The U.S. Department of Commerce’s Internet
Policy Task Force (the Task Force), which
is led by both the U.S. Patent and Trademark Office (USPTO) and the National
Telecommunications and Information Administration (NTIA), published on January
28 a White
Paper on Remixes, First Sale, and Statutory Damages which addresses three
issues:
1)
the legal framework for the creation of remixes;
2)
the
relevance and scope of the first sale doctrine in the digital environment; and
3)
the application of statutory damages in the
context of individual file-sharers and secondary liability for large-scale
online infringement.
The Task Force had published a Green
Paper, “Copyright
Policy, Creativity, and Innovation in the Digital Economy” on July 31,
2013, which had identified these three issues warranting further review by the
Task Force.
The Task Force then published a Notice
in the Federal Register seeking comment on these issues. It conducted a public
meeting in December 2013 and also held roundtables around the U.S., before reviewing
comments
from stakeholders as diverse as rights holder organizations, Internet-based
companies, public interest groups, libraries, academics, and individual authors
and artists.
Remixes
Remixes use existing works, some
of them still protected by copyright, to create new works, which may be compilations or derivative
works under the Copyright Act, or collective works. As noted by the Task Force, user generated
content (“UGC”) “has become a hallmark of
the Internet” (p.6).
Some of the remixes, such as fan
fiction and fan videos, are created by non-professionals, while others, such as
music mashups, are created by professionals and may even be sold. Several
stakeholders noted that “the lines
between amateur and professional, and between noncommercial and commercial, are
often blurred” (p. 7). Others noted that “noncommercial activities can cause harm to the market for the original
work or for licensed derivative works” (p.8).
Some remixes are fair use, some are
not, and determining what is fair use or not is not easily determinable, even
by attorneys or by courts, as noted by some stakeholders (p.10). The Copyright
Office maintains an online fair use
index to help determine whether a particular use may be fair or not, but this
tool alone does not provide an absolute determination of whether a particular
use is fair or not.
The Task Force did not believe that
a compulsory license, such as the one provided by section 115
of the Copyright Act for phono records, would be advisable. At the time
this compulsory license was enacted, one company had the monopoly on the piano
roll market, and the Task Force has not seen evidence that a similar monopoly
exists today for remixes or their licensing.
Also, such compulsory licenses
would allow the creation of derivative works, whereas statutory licenses now only
permit reproducing, distributing, and public performance of the licensed work,
without alteration (p. 26). While the Task Force acknowledged that remixes are “valuable contributions to society… the
record has not established a need to amend existing law to create a specific
exception or a compulsory license for remix uses” (p. 4).
Instead, the Task Force recommends
three goals to be pursued so that remixers would understand when a use is fair or
not, and to understand how to obtain licenses.
These three
goals are:
1.
developing negotiated guidelines which would provide
greater clarity as to the application of fair use to remixes;
2.
expanding the availability of a wider variety of
voluntary licensing options; and
3.
increasing educational efforts aimed at
broadening an understanding of fair use.
The guidelines could be developed
independently or with the collaboration of the government (p. 28) and should be
written in language easily understandable by the general public (p.29). The
White Paper notes that such guidelines already exist, such as the Principles for User Generated Content
Services which aims at “foster[ing]
an online environment that promotes the promises and benefits of UGC Services
and protects the rights of Copyright Owners.”
As licensing would remain voluntary,
authors and rights holders would have the option to refuse granting a license, “especially when the prospective licensee is
seeking permission for a use that the author or rights holder considers
offensive” (p. 30).
A stakeholder gave the example
of the Beatles Hey Jude song used to
create an Anti-Semitic work (see note 44 of the White Paper). But such hateful
use would probably be fair use, and protected by the First Amendment. Only
granting authors a moral right would allow them to bar every use they find
offensive. By the way, what is “offensive”?
The Beatles example would be considered offensive by many, if not all, but
what about use of a protected work to comment on issues where opinions diverge more,
such as political opinions?
First Sale Doctrine
The Task Force noted that works distributed
online are often licensed, not sold, and “this
could make the resale market obsolete” (p. 35). Some stakeholders noted
that the contractual terms of such licenses are often “opaque” (p.39).
Libraries expressed concerns
that their use of digital works may be limited, including eBook library loans
(p. 47). Indeed, libraries may only lend books thanks to the first sale
doctrine, but the Task Force believes that “early
government intervention into the eBook market could skew the development of
innovative and mutually beneficial arrangements” between eBook publishers
and libraries. However, this may change if libraries are not able to “appropriately serve their patrons due to
overly restrictive terms imposed by publishers” (p.4).
In order to preserve the first
sale doctrine in the online environment, the Task Force believes it is not
advisable to extend the first sale doctrine to digital transmissions of copyrighted
works, because of the risks that would cause to copyright owners’ primary
markets.
The Task Force noted that
digital works are offered at lower prices than the hard copies of the works and
thus deliver the benefit offered by the first sale doctrine to consumers who
may purchase used books and used copies of protected works at a lower price
(p.58).
While consumers are not allowed
to resell their digital copies, “[i]t is difficult… to determined the value of
this lost benefit” as the Task Force does not have “sufficient data to conduct an authoritative cost-benefit analysis of the trade-offs
between the consumer benefits from the first sale doctrine and from licensed
online services”(p. 59).
So U.S. law is not (yet) ready
to authorize the resale of digital goods.
Statutory Damages
Statutory damages have been
applied against individuals sharing files online and against online services found
to be secondarily liable for such infringements. Remix artists often refrain
from using a protected work, even they believe their use is fair, as fair use can
not be accurately predicted and “the
threat of high statutory damages can stifle lawful activity” (p.33). Some
stakeholders also argued that statutory damages have a chilling effect on innovation
and investment (p.80), an assessment disputed by some right holder groups (p.
81).
Statutory damages have also allowed
the development of a noxious “business model” of massive copyright infringement
suits (aka copyright trolls), which abuse the litigation process by filing hundreds
of boilerplate copyright infringement suits, using the subpoena power of the
courts to find the identity of Internet users. These suits are, however, rarely
litigated, but instead are settled after intimidating correspondence (p. 74).
The Task Force recommends three amendments
to the Copyright Act so that the needs of copyright owners, users, and
intermediaries may be better balanced:
First, the Task Force recommended
that Congress add a new paragraph in Section 504 of the
Copyright Act to provide a list of factors for courts and juries to
consider when determining the amount of a statutory damages award. It proposed the
insertion of this new clause in subsection Section 504(c): (p.87)
FACTORS
TO CONSIDER -- In making any award under this subsection, a court shall consider
the following nonexclusive factors in determining the appropriate amount of the
award:
(1) The plaintiff’s revenues lost and the
difficulty of proving damages.
(2)
The defendant’s expenses saved, profits reaped, and other benefits from the infringement.
(3) The need to deter future infringements.
(4) The defendant’s financial situation.
(5) The value or nature of the work
infringed.
(6)
The circumstances, duration, and scope of the infringement, including whether
it was commercial in nature.
(7)
In cases involving infringement of multiple works, whether the total sum of
damages, taking into account the number of works infringed and number of awards
made, is commensurate with the overall harm caused by the infringement.
(8)
The defendant’s state of mind, including whether the defendant was a willful or
innocent infringer.
(9)
In the case of willful infringement, whether it is appropriate to punish the
defendant and if so, the amount of damages that would result in an appropriate
punishment.
The Task Force explained that these
factors “should be weighted holistically”
(p. 88).
Secondly, the Task Force recommended
amending Section
401(d) and 402
(d) of the Copyright Act to expand eligibility for the lower “innocent
infringement” statutory damages awards (p. 97).
Thirdly, the Task Force
recommended giving courts discretion to assess statutory damages other than on
a strict per-work basis in cases of non-willful secondary liability for large
scale online services (p. 97).
Small Claims Tribunal
The Task Force is also in favor
of establishing a small claims tribunal, as it believes this “could help diminish the risk of
disproportionate levels of damages against individual file-sharers” (p.5).
This has been proposed by the Copyright Office itself.
The tribunal would be
centralized, in a single location, and would provide for a cap on awards of
both statutory and actual damages. There would be limited discovery and
counterclaims, and all relevant defenses could be asserted, including fair use.
Also, it would not be mandatory to be represented by an attorney, and the
tribunal could award costs and fees against frivolous litigants (p. 99). This
is a very interesting proposal and I hope it will be implemented soon.
