"Absurd" Limewire Damages Rejected

Following on Ben’s post earlier about the closure of Limewire and its effect on illegal filesharing, a note about the damages ruling recently issued by the judge in the Limewire case, judge Kimba Wood of Manhattan federal district court. Judge Wood rejected the plaintiff record companies’ demanded damages, as reported here. The plaintiffs’ damages request would have reached as high as $75 trillion under their theory of statutory recovery for copyright infringement. Judge Wood noted that this amount is "absurd" and is “more money than the entire music recording industry has made since Edison's invention of the phonograph in 1877.” Rather than assess damages for each instance of infringement, as requested by the plaintiffs, she limited damages to one damage award per infringed work.

While her reasoning makes practical sense in consideration of the fact that the astronomical damages sought by the plaintiffs could not possibly be satisfied by defendant payouts, it nonetheless creates a situation where plaintiffs winning infringement claims on a “smaller” level are able to maximize their damages with damage awards for each instance of infringement, but plaintiffs whose works have been infringed countless times by a defendant are limited in their recovery to prevent “absurd” damages. Is such a result fair or does it dilute the deterrent factor intended by the availability of statutory damages?

Google Book Settlement hits brick wall

On Tuesday, Circuit Judge Chin rejected the Google Book Settlement. Is this the end of the road for the Settlement or merely another inconclusive step in proceedings that have been ongoing for six years (see potted history at the end of this post if you would like a refresher)? The parties can appeal within 30 days but as the Scrivener’s Error blog explains, this is unlikely to succeed. If the judge’s opinion stands, how much room for manoeuvre does it give the parties to redraft the Settlement?

The opinion states:

‘While the digitisation of books and the creation of a universal digital library would benefit many, the ASA [Amended Settlement Agreement] would simply go too far. It would permit this class action – which was brought against defendant Google Inc. (“Google”) to challenge its scanning of books and displays of “snippets” for online searching – to implement a forward-looking business arrangement that would grant Google significant rights to exploit entire books, without permission of the copyright owners. Indeed, the ASA would give Google a significant advantage over competitors, rewarding it for engaging in wholesale copying of copyrighted works without permission, while releasing claims well beyond those presented in the case.…

‘In the end, I conclude that the ASA is not fair, adequate, and reasonable. As the United States and other objectors have noted, many of the concerns raised in the objections would be ameliorated if the ASA were converted from an “opt-out” settlement to an “opt-in” settlement…. I urge the parties to consider revising the ASA accordingly.’

On the face of it, this language does not amount to insisting on right owners ‘opting in’ but when the opinion is taken as a whole, this does seem to be almost mandatory. The most significant reasons for which the judge finds the Settlement unacceptable hinge on its ‘opt-out’ nature:

1. It is for Congress to create any mechanism for the exploitation of unclaimed books (including orphan works).
2. The original litigation was about display of snippets in Google Book Search – it is an unacceptable use of the class-action process that the Settlement releases claims in respect of the extensive further uses that are permitted under the Settlement.
3. ‘It is incongruous with the purpose of the copyright laws to place the onus on copyright owners to come forward to protect their rights when Google copied their works without first seeking their permission.’
4. The Settlement would give Google ‘a de facto monopoly over unclaimed works’.

There seem to be only two ways to fix these problems:

1. Make the Settlement ‘opt-in’, in which case it would not be a class-action settlement but the settlement of claims by a specific list of people. They, and only they, would agree to waive their claims against Google and to offer Google licences to exploit their works.
2. Keep the suit as a class action and draft a settlement that only covers past uses of works in Google Book Search. It would not grant future licences, not even ongoing licences for exploitation in Google Book Search.

Potted History of the Google Book Settlement

From 2004 certain libraries have allowed Google to scan their stocks. Google makes the public domain books available in full on Book Search. For in-copyright books a search returns ‘snippets’. Google say they do not need permission from the copyright owners for this: it is covered by fair use.

In 2005 Google was sued for copyright infringement by the Authors Guild (in a class action) and by five American publishers, subsequently deciding to settle, drafting the Google Book Settlement. In 2006 the La Martinière publishing group sued in France. In December 2009 the French court decided that Google Book Search did infringe French copyright. In April 2010 photographers, illustrators, graphic artists and photo libraries launched a suit.

The Settlement Agreement is far wider in scope than the original litigation over snippets. Google acquires US rights to sell ebooks, print-on-demand copies, online access; to include in institutional and consumer subscriptions; to make available free on library computers; and to return 20% of book in internet search. For in-print books, Google needs the express authorization of rightsholders but for out-of-print books this grant of rights is assumed and rightsholders must opt out.

Since it is the settlement to a class action, the Settlement can only be approved by the court after a hearing and on finding that it is fair, reasonable and adequate. The court gave the original Settlement preliminary approval in 2008, fixing the hearing for 2009. An avalanche of objections to the settlement were submitted to the court and the US government rejected it. The court therefore allowed the parties to submit an amended settlement.

The most significant change in the Amended Settlement was that it basically only included books published in the US, UK, Canada and Australia, instead of the whole world. The Settlement had received strong opposition from Continental Europe, especially France and Germany, but barely a murmur from the UK. It is obvious that the revised geographical scope of the Amended Settlement was designed to cut out opposition from the main critics. The US government again rejected the Amended Settlement but expressed willingness to continue to work with the parties. At the hearing on 18 February 2010, the judge said he was not going to rule. His judgment was reserved – until 22 March 2011.

During these protracted proceedings, Google has continued to scan books at an ever-increasing speed. In October 2008, when the Settlement was first drafted, Google had scanned 7 million books. A year later 10 million books had been scanned. Now the figure has passed 15 million.

"Do bad things happen when works fall into the public domain?"

Does this book behave
the same way ...

A rapt audience of nearly forty people (including late arrivals and no-shows) thoroughly enjoyed Professor Paul J. Heald's presentation yesterday afternoon, kindly hosted by Olswang LLP in its congenial panoramic Room 20, on "Do bad things happen when works fall into the public domain?"  Now the readers of this weblog can get a flavour of the event, thanks to a terrific exercise in note-taking by Dr Stephen Moffitt who records as follows:

"Why should we care about the public domain? Since the passing of the Copyright Term Extension Act (CTEA or Sonny Bono Act) in the US in 1998, there have been no copyright works passing into the public domain. Both England and Japan had contemplated a similar sort of extension but chose not to.

Clearly there is a concern about works falling into the public domain. Those who push for extensions to copyright do so on three main grounds.

1. There will be an underusage of these works as they become orphans with no owner to use them. This, Paul argues, was the basis for the CTEA.

2. Over-usage of public domain works, or the tragedy of the commons. Here works will be devalued because they will be used too much because they are free.

3. Debasement of the work through inappropriate or distasteful usage. This is mostly presented as the pornographic use of characters and stories

... as this book?

Since these arguments for the extension of term protection are based on assumptions that are quantifiable, Paul followed in the footsteps of Tim Brooks and began a series of papers where he attempted to prove or disprove the argument against the public domain through comparing the fate of works in the public domain to those still under copyright. In a series of three papers, he looked at the continued publication history of best sellers from 1907-1922, which are all in the public domain and those from 1923-1932, which are still under copyright. He looked at a number of measures, including whether the book was still in print, how many editions of the book were available and the price of the edition. His findings indicated that there was no statistical difference between the works in copyright and those outside. In fact, Paul noted that the data indicated that there was little support for the under-use of the public domain works as almost all of them were in print, compared to around 75% of the copyright works. Additionally, there appeared to be no meaningful difference in price between the two types either.

Paul then looked at popular music used in films between 1968-2008 in order to test the over-usage argument. Again he identified songs that were in the public domain and those that were in copyright in roughly the same timeframe as the books. Looking at the 74 songs that appeared in 4 or more films during that timeframe, he found no difference in usage between protected and unprotected works.This was the same for works that appeared in 1, 2 or 3 films. Public domain and copyright works were used roughly the same amount.

With regard to the debasement argument, Paul is currently working on a study of audiobooks and customer perception of their quality. In the study, he is looking at three types of works: amateur recordings of public domain works, professional recordings of public domain works and professional recordings of copyright works. In his first test of customer perceptions, he surveyed around 160 people on the quality of various recordings. While the full study is not complete, the preliminary reports indicate that there is no difference between the public domain recordings and the copyright ones.

[Stephen adds: these last few lines are a combination of Paul's comments after his talk and my own thoughts] The conclusions that Paul has reached is that there is little statistical evidence to support the assertions that bad things happen to works when they enter the public domain. One may argue that these studies are merely proxies; they do not really look at sales figures for example.  But, as Paul noted, the data is not really there. In the end, this is as damaging for the argument against the public domain as the results of these studies because, if there is no data to support, one way or another, the assertions about the problem of the public domain, we need to be more honest about the basis for our policy decisions".

The 1709 Blog hopes to get its hands on Paul's PowerPoints soon, in which case it will share them with readers too.

Limewire closure slows down illegal filesharing, but new alternatives emerge

Research firm NPD Group have released findings that show that illegal file sharing of songs via peer-to-peer services has dramatically dropped off since Lime Wire was shut down by a US federal court who found the company liable for copyright infringement. The Recording Industry Association of America had file a copyright suit against Lime Wire and CEO Mark Gorton in 2007, claiming the company encouraged the pirating of billions of songs.

NPD said "the percentage of Internet users who download music via peer-to-peer services was at 9 percent in the fourth quarter of 2010, compared to 16 percent in the same period earlier in 2007" which is clearly a significant drop. NPD also found that the average number of music files downloaded from P2P networks also declined from 35 tracks per person in Q4 2007 to just 18 tracks in Q4 2010, although some downloaded just one or two tracks, while others took hundreds. NPD estimates there were 16 million P2P users downloading music in Q4 2010, down from 28 million in the same period in 2007.

Good news for content owners? Maybe ..... the research also noted that it appears that former LimeWire users are now moving to similar networks. Greg Sandoval, writing on CNet, reports that Frostwire had seen usage double in the final six months of 2010 after Limewire was shuttered in October, whilst Bittorrent client u-Torrent had a fifty percent uplift in users.

Read more at: http://news.cnet.com/8301-31001_3-20046136-261.html

"Public domain" seminar tomorrow: final reminder

"What happens to works when they fall into the public domain?" is the title of a seminar which The 1709 Blog has organised for tomorrow, Wednesday 23 March.  The speaker is Professor Paul J. Heald, of the University of Georgia Law School.  Paul is going to present some of his thoughts and -- more importantly -- the fruits of some of his own research.

The venue is the London office of Olswang LLP at 90 High Holborn, London.  Registration begins at 5pm; the seminar starts at 5.30pm and, following questions and discussion, will end by 7pm.  Refreshments will be provided.

We have 30 people signed up to attend so far -- but there's still room for more. To register, email Jeremy here and let him know (using the subject line 'Heald Reg').

Tug of love over Davros: the battle-lines are drawn

Lee Curtis has sent this link to a Daily Mail article, "BBC sued over Who first drew the evil Dalek mastermind Davros".  The claimant, Steven Clark, who is now 51, says he invented Davros for a competition run by the now defunct TV Action magazine in 1972. According to the article,

" ...his drawing – a pencil sketch coloured in with felt pens [depicted, right] – showed a ‘half-man half-Dalek’ with an additional eye in the centre of his forehead, a headset, epaulettes, a withered left hand and finger-like switchgear on the Dalek base. ...

He is demanding the Corporation pay damages, or a sum equivalent to the profits generated from the character over the years. This could run into many thousands of pounds.
... The character is so popular it is sold as toy figures, with remote-controlled models costing upwards of £20 each. ... 

Mr Clark, who says he kept handwritten copies of his entry, didn’t win the contest – which had a colour television as top prize – and heard nothing from the judging panel. But three years later his disappointment turned to anger when he saw a brand new episode of Doctor Who called The Genesis Of The Daleks. The episode, regarded as a classic by fans, introduced viewers to a new villain called Davros, but to Mr Clark the character looked almost identical to the one he had sketched. 

... Steven was 16 when the episode was aired. He couldn’t believe his eyes when he saw his creation on screen. It was a mixture of emotions. He was excited, confused and angry.’ The teenager, who by this time was working in his local branch of Halfords, contacted solicitors but it went no further because he had lost the copies of the competition entry. However, 20 years later, he found them hidden in a set of family encyclopedias. He wrongly believed too much time had passed for another claim, although over the years he has sent several letters to the BBC asserting his rights over the character.

... Experts believe that ...Mr Clark can ... earn tens of thousands of pounds in compensation. One legal source said: ‘He is asking for damages or a pound-for-pound equivalent for all the profits generated by the character since he was introduced to viewers in 1975.  

... Last year, BBC Worldwide identified the huge overseas success of Doctor Who as one of the reasons it had notched up record profits of £140 million ...".

To the casual observer there appears to be a not inconsiderable degree of similarity, as the illustrations show, though the 'Dalek' element of the two pre-existed the competition since the first Daleks made their TV debuts as long ago as December 1963.  One topic that the news report doesn't mention is the terms of the competition and whether they might have required the assignment of copyright, or at least a licence, as a condition of entry -- in which case the old question of infant's relief and whether a child back in 1972 could have divested himself of copyright in a situation which could not be said to be for his future benefit.

Star Wars: the Hearing

Last week during a three-day hearing, the UK’s Supreme Court turned its attention to copyright law – for the first time since its metamorphosis from House of Lords to Supreme Court. The issues in Lucasfilm v Ainsworth are whether the Star Wars stormtroopers’ helmets are ‘sculptures’, so attracting copyright protection, and whether English courts have the jurisdiction to hear claims about infringement of foreign copyrights.

SCULPTURE

In the first-instance decision, Mann J held that the stormtroopers’ helmets were not sculptures on the grounds that their purpose was primarily utilitarian, not artistic – nor were they works of artistic craftsmanship. In the Court of Appeal, Lucasfilm appealed the finding that they were not sculptures but did not challenge the finding that they were not works of artistic craftsmanship. The Court of Appeal affirmed Mann J’s decision.

The question of whether the helmets were utilitarian is central to the appeal. According to Lucasfilm, the Court of Appeal had misdirected itself by considering the pretend functions of the armour as real functionality.

Visual v practical function

Jonathan Sumption QC for Lucasfilm argued that the helmets attract copyright as ‘sculptures’ because (a) sculptures should be defined as three-dimensional works that are created for a predominantly artistic rather than functional purpose, (b) an artistic purpose means that of creating a visual impact and (c) the helmets fall within this definition because their purpose is entirely visual not utilitarian.

Alastair Wilson QC for Andrew Ainsworth said a sculpture would be something of overwhelmingly visual significance (but not, I think, that every object of overwhelmingly visual significance would be a sculpture).

Lucasfilm’s definition of sculpture got the five justices of the Supreme Court thinking. Lord Mance wanted to know if flower arrangements and ornamental gates were sculptures. Lord Phillips’s thoughts turned to birthday cakes.

Lord Mance asked if everything on a film set was therefore a sculpture – weren’t they all there for their visual impact? Sumption said everything on the set was a sculpture provided that it was original.

Wilson argued that the requirement of originality would not significantly limit the number of items on a film set that attracted copyright – originality in the context of copyright simply meant that works were not copies of other copyright works. Therefore a set lamppost could be a precise copy of a real lamppost (which is not a copyright work) and still be an original copyright work. Wilson made no mention of Infopaq – isn’t there a potential problem with saying that making a slavish reproduction of a non-copyright item constitutes the intellectual creation of the author?

In his reply Sumption appeared to change his story: a desk or lamppost made for a set would have a functional purpose – unlike the stormtroopers’ helmets. Some costumes, he said, do have a functional purpose: to clothe the actors. The stormtroopers’ uniforms, by contrast, are not to clothe the actors, rather the actors are there to display the armour.

Wilson’s arguments about the functionality of film sets were no less tortuous. To him the pretend functions of film props should count as utilitarian functions. Lord Mance thought that a ‘pretend function’ is a visual impact though different from other types of visual impact. He asked whether Wilson was drawing distinctions between different types of visual impact. Wilson answered by saying that the relevant visual impact for sculpture would be contemplative. This was one of the moments during the hearing when it seemed that the courtroom had been transported to the 19th century.

In the rather poor acoustics of the court I heard Wilson say that the Tin Man in the Wizard of Oz was probably a work of artistic craftsmanship and he could conceive of costumes so far removed from reality that they were sculpture. The distinctions were starting to become too subtle for some of the justices. ‘You can’t really distinguish between the Straw Man and the Tin Man?!’ Lady Hale exclaimed in disbelief.

How does the criterion of non-functionality to define sculpture fit in the context of other intellectual property rights?

In UK law, 3D objects can potentially attract a number of IP rights. Patents for inventions last 20 years. Design rights last up to 25 years. Copyright lasts for the lifetime of the author plus 70 years. Why is copyright’s term three to five times longer than the design right term?

One reason may be historical: perhaps in the 19th century industrial designs were considered to be less worthy of protection than fine art. Today we would have a problem with saying that a banal chocolate-box painting is more creative/worthy than an iconic design.

A modern defence of the difference between design and copyright terms is economic. The Green Paper for the Design Directive states:

‘The freedom of the designer may, if the product is to perform the function for which it has been conceived, be more limited than the freedom of an author of fiction. There may well be a limit to the number of ways in which a specific product can be designed if the constraints dictated by its intended function are to be respected. If and when this is the case a long lasting protection and the general exclusion by copyright law of reproduction of even small parts of a work may imply the creation of de facto monopolies in the market.’

This argument does not seem particularly strong. If Henry Ford’s Model T was protected by a design right today, would a budding young entrepreneur decide that he couldn’t risk entering the car industry? If this is the modern justification for the difference in design right and copyright terms, then the objective is to avoid creating de facto monopolies in the market for functional products.

The stormtroopers’ helmet design is not going to limit competition in the market for helmets (motorcycle helmets or workers’ helmets). So on that basis, functionality is not a reason why they should have a shorter term of protection.

But are they sculptures?

Even though there may be no policy reason to give the helmets a shorter term of protection, what if the law does not embody a sound policy? It is not the job of the Supreme Court to rewrite acts of Parliament on the basis that they are not underpinned by sound policy.

The Copyright Designs and Patents Act only grants copyright protection to three-dimensional objects if they are sculptures, works of artistic craftsmanship or works of architecture. Non-functional three-dimensional works of the highest artistic quality will not have copyright if they do not fall into one of these three categories.

So what is a ‘sculpture’? Wilson argued that a sculptor must have the intention to make a work of art.

Laddie J in Metix v G. H. Maugham said that the following was close to the right definition: ‘a three-dimensional work made by an artist’s hand. It appears to me that there is no reason why the word “sculpture” in the 1988 Act, should be extended far beyond the meaning which that word has to ordinary members of the public.’

This approach mirrors a basic rule of statutory interpretation: to give the words of an act of Parliament their plain, ordinary and literal meaning.

What is normally meant by ‘sculpture’? The Oxford English Dictionary has ‘that branch of fine art which is concerned with the production of figures in the round or in relief’. A former Keeper of the Tate Gallery Modern Collection tells me that: ‘in the professional art community (and in what I suspect is a growing percentage of the population at large) a sculpture is generally thought to be any three-dimensional entity that is intended by the artist to be a work of art.’

Although the helmets contribute to the aesthetic of the film and communicate a sense of menace, it would seem unlikely that they were intended as works of art in their own right.

Are they ‘works of artistic craftsmanship’? It is harder to determine the ordinary meaning of this phrase as it is not an ordinary phrase. Case law has left it as a fuzzy concept and one into which the helmets could plausibly fall.

JURISDICTION

In British South Africa v Companhia de Moçambique [1893], which concerned a dispute about land in South Africa, the House of Lords held that English courts can have jurisdiction over ‘transitory’ matters overseas but not those that are ‘local in nature’. Lucasfilm say that if the defendant is domiciled in England the default rule is that an English court has jurisdiction over the defendant and can hear claims concerning any wrong done abroad, applying foreign laws. The Moçambique case creates a unique exception for immoveable property but it does not apply to IP.

In support of this they say that IP isn’t immoveable property, but personal or moveable property (s. 90 CDPA). It is true that IPRs have a situs but so do other movables such as debts. English courts are applying the laws of other jurisdictions every day. There would have to be a principled justification for not treating copyright like other rights. The reason given is that there is an international consensus that copyright should not be handled cross-jurisdictionally – but there is in fact no such consensus. Wilson tried to argue that English courts would have difficulty understanding US law, a point that appeared to go down like a lead balloon with private-international law expert Lord Collins. The difficulty of applying foreign laws is never an excuse, he said.

Lord Phillips asked what damages would be applied in a US copyright case. The answer given seemed to be the English damages (but doesn’t Rome II say US damages?).

Lucasfilm went on to argue that even if the Moçambique rule did apply to IP, it has in any case been displaced by the Brussels Convention. The justices seemed to be clear that if the case ends up hinging on the Brussels Regulation, a reference to the ECJ will be required, as the Regulation does not make it clear whether it applies to non-EU claims or not.

Lord Phillips noted the undesirability of leaving someone without a remedy. Unless the Supreme Court reverses some part of the Court of Appeal’s decision, Lucasfilm, whose US copyright has been held to be infringed, will be without a remedy. Apart from infringement of UK copyright and the English court hearing the claim of infringement of US copyright, there was a third alternative: enforcing the US judgment. Lucasfilm have not appealed this but from a pragmatic perspective it would have been the simplest way of providing them with a remedy. Why was it not available? Andrew Ainsworth never submitted to the jurisdiction of the US court. This reason for refusing to enforce a foreign judgment was explained in Rubin v Eurofinance:

‘It is, and has for centuries been, a fundamental principle of English private international law that the judgment of a foreign court is not enforceable unless the defendant was present within the jurisdiction, or in some way submitted himself to the jurisdiction, of the foreign court. This principle applies both at common law and under the Administration of Justice Act 1920 and Foreign Judgments (Reciprocal Enforcement) Act 1933: see Dicey paras. 14-49 and -50. Whilst other countries may regard this as unduly restrictive (and probably the United States would), it represents English law.’

Could it be that this arguably ‘unduly restrictive’ principle of common law needs revisiting?

When the justices deliver their judgment in a few months, it will be interesting to see how widely they cast their net. Sometimes the House of Lords went beyond answering the specific point on appeal, offering a revised textbook in the relevant area of law. Will they restrict their opinions to sculpture or include works of artistic craftsmanship? Will they stick to jurisdiction over copyright claims or cover other intellectual property rights too?

Bits and pieces

Grzegorz Pacek, a Polish lawyer who is currently also a Ph.D candidate at the Jagiellonian University in Cracow, is working on a thesis on the use of copyright-protected works by the press in reliance on statutory permissions (eg news reporting as a part of 'fair use' or'fair dealing'). While Grzegorz is particularly concerned with Polish law, he is also interested in a comparative analysis, taking in other jurisdictions -- so he wonders if there are any readers who share his interest and who wold like to contact him with their thoughts and experiences (presumably this includes newspapers, reporters and authors of works to which the press has helped itself).  Do get in touch if you can. Grzegorz can be emailed here.

Professor Paul Torremans has informed us that "The ALAI Congress is this year being organised by our Irish colleagues. It will take place in Dublin on 30 June and 1 July 2011. The programme and registration details can be found at http://www.alaidublin2011.org/. The early bird registration rate applies only until 1 April".

In December 2009 the 1709 Blog mentioned the references to the Court of Justice of the European Union of Cases C‑431/09 et C‑432/09 Airfield NV and Canal Digitaal BV v Belgische Vereniging van Auteurs, Componisten en Uitgevers CVBA (Sabam) and Airfield NV v Agicoa Belgium BVBA.  Well, the Advocate General's Opinion was published this morning here -- in a number of languages but not, alas, in English.  In French, AG Niilo Jääskinen opines as follows:

«La directive 93/83/CEE du Conseil, du 27 septembre 1993, relative à la coordination de certaines règles du droit d’auteur et des droits voisins du droit d’auteur applicables à la radiodiffusion par satellite et à la retransmission par câble, ne s’oppose pas à ce qu’un fournisseur de bouquets de chaînes de télévision satellitaires soit tenu d’obtenir l’autorisation des titulaires de droits d’auteur, ou de droits voisins du droit d’auteur, pour des opérations dans lesquelles un organisme de radiodiffusion lui fournit les signaux porteurs de ses programmes dans des circonstances telles que celles en cause au principal.»

In English, thanks to Google, this comes out as

"Council Directive 93/83/EEC of 27 September 1993 on the coordination of certain rules concerning copyright and rights related to copyright applicable to satellite broadcasting and cable retransmission, does not preclude that a provider of channel satellite television is required to obtain permission from the holders of copyright or related rights of copyright, for transactions in which a broadcasting organization provides signals carrying programs in circumstances such as those at issue".

Readers' comments and clarifications are welcomed.