

(2) a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire… 1017 USC § 101.

Based on this definition, the Supreme Court held that the “instance and expense” test doesn’t apply for works created under the 1976 Act, though it rejected the idea that the first definition only refers to “formal, salaried” employees. 11Community for Creative Non-Violence v. Reid, 490 US 730 (1989). Instead, courts must look at common law rules of agency to determine whether a work was made within the scope of employment — these rules place the actual nature of the relationship between two parties above whatever language is used in written agreements between them.

Factors that a court might consider include “the skill required; the source of the instrumentalities and tools; the location of the work; the duration of the relationship between the parties; whether the hiring party has the right to assign additional projects to the hired party; the extent of the hired party’s discretion over when and how long to work; the method of payment; the hired party’s role in hiring and paying assistants; whether the work is part of the regular business of the hiring party; whether the hiring party is in business; the provision of employee benefits; and the tax treatment of the hired party.”

Whether a particular work is a work made for hire or not has numerous implications, but the doctrine is especially significant when it comes to the question of a creator’s termination rights, which is the issue at play here.

Copyright Termination

The 1909 Copyright Act provided for an initial copyright term of 28 years with an optional renewal period of 28 more years of protection. The idea behind this set-up was to give authors, who may have been in a weak bargaining position when their work was first created, a chance to renegotiate licenses if a work became valuable. However, in 1943, the Supreme Court held that there was nothing in the 1909  Act that prevented authors from assigning the right to copyright renewal in their initial assignment. 12Fred Fisher Music v. M. Witmark & Sons, 318 US 643. The court noted, “We are asked to recognize that authors are congenitally irresponsible, that frequently they are so sorely pressed for funds that they are willing to sell their work for a mere pittance, and therefore assignments made by them should not be upheld … We do not have such assured knowledge about authorship, and particularly about song writing, or the psychology of gifted writers and composers, as to justify us as judges in importing into Congressional legislation a denial to authors of the freedom to dispose of their property possessed by others. While authors may have habits making for intermittent want, they may have no less a spirit of independence which would resent treatment of them as wards under guardianship of the law.” The result of this ruling was that it became common practice for publishers to insist upon an assignment of the renewal period when an author initially assigned his rights, effectively erasing the purpose of having two copyright terms. 13Marvel Characters v. Simon, 310 F.3d 280, 284 (2nd Cir. 2002).

When Congress set its sights on revising the Copyright Act, it took another look at this issue of new and emerging authors and creators signing away their rights because of their weak bargaining positions. This led to the creation of a termination right in the Copyright Act of 1976, gives an author the right to terminate any exclusive or nonexclusive license or transfer of copyright. 1417 USC § 203. Works that were already in existence when the 1976 Act was passed also received a termination right, 17 USC § 304(c). The termination right is inalienable — any agreement that takes it away is invalid.

The termination right does not, however, apply to works made for hire. Under the law, the “author” of a work for hire is the person or company doing the hiring. Since the actual creator never had a copyright to transfer, it follows that there is nothing to terminate. It should not be surprising then that most challenges to copyright terminations will hinge upon whether the original work was a work for hire or not.

The Court Decision

The court found the evidence that Kirby’s works were made at Marvel’s instance “overwhelming” — it pointed to only one conclusion: “Kirby did not create the artwork … until [Stan] Lee told him to.” Kirby’s heirs argued that there wasn’t a written agreement between Kirby and Marvel, meaning Marvel lacked the legal right and to control his work, but the court pointed out that a contract need not be in writing. When it looked at the actual relationship of the parties, it concluded that it was “undisputed” that “Marvel did control and supervise all work that it published between 1958 and 1963.”

The expense prong is in Marvel’s favor as well, since it was Marvel, not Kirby, who bore the risk of the comic books’ failure. The fact that Kirby was paid a flat sum for each page he submitted also favored Marvel, since the Second Circuit views a flat sum payment for work sufficient to meet the expense prong of the test. 15Playboy at 555. This made Marvel the presumptive author of Kirby’s creations unless Kirby’s heirs could rebut this presumption with evidence to the contrary.

Unfortunately for the heirs, the court found the evidence they presented thoroughly unconvincing. One piece, a 1972 agreement that was the first written contract between Kirby and Marvel, even contained a clause stating that Kirby agreed the works were made for hire.

The heirs pointed out, however, that the contract included a provision assigning “any and all right, title and interest [Kirby] may have or control” to Marvel. They argued that this provision made no sense if Marvel already owned the copyrights on Kirby’s creations as works made for hire.

The court disagreed, citing to several other cases where similar provisions were not sufficient to rebut the work made for hire presumption. In many situations, provisions like these operate like “quit-claim” deeds in real estate; that is, they aren’t warranties or admissions that a party has any rights to transfer.

In total, the facts and evidence presented convinced the court that Kirby’s creations were works made for hire. Marvel was the statutory author under the 1909 Act, making the termination notices filed by Kirby’s heirs invalid. This conclusion is, I think, on solid legal ground and consistent with previous cases.

References

References
↑1 Marvel is no stranger to this type of litigation — in 2003, it settled a similar suit with creator Joe Simon over rights to Captain America, and has faced challenges to various other characters, including an ongoing dispute with Gary Friedrich, creator of Ghost Rider; see also In re Marvel Entertainment Group, 254 BR 817 (D. Dela. 2000) which covered a dispute over various characters.
↑2 This litigation spawned an earlier decision, Marvel Worldwide v. Kirby, 756 F.Supp. 2d 461 (SDNY Nov. 22, 2010), where the court dismissed several of Kirby’s counterclaims.
↑3 For example, in Playboy v. Dumas, 53 F.3d 549 (2nd Cir. 1995), the works at issue were made between 1974 and 1984.
↑4 17 USC § 26 (1976) (repealed).
↑5 Playboy at 554.
↑6 Yardley v. Houghton Mifflin Co, 108 F.2d 28 (2d Cir 1939); Grant v. Kellogg Co, 58 F.Supp. 48 (SDNY 1944); Dielman v. White, 102 F. 892 (CCD Mass 1900).
↑7 Lin-Brook Builders Hardware v. Gertler, 352 F.2d 298, 300.
↑8 See  Brattleboro Publishing Co v. Winmill Publishing, 369 F.2d 565, 567-68 (2d Cir 1966); Murray v. Gelderman, 563 F.2d 773, 775 (5th Cir 1977).
↑9 Playboy at 554.
↑10 17 USC § 101.
↑11 Community for Creative Non-Violence v. Reid, 490 US 730 (1989).
↑12 Fred Fisher Music v. M. Witmark & Sons, 318 US 643. The court noted, “We are asked to recognize that authors are congenitally irresponsible, that frequently they are so sorely pressed for funds that they are willing to sell their work for a mere pittance, and therefore assignments made by them should not be upheld … We do not have such assured knowledge about authorship, and particularly about song writing, or the psychology of gifted writers and composers, as to justify us as judges in importing into Congressional legislation a denial to authors of the freedom to dispose of their property possessed by others. While authors may have habits making for intermittent want, they may have no less a spirit of independence which would resent treatment of them as wards under guardianship of the law.”
↑13 Marvel Characters v. Simon, 310 F.3d 280, 284 (2nd Cir. 2002).
↑14 17 USC § 203. Works that were already in existence when the 1976 Act was passed also received a termination right, 17 USC § 304(c).
↑15 Playboy at 555.

Is Turntable.fm Legal?

By , August 01, 2011.

The latest darling of the digerati is music service Turntable.fm. The site has grown to nearly 400,000 monthly active users (despite still being invite-only) and has raised $7.5 million from investors since it launched just two months ago. Along with countless rave reviews in the blogosphere, it has been covered by Billboard, labelled “the cool kids’ Pandora” by CNN, and called “amazing” by the New York Times.

And it is pretty cool, as I’ve discovered after playing around with it in the last couple weeks. It’s great for sharing music — in the real sense of the word, not in the false “file-sharing” sense — with friends and strangers, discovering new music, or simply as a “traditional” internet radio station that you listen to at work or home.

But is it legal? Several people have already asked the question. As with most questions involving copyright, the answer is not easy, as these answers are typically very fact-specific and depend on interpreting laws that lack bright-line distinctions. The answer isn’t made easier by the fact that the team behind Turntable.fm has remained tight-lipped for the time being.

For those unfamiliar with the site, Billboard’s article provides a good rundown of how it works.

Whether Turntable.fm is legal depends on whether it is licensed to exercise any of the exclusive rights of any copyrighted content.  Recorded music consists of two separate copyrights: a copyright for the underlying musical composition and a copyright for the particular sound recording of the song. Each of these copyrights consist of individual rights — notably, the right to reproduce, the right to distribute, and the right to publicly perform a work.

Public Performance

Streaming a song implicates the public performance right of a musical composition. 1US v. ASCAP, 485 F.Supp.2d 438, 442 (SDNY 2007). Performance Rights Organizations (PROs) — in the US, these include ASCAP, BMI, and SESAC — administer the licensing of public performance rights for nearly all musical compositions — the notable exception being a portion of the catalog of EMI, which recently began administering the public performance rights for “New Media” services itself.

In the past couple weeks, Turntable.fm has inked deals with both ASCAP and BMI. That leaves agreements with SESAC and EMI Publishing for the site to be fully covered, though presumably those are in the works or already on the way based on the site’s efforts to become licensed under the other PROs.

Performance rights for sound recordings are a bit trickier. When sound recordings were first given copyright protection, that protection did not include a right to public performance. However, in 1995, Congress added a narrow performance right to sound recordings via a digital audio transmission. 2Digital Performance Right in Sound Recordings Act, Pub. L. No. 104-39, 109 Stat. 336 (Eff. Feb. 1, 1996). It also included provisions for statutory licensing for certain webcasters, provisions that were amended by the DMCA in 1998.

Currently, noninteractive services are eligible for statutory licensing; interactive services — think on-demand streaming services like Spotify — must negotiate directly with copyright owners for public performance licenses. 317 USC § 114(d)(1) and (d)(2).

The Copyright Act defines an “interactive service” as:

one that enables a member of the public to receive a transmission of a program specially created for the recipient, or on request, a transmission of a particular sound recording, whether or not as part of a program, which is selected by or on behalf of the recipient. The ability of individuals to request that particular sound recordings be performed for reception by the public at large, or in the case of a subscription service, by all subscribers of the service, does not make a service interactive, if the programming on each channel of the service does not substantially consist of sound recordings that are performed within 1 hour of the request or at a time designated by either the transmitting entity or the individual making such request. If an entity offers both interactive and noninteractive services (either concurrently or at different times), the noninteractive component shall not be treated as part of an interactive service. 417 USC § 114(j)(7).

Only one case has been faced with the issue of distinguishing between interactive and noninteractive services. In Arista Records v. Launch Media, the Second Circuit considered whether the webcasting service LAUNCHcast was “interactive” within the meaning of the statute. LAUNCHcast allows users to create custom stations by selecting a genre, artist, or song; the service than generated a custom playlist for the user (I’ve never used LAUNCHcast, but from the description, the service sounds like it operates similarly to Pandora). The plaintiffs argued that this type of service is clearly interactive since the stations are “specially created for the recipient.”

The Second Circuit disagreed with this broad reading of the statute’s language. It turned to Congress’s intent for more clarification, and after a thorough examination of the legislative history, said:

In sum, from the SRA to the DMCA, Congress enacted copyright legislation directed at preventing the diminution in record sales through outright piracy of music or new digital media that offered listeners the ability to select music in such a way that they would forego purchasing records.

Armed with a narrower reading of the statute, the court ultimately concluded that LAUNCHcast was not an “interactive” service “because the webcasting service does not provide sufficient control to users such that playlists are so predictable that users will choose to listen to the webcast in lieu of purchasing music, thereby—in the aggregate—diminishing record sales.”

It appears that Turntable.fm is operating as a noninteractive service. The music on its system is provided through MediaNet, which also assists with licensing through SoundExchange, the organization in charge with administering statutory licensing of digital performance rights for sound recordings.

For a non-DJing listener, the service does appear to be noninteractive in the legal sense. Aside from selecting a room to listen in, a non-DJ listener has no control over the selection of music. The service doesn’t announce the name of upcoming tracks, nor does it allow tracks to be downloaded. It also limits the number of times tracks from the same artist or album can be played within a certain time frame.

But the service may be considered interactive for those users who are DJ-ing, since they do specify the selection of songs to be played. A service can have both noninteractive and interactive components; for Turntable.fm, that may mean that the statutory license covers the streams made to non-DJ listeners while the streams made to DJ-ing users need to be licensed directly with the sound recording copyright owners.

There is evidence that Turntable.fm is working on complying with the law in this area, either by negotiating such a license or making sure the service is noninteractive under the statute for DJ-ing users. For example, when a user is the only one in a room DJ-ing, the song is only streamed to room visitors while the DJ can only hear a preview. This prohibits someone from using the service as a purely on-demand streaming service like Spotify.

Is that enough? Unfortunately for Turntable.fm, there is no clear answer to that question. The line that divides interactive from noninteractive services is unclear, and I think arguments could be made on either side. For example, this passage from a DMCA conference report points out certain features that would separate an interactive service from a noninteractive one:

[A] service would be interactive if it allowed a small number of individuals to request that sound recordings be performed in a program specially created for that group and not available to any individuals outside of that group. In contrast, a service would not be interactive if it merely transmitted to a large number of recipients of the service’s transmissions a program consisting of sound recordings requested by a small number of those listeners. 5H.R. Conf. Rep. No. 105-797, at 87-88 (1998).

Turntable.fm seems to fit more in the latter category than the former — although it does allow users to create “private” rooms. A “private” room might be considered specially created for a small group of people and not available to individuals outside that group — or it might not, because setting a room as “private” doesn’t bar anyone from joining the room, it just prevents that room from being included in the list of rooms that users see on the site; anyone can join the room if they know the link to it.

Bottom line, the interactive/noninteractive distinction is one that can only be fully determined in court. In 2000, the Digital Media Association (DiMA) petitioned the Copyright Office to clarify this distinction via regulation, but the Copyright Office declined. In its response to the petition, the Office said, “Such a determination must be made on a case-by-case basis after the development of a full evidentiary record in accordance with the standards and precepts already set forth in the statute,” and concluded, “In light of the rapidly changing business models emerging in today’s digital marketplace, no rule can accurately draw the line demarcating the limits between an interactive service and a noninteractive service.”

Reproduction and Distribution

Turntable.fm’s catalog of over 11 million songs is provided through MediaNet, and any reproduction or distribution of that content is covered by its agreement with the service. As per that agreement, Turntable.fm doesn’t allow users to download any of the songs — and in fact appears to be taking affirmative steps to ensure that continues to be true.

The site also allows users to upload songs to the service. The DMCA shields service providers from any infringement that arises by reason of storage at the direction of a user. 617 USC § 512(c). If a user uploads someone else’s song without permission, Turntable.fm must remove it if it has knowledge that it is infringing or receives a takedown notice from the copyright owner.

This feature doesn’t expose Turntable.fm to much risk of liability. Any song that is uploaded isn’t reproduced or distributed further, since the site doesn’t allow downloading. And any public performance of the composition or recording is likely already covered by the blanket licenses the site has in place.

Bottom Line

A few weeks ago, Turntable.fm blocked use of its site from non-US users. Currently, the licenses it does have in place probably extend only to the US. These licenses almost fully cover the site’s use of copyrighted content — Turntable.fm may need to negotiate directly with sound recording owners for public performances received by DJing users depending on whether it is considered an interactive webcaster for these users.

What’s encouraging is that the site owners appear to be working on building a legally-compliant music service from the start. Often, copyright critics try to build a false wedge between content and technology companies. But Turntable.fm shows that it’s possible for a start-up to build an exciting and innovative service that respects copyright. Such services are exciting because they represent sustainable business models that benefit everyone — creators, entrepreneurs, and consumers.

References

References
↑1 US v. ASCAP, 485 F.Supp.2d 438, 442 (SDNY 2007).
↑2 Digital Performance Right in Sound Recordings Act, Pub. L. No. 104-39, 109 Stat. 336 (Eff. Feb. 1, 1996).
↑3 17 USC § 114(d)(1) and (d)(2).
↑4 17 USC § 114(j)(7).
↑5 H.R. Conf. Rep. No. 105-797, at 87-88 (1998).
↑6 17 USC § 512(c).

Friday’s Endnotes – 07/29/11

By , July 29, 2011.

Son of NewzBin: Another victory for the film-makers — IPKat takes a look at one of the many British copyright decisions to come through this week. In this one, the court ruled in favor of the Motion Picture Association’s action to require a British ISP to block access to a website previously deemed infringing.

Drop It Like It’s Hot[file] — On July 8th, the direct infringement claim against cyberlocker Hotfile was dismissed, leaving only the secondary infringement claims brought by the five major motion picture studios. Christopher Harrison wonders if the court got it right, noting that once a file is uploaded, Hotfile creates five additional copies of the file; this seems to Harrison to be the type of volitional conduct that previous cases weren’t talking about when they found no direct infringement.

Of libraries and writers (and rights) — John Degen notes, with some irony, that when libraries are in trouble, it is authors that come to their aid, while the free-culture movement sits in silence. Good read.

Rogue Site Goes Good — China’s top search engine Baidu, long a concern of rightsholders for its notorious infringement, has recently announced a licensing deal with several major music labels. Steve Tepp calls this a “dramatic step in the right direction.”

Hello Mr. Brightside — Eric Beall gives five reasons to be optimistic about the music industry. “After almost a decade of what has seemed like irreversible decline in the music industry, with each year bringing declining sales, more consolidation, less creative growth, and a growing irrelevance in pop culture, we might finally be turning things around.”

Un-cover-ing — Law Law Land never fails to deliver entertaining and often humorous articles on mostly dry legal topics. Here, Harrison J. Reynolds looks at cover songs of cover songs. That is, sometimes a cover song is so distinctive or different from the original version that it becomes almost like a different song. Are there any legal issues that arise when another artist covers the cover song?

Pittsburgh Transforms into Gotham City — The Steel City is home to the third installment of the new Batman trilogy. The largest film production that Pittsburgh has seen brings with it thousands of jobs and big boosts in revenues for local businesses.

Disruptors disrupted: NLA victory brings common sense back to copyright — Dominic Young cuts through the hype associated with a UK Court of Appeals ruling that a news crawler and its PR clients require a license from newspapers. It is not, as some have characterized the decision, the end of the web as we know it.

The Oddball US Privacy Law That’s Keeping Netflix Away from Facebook — A law that puts limits on publishing a person’s video rental history is making Netflix hesitant to open up its Facebook application in the US. Social networking has really turned the concept of privacy on its head.

Labor is a cost, not a profit — Though geared toward prop-makers, Eric Hart’s (my brother) post is great advice for anyone freelancing in creative fields.

ZapTunes wants deals to sell independent artists’ music — A warning to independent artists. This company was previously in the news for selling what amounted to an mp3 search engine for $25 a month, with the added bonus that some users reported credit card charges after they had cancelled. Not a bad idea to steer clear of this one.

Five Minutes of Fame — Faza at the Cynical Musician looks at fame and the internet. “Musicians have tended to monetise their fame directly: fame meant fans and fans meant sales. Fame can thus be viewed as mind-share, in the marketing sense. If this fame-sales connection is broken – something we seem to be heading towards – then there seems to be little benefit to be had from your short-term fame while it lasts. That is why I say that a non-paying fan is no better than a non-fan. It is best understood when we compare Rebecca Black and Justin Beiber – both are world-famous, but only one of them has a career.”

Lay Judgments of Judicial Decision-Making — The results of a study confirm what many perhaps find obvious. Non-lawyers base their decision of how “good” a judicial opinion is primarily on the result; if they agree with the outcome of the case, they accept the reasoning the court used to get there.

Capitol v. Thomas-Rasset Verdict Unconstitutional

By , July 25, 2011.

On Friday, a federal judge slashed the verdict awarded  by a jury against illegal downloader Jammie Thomas-Rasset last November.

This decision brings a mix of good news and bad news for copyright owners. It also represents a somewhat striking departure from judicial deference to Congress’s authority to set damages in civil cases by statute.

To put it another way, this decision and last year’s decision against Joel Tenenbaum represent the first time in history that a US court has found a substantive due process limit on damages set by statute. Regardless of how much one agrees with the result of the courts’ decisions, one should appreciate the need for caution when those courts depart dramatically from historical practice and enter new constitutional territory.

Judge Davis, sitting in the District Court of Minnesota, called the $1.5 million verdict for stealing 24 songs “appalling” and reduced it to $54,000 on constitutional grounds. This is similar to last July’s ruling in Sony v. Tenenbaum, where Judge Gertner, in the District Court of Massachusetts, reduced a $675,000 verdict against the college student for downloading and distributing 31 songs on constitutional grounds (though Judge Gertner reached her conclusion using a different standard than Judge Davis used, as explained below). Both parties in Tenenbaum have appealed that decision; that appeal is currently pending in the First Circuit.

The Tale of Thomas-Rasset

This is the second time Judge Davis has reduced a jury award against Thomas-Rasset. The history of Capitol v. Thomas-Rasset 1Although the plaintiffs include six record labels, I’ll be referring to the plaintiff as Capitol to keep things simple. is a bit involved, so it’s worth reviewing it. 2For more background, I highly recommend Ben Sheffner’s posts at Copyrights and Campaigns on the Thomas-Rasset and Tenenbaum lawsuits.

On October 4, 2007, a jury award damages of $222,000, or $9,250 per song. The verdict was vacated after the court held it had erred in one of the jury instructions, and a new trial was set. On June 18, 2009, the jury in the second trial returned an award of $1,920,000 against Thomas-Rasset, $80,000 per song. The court reduced that award under the common-law doctrine of remittitur. Capitol rejected the remitted award and a third trial, solely to determine the amount of damages, was set. 3Under the Seventh Amendment, a plaintiff has the right to reject a remitted award, see Hetzel v. Prince William County, 523 US 208, 211 (1998). This time, the jury awarded $1,500,000 against Thomas-Rasset, or $62,500 a song.

After this judgment, both parties moved to amend the verdict. It’s on this motion that Judge Davis reduced the verdict on constitutional grounds.

The court’s exact holding was that in copyright cases “involving a first-time willful, consumer infringer who committed illegal song file-sharing for her own personal use”, the maximum award that due process allows is three times the statutory minimum, or $2,250 per song.

Before looking at the decision in more detail, I think it’s important to note three things.

First, since this decision come from a district court, it is not binding precedent. Other courts may find Judge Davis’s reasoning persuasive if they are ever faced with a similar case, but no court is required to follow his holding.

Second, whether one agrees or disagrees with the court’s holding, it should be pointed out that this is a very limited holding. It would seem that it doesn’t apply if a defendant was found liable for distributing a copyrighted work rather than just reproducing it. For various reasons, during their end-user litigation campaign, the record labels relied largely on the theory that simply making a copyrighted work available (by using a program like Kazaa that, by default, shares a user’s music files with other users) constitutes distribution. The Minnesota District Court ultimately rejected this theory, so Thomas-Rasset was only found liable for reproduction. Many other courts, however, have adopted the “making available” approach. 4See Peter S. Menell, In Search of Copyright’s Lost Ark: Interpreting the Right to Distribute in the Internet Age (October 08, 2010).

Joel Tenenbaum, by the way, was found liable for distribution after admitting to it at trial.

Finally, I don’t want to minimize concerns about the size of statutory damage awards in copyright cases, especially cases like these. It’s certainly an important policy issue. But the fact remains that this verdict was rendered by a jury and falls within the range set by Congress through law. The question here is not whether one personally thinks the award is too high, but rather whether something in the Constitution limits an award rendered in this manner.

Setting the Standard

The decision in full:

[scribd id=60635512 key=key-1rvopby119r8d3nonrmi mode=list]

Most people would (understandably) assume that a decision like this was made under the Eighth Amendment of the Constitution, which states that excessive fines shall not be imposed. But that’s not the case. A “fine” is a payment “directly imposed by, and payable to, the government.” 5Browning-Ferris Industries of Vt. v. Kelco Disposal, 492 US 257, 268 (1989). A jury award is not a fine since it is imposed by a private plaintiff and payable to that plaintiff.

The basis for this decision is instead the Fifth Amendment, which says “No person shall … be deprived of life, liberty, or property, without due process of law.” Due process limits “grossly excessive” damages awards based on notions of “fundamental fairness.” 6TXO Production Corp. v. Alliance Resources Corp., 509 US 443, 454-55 (1993). But note that not everyone is convinced that due process does any such thing. Justice Scalia, in particular, has been consistently skeptical of the Supreme Court’s adoption of a “substantive due process” approach in its punitive damages jurisprudence; see BMW v. Gore, 517 US 559, 598-607 (1996) (Scalia, J., dissenting in judgment); TXO v. Alliance Resources Corp, 509 US 443, 470 (1993) (Scalia, J., concurring in judgment); Pacific Mut. Life Ins. Co. v. Haslip, 499 US 1, 25-28 (Scalia, J., concurring in judgment).

At the heart of this case and the pending appeal in Sony v. Tenenbaum is which standard should be used to determine the maximum award allowed by due process. In Tenenbaum, the court analyzed the statutory damages award using the standard developed to address excessive awards of punitive damages, specifically BMW of North America v. Gore, 7517 US 559 (1996). Capitol and the government argued, however, that such awards should be analyzed under the far more deferential standard set down in St. Louis, I.M. & S. Ry. Co. v.Williams, which addresses due process limits on damage awards that have been set by statute. 8251 U.S. 63, 67 (1919).

The court sided with Capitol and the government. Punitive damages awards present due process concerns that aren’t present when the amount of damages are set by statute; for example, defendants have notice of their potential liability under statutory damages, while punitive damages theoretically have no upper cap. Leslie Burns notes that this is good news for copyright owners; I imagine it’s not quite as welcome news for Joel Tenenbaum.

Things start to get weird from here, however. Judge Davis begins by stating that Williams “highlighted three factors when analyzing whether the statutory damages award complied with the due process clause: ‘the interests of the public, the numberless opportunities for committing the offense, and the need for securing uniform adherence to established passenger rates.'” He then considers these three factors in the context of this case. However, this consideration seems to be an analysis of the constitutionality of the statute itself, rather than the amount of damages awarded in a particular case. That is, if Judge Davis found these factors weren’t present here, would that mean due process never allows statutory damages in copyright infringement cases?

Nevertheless, the court did find these factors supported an award of statutory damages, and his analysis is very favorable to copyright owners. For the first factor, the court remarked that “There is a significant public interest in vindicating copyright. In fact, ‘the primary object in conferring the monopoly lie[s] in the general benefits derived by the public from the labors of authors.'” There are numberless opportunities for infringing copyright through P2P networks since it is “easy, costless, and quick.” Finally, the need for deterrence is high. Said Judge Davis, “Online infringement is easy to complete; it causes real damage to the copyright holders, and, thereby injures the public by leading to a decrease in the incentive to create artistic works; and it is widespread.”

“Obviously” — You keep using that word…

The court did not think, however, that an award of $1,500,000 for stealing 24 songs was appropriate under the due process clause. It cites only two reasons for its conclusion: (1) Thomas-Rasset is an individual and not a business and infringed for personal use rather than commercial gain; and (2) the statutory damages award is too far away from the actual damages suffered by Capitol. The court may be correct as a matter of policy, but this seems rather flimsy reasoning for saying the damages award is prohibited by the Constitution.

I’m not alone in thinking the court was on shaky ground arriving at this conclusion. Attorney Christopher Harrison notes:

Judge Davis’ entire constitutional due process analysis appears to boil down to, “I personally think this is too high an award.”  There is no further legal support to his position.  In fact, later in the opinion he states “The Court accords deference to the jury’s verdict. Yet an award of $1.5 million for stealing and distributing 24 songs for personal use is appalling. Such an award against an individual consumer, of limited means, acting with no attempt to profit, is so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.”

But the jury’s verdict is quite clearly not obviously unreasonable.  As noted above, the three juries in this case awarded damages of $9,250, $80,000, and $62,500 per song.  The jury in Tenenbaum awarded $22,500 per song.  While that range is pretty wide, the juries have awarded between 4 and 35 times as much as both Judge Davis and Judge Gertner find “obviously unreasonable.”

Indeed, I think you can present more legal support that the court misapplied the Williams standard rather than applying it correctly. For starters, reducing an award of statutory damages is extremely rare — while courts since Williams have stated that due process places a limit on statutory damages, they almost always uphold verdicts. I’ve only been able to come across one previous case where an award hasn’t been upheld.

In Southwestern Telegraph & Telephone Co. v. Danaher, the Supreme Court struck down a damages award against a telephone company on due process grounds in part because it found the company had been acting reasonably. 9238 US 482 (1915). The Court noted, “There was no intentional wrongdoing; no departure from any prescribed or known standard of action, and no reckless conduct.” None of those hold true in this case.

The District Court of Minnesota has broken new ground and entered terra incognita in due process jurisprudence with this decision. It’s difficult to see how a jury award for a willful violation of a law, within the range of damages that Congress has provided by statute, is so “obviously unreasonable” to be unconstitutional.

What happens now? Either side can appeal this decision to the Eighth Circuit Court. This would put appeals in two separate circuit courts on the issue of due process limitations on statutory damages in file-sharing cases. No word yet on whether this will happen.

References

References
↑1 Although the plaintiffs include six record labels, I’ll be referring to the plaintiff as Capitol to keep things simple.
↑2 For more background, I highly recommend Ben Sheffner’s posts at Copyrights and Campaigns on the Thomas-Rasset and Tenenbaum lawsuits.
↑3 Under the Seventh Amendment, a plaintiff has the right to reject a remitted award, see Hetzel v. Prince William County, 523 US 208, 211 (1998).
↑4 See Peter S. Menell, In Search of Copyright’s Lost Ark: Interpreting the Right to Distribute in the Internet Age (October 08, 2010).
↑5 Browning-Ferris Industries of Vt. v. Kelco Disposal, 492 US 257, 268 (1989).
↑6 TXO Production Corp. v. Alliance Resources Corp., 509 US 443, 454-55 (1993). But note that not everyone is convinced that due process does any such thing. Justice Scalia, in particular, has been consistently skeptical of the Supreme Court’s adoption of a “substantive due process” approach in its punitive damages jurisprudence; see BMW v. Gore, 517 US 559, 598-607 (1996) (Scalia, J., dissenting in judgment); TXO v. Alliance Resources Corp, 509 US 443, 470 (1993) (Scalia, J., concurring in judgment); Pacific Mut. Life Ins. Co. v. Haslip, 499 US 1, 25-28 (Scalia, J., concurring in judgment).
↑7 517 US 559 (1996).
↑8 251 U.S. 63, 67 (1919).
↑9 238 US 482 (1915).

Friday’s Endnotes – 07/21/11

By , July 22, 2011.

An Oral History of Friday Night Lights (via Alex Epstein) — One of the best TV shows no one has seen wrapped up its fifth and final season last week. This oral history recounts the long odds the show faced and, despite this, how everyone remained true to its creative vision (minus the second season’s murder subplot). Great reading, as you hear not only from producers and actors, but also writers, camera operators, and others involved.

PROTECT IP’s Groundhog Day — The RIAA notes how critics of PROTECT IP frequently recycle the same arguments they’ve used before in other situations. It points out that the dire predictions made years ago didn’t come true, but that hasn’t stopped the advancement of the same predictions for this legislation. To paraphrase Mr. Masnick, how many times will IP critics claim the sky is falling before people stop believing them?

US Copyright Alert System: What About Cyberlockers? — James Gannon asks whether the recently announced agreement between ISPs and copyright owners can be extended to alleviate the substantial infringement coming from cyberlocker sites and offers a couple recommendations.

More Bunk from the CCIA: What do Derek Jeter, Tom Adams and Ari Emanuel have in common? — They all work in a “fair use” industry, at least according to the Computer & Communications Industry Association. Chris Castle picks apart the joke of a study released by the CCIA, which is more interested in creating a false wedge between content creators and technology companies than providing actual research.

Artistic originals: we invest more than we think … — Art and Artifice looks at the UK’s Intellectual Property Office’s Economics, Research and Evidence team recently published report on estimates of investment in creative works in the UK. The report estimates that approximately £4.3 billion ($7.0 billion) was invested in creating new artistic works in the UK in 2008.

Independent Filmmaker Shares His Take on the Impact of Content Theft — Jason Stall, whose recent documentary Blood Into Wine follows Maynard James Keenan’s sojourn into winemaking, talks about the effect piracy has had on him. “If you can’t raise the money you did before, quality is going to go down, quantity is going to go down and you’ve crushed the creative process.”

PayPal works with police and industry to tackle copyright infringing websites — The IFPI announced that the popular online payment service has entered into an agreement that provides for stronger action against infringers. “Carl Scheible, PayPal UK’s managing director, commented, ‘Today’s announcement shows that PayPal is very serious about fighting music piracy. We’ve always banned PayPal’s use for the sale of content that infringes copyright, and the new system will make life even harder for illegal operators. Our partnership with the music industry helps rights holders make money from their own content while stopping the pirates in their tracks.'”

Jam Tomorrow — Another excellent piece from the Cynical Musician. For new musicians whose goal is to eventually get paid for their work (and this applies to other creative professionals), the focus should be on, well, getting paid for their work. “Exposure” and giving things away are a means, not the end.

Why TV Companies Couldn’t Care Less About Original Online Video — An informative post from Ashkan Karbasfrooshan, founder and CEO of WatchMojo, about investment in premium web-only content by traditional media companies. Karbasfrooshan’s conclusion is that while such content continues to grow in popularity, and provides opportunities for start-ups to make money from lean, efficiently produced content, it doesn’t yet make sense for traditional media companies to pour more money into creating their own new media content.

Sierra Leone Celebrates New Copyright Act — The African nation’s parliament recently passed a new Act to replace the 1965 Act. Upon passage, “throngs of celebrants used loud musical sets placed on top of vehicles, plus traditional musical instruments including the popular ‘Bubu’ instruments, to party all day long along major streets in Freetown.” Also from the Afro-IP blog this week, no IP changes yet for the newly-independent nation of South Sudan.

Jewel cases! Get your empty jewel cases here! — I’ve previously heard of this strategy being touted amongst certain communities as a way around the law when selling works that might be considered infringing. Basically, you say you’re “giving away” the CD or DVD and selling the packaging. The 1709 Blog reports that a man in Florida who was using such a strategy is now facing felony charges.

Jail? For downloading too many articles??? — Copyright Librarian offers an evenhanded, objective look at the Aaron Swartz story, straightening out many of the misconceptions.

Alexander v. Murdoch — TV’s Modern Family (big fan) survives a claim of copyright infringement claim from a scriptwriter who believed a treatment he wrote was copied to create the popular show. The court gives a substantial discussion about why there is no infringement, at times hewing close to snark:

Plaintiff also claims that both works have characters with “funny Jewish names,” specifically mentioning Plaintiff’s Ben Figiwitz and Modern Family‘s “Pepper Saltzman” and “Shell Turtlestein.” Magistrate Judge Francis noted that “[i]t is not obvious why the name Figiwitz is funny, whereas both of the names featured in Modern Family are plainly designed to be humerous.” Specifically, “Pepper Saltzman” is clearly a play on salt and pepper, and “Shell Turtlestein,” the name of Manny’s pet turtle clearly refers to the poet Shel Silverstein, and not a reference to the turtle’s religion (assuming that the turtle is, in fact, Jewish).

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