July 12th A Good Day and a Bad Day for Google in France

Something was decidedly in the air last Thursday (July 12) in this Kat's native Canada and his adopted home of France.  On that day, the Supreme Court of Canada handed down five important rulings in copyright matters while the French Cour de cassation issued four noteworthy decisions in respect of online copyright infringement (all involving Google!).  There was good news and bad news for Google.

First, the good news:

In a series of three decisions involving the French safe-harbour provisions available to qualifying online service providers (such as hosting providers) the Cour de cassation clarified the law on notice and takedown procedures.  To date, appellate courts have generally required an online service provider who has been duly notified of the presence of infringing content on its service not only to take it down (expeditiously) but also to ensure that it remains down without the need for any further notification and even if the content may have been re-posted at a different address (so-called takedown and stay down).  This approach has now been rejected by the Cour de cassation, which held that to impose such an obligation is tantamount to imposing a general monitoring obligation, which is contrary to applicable law.  (Two of these decisions also addressed an interesting issue relating to whether Google Video's method a showing the video from a third-party website was actually an infringement of the public performace right; I hope to come back to this in another post.)

Then, the bad news:

In another ruling dated the same day, the Court gave its first decision on Section L.336-2 of the Intellectual Property Code, which allows a court to order third parties to take measures to assist in preventing online copyright (and neighbouring right) infringement.  A body representing record companies (SNEP) took action against Google on the basis of this provision, seeking an injuction requiring Google to alter its Google Suggest tool, which, SNEP claimed (and adduced evidence in support of) had a tendency to complete searches of artist names, song titles and album titles with terms such as "torrent", "megaupload" and "rapidshare".

The appellate court had dismissed the action, holding that the functionality at issue was not itself an infringement of any copyright or neighbouring right such that one of the requirements of Section L.336-2 IPC was not satisfied.

The Cour de cassation reversed, holding that the Google site systematically directed users towards infringing sites such that the Google site could be said to be providing the means to infringe copyright/neighbouring right and that the measures sought were intended to prevent such infringement by eliminating the automatic association of certain words with search requests, which could indeed contribute to making it more difficult to find the infringing sites (even if it is not 100% effective).

The matter was thus remanded to the Versailles Court of Appeals.

Links to rulings here:
SNEP decision
Safe harbour decisions

The Cat Signal: it's launch day!

A new lobby group, the Internet Defense League, is launching today to fight so-called copyright crackdown legislation. Members include Mozilla, WordPress and Reddit, who join together in "Protecting Free Internet Since 2012".

The group "takes the tactic that killed SOPA & PIPA and turns it into a permanent force for defending the internet, and making it better. Think of it like the internet's Emergency Broadcast System, or its bat signal!"

How does it intend to do this? By offering a code that can be embedded in members' websites. The League says that "When the internet's in danger and we need millions of people to act, the League will ask its members to broadcast an action. (Say, a prominent message asking everyone to call their elected leaders.) With the combined reach of our websites and social networks, we can be massively more effective than any one organization"

Look out today for the group's "cat signal" which is being blasted all over the internet, and tonight for the image being projected into the sky, Batman-style (on the opening night of The Dark Knight),  in London, San Francisco, New York, Washington DC and Ulaanbaatar.

Copyright is high on the political agenda in North America and in Europe, so this is undoubtedly the right time to lobby. The law is evolving in an attempt to catch up with technology and both rightsholders and users need to take action to ensure that the changes decided on are not to their detriment.

The Internet Defence League's coordinated approach is helpful: a united voice will hold much more sway than each company could on its own. However members of the group do choose on a case-by-case basis whether to participate in alerts, and the views in alerts are not always endorsed by all members. It will be interesting to see how this pans out in practice.

The League says: "We are very happy to be sharing a launch date with Batman. Everyone who took part in defeating SOPA, PIPA and ACTA this year are legitimate real-life superheroes. Sure, the film's parent company probably has bats$%&# crazy plans for our internet (and yes, they gave a role in the movie to a pro-PIPA Senator). But Batman? He's awesome."

Fair use in the US: the Wiley case and prior art for patents

From our friend Philippa Malas comes another guest post, this time on a subject that goes right to the core of intellectual property -- the citation of copyright-protected materials on patent proceedings. As often happens, most of the dynamic of the dispute which has triggered the current debate comes from the United States, but readers are invited to filter the issue into their own jurisdictions and consider the likely outcome there. Anyway, as Philippa explains:

The trigger for debate

The United States Patent and Trademark Office (USPTO) filed a motion in June 2012 to intervene in a case which argues that the reproduction of scientific journal articles as prior art in US patent applications infringes copyright under Copyright Act 17 U.S.C. §501. Will the US courts finally be able to reconsider and clarify the scope of “fair use” post-American Geophysical Union v Texaco Inc. 60 F.3d 913 (2d Cir.1994)? Maybe.

The background

In February 2012, publishers John Wiley & Sons, Ltd and the American Institute of Physics filed claims against two US law firms: Schwegman, Lundberg & Woessner, P.A.; and McDonnell Boehnen Hulbert & Berghoff LLP. The firms submitted copies of articles published by Wiley and AIP as prior art in patent applications. Wiley and AIP contend that the copies filed with the applications are unauthorised and that even copies made for research but not ultimately used in filings (distributed internally or to clients/opposition) also infringe as the copying is not covered by any licence. Wiley and AIP argue that the firms, by not paying licence fees specifically for these uses, are making a profit; they are using the ‘free’ copies as part of a service for which they receive compensation from the client. US patent applications, however, require the disclosure of certain information (37 C.F.R. §1.56), including prior art which helps establish whether an invention already exists. It is not surprising that the USPTO has taken a particular interest in these cases stating “the United States and the entire patent system instituted by Congress are at risk of serious harm if the USPTO is denied intervention”. It argues that a finding in favour of the Plaintiffs would have a “significant adverse effect not just on patent prosecution, but also patent infringement litigation”.

Fair use

The relevant defence to these claims is found under the US Copyright Act 17 U.S.C. §107: the “fair use” provision. This is an exception to the exclusive copying and distribution right imposed by 17 U.S.C. §§102 and 106. Fair use is not defined under the Copyright Act and therefore each case is determined to a great degree on its own facts (Campbell v Acuff Rose Music, 510 U.S. 569, 578 (1994). So far, so good but the regime also provides a framework to assist the court in determining whether the exception applies:

(1) the purpose and character of the use (including whether it is commercial/not for profit);

(2) the nature of the work to which the right is attached;

(3) the amount of the portion used in relation to the work as a whole and

(4) how the use effects the potential market for or value of the work.

The framework is cumulative as the weight of one factor can tip the balance in favour of fair use even if the argument under another limb is weak. These four limbs were considered by the U.S. Court of Appeals for the Second Circuit in American Geophysical Union v Texaco, 37 F.3d 882 (2nd Cir. 1994); a case which caused some consternation as it settled out of court before the fair use principles could be addressed and clarified by the Supreme Court. The appellate court held that Texaco could not rely on fair use to exculpate its scientists who had photocopied articles from scientific journals without paying royalties. This was regardless of Texaco having subscribed to the journals. In relation to the first limb, the court ruled that consideration of Texaco’s profit motive was relevant but failed to examine the difference between direct and indirect commercial use and instead drew an ambiguous distinction between institutional and independent research. They also held that the market was affected under limb four, relying on Texaco’s ability to make royalty payments via the Copyright Clearance Center (CCC). The Supreme Court has not been given the opportunity to reassess the framework since.

The USPTO’s view

The USPTO made clear how it would apply the current principles to this case before filing its intervention. In January 2012, it released a memorandum which opined on whether fair use was available for, what it termed, non-patent literature (“NPL”) which was copied and submitted during the course of patent applications or prosecutions. The memo applied relevant case law to each limb of the framework and unremarkably, concluded that both the USPTO and the applicant’s copying and supply of NPL fell within the exception. To reach this conclusion it argued that:

(1) NPL is submitted as evidence for a non-commercial governmental purpose. The use is arguably ‘transformative’ (a copyright work is used in a different context to serve a different function from the original) which is more likely to be considered fair use than non-transformative;

(2) NPL is factual, published work which receives a lesser degree of protection than expressive and/or unpublished work;

(3) the amount of the work used varies from a part to the entirety of a work but when considered with other limbs of the framework, a finding of “fair use” would be likely;

(4) as NPL is typically published several years prior to use in patent applications, its commercial value is limited. NPL is only used in the patent examination process, which the USPTO does not allow to become freely available on the internet (its is not published under Public PAIR) and means there is no market that is impaired by the use of the NPL.

The Intellectual Property Owners Association (“IPO”) has also taken an interest in the debate and on 11 June 2012 passed a resolution agreeing with the USPTO’s position: copies of NPL used “in the course of preparing and prosecuting patent applications and maintaining comprehensive files relating to prosecution is fair use under 17 U.S.C. §107”. Its position appears to be broader than the USPTO’s which carefully stated that it did not take a position on Wiley and AIP’s other submission regarding the use of copyright material more generally in the course of the litigation process.

How will the court addresses this wider contention, especially while concurrently implementing the fair use framework for NPL? One outcome could mean that law firms will have to keep a more watchful eye on their general use of copyright material, ensuring that they are aware of the extent of their existing intellectual property licences and subscriptions.

Not fair?

As skillful as the USPTO’s application of the principles might be, the four-limb framework offers little scope for certainty when trying to assess whether fair use applies. The second and third limbs are not overly complex in basis and as the USPTO’s memorandum shows, can be widely construed in support of the other limbs, which reiterates the importance of case-by-case analysis in this area. It also highlights a difference between “fair use” in the US, which is applicable to any work, and its cousin “fair dealing” in the UK which is subject to three limitations: fair dealing for the purposes of non-commercial research or private study; fair dealing for the purposes of criticism or review; and finally fair dealing for the purposes of news reporting. First, the UK court is required to find that a substantial part of the work has been copied after which it addresses whether the copying can be justified under one of three fair dealing exceptions. There is no general discretion for the court to find a use ‘fair’ and it could be argued that this leaves the UK court with less room to manoeuvre especially with the ever increasing pace of technological development. For the time being it does at least give rights holders and prospective infringers a greater capacity to predict what can and cannot be copied. In contrast, the US test leaves us to grapple with fluid principles which could eventually be cast in favour of one side of the rights holder vs public interest balance, depending on the stakeholders involved.

The US framework also provides a conceptual minefield when construing the first and fourth limbs. As the Texaco case demonstrates, this is especially so in relation to the shifting boundaries of publicly and privately funded research. Analysing the effect on the market is not straight-forward and the conclusion in Texaco that the CCC offers a mechanism by which such an effect can be judged is not necessarily concrete. The USPTO’s argument above supposes that a rights holder’s interests are overridden if a government body requires a copy of copyright material. Such reasoning cannot be right. It would undermine the intrinsic nature of a copyright regime and while the USPTO acknowledges that there is no rule, per se, that provides a blanket fair use exemption for government institutions, it references a number of cases which it argues lean towards such an exemption. Once again, this highlights the unpredictability of the fair use framework as the cases cited by the USPTO are broad in their factual basis and cannot automatically support such a general deduction. Guidance from the courts on these two limbs would be invaluable.

No stable basis

The reason for the breadth and difficulty of the US fair use test occurs because the nature of copyright does not provide a stable basis on which a fair use test can be formulated. The well recognized weighing of the rights holder’s interests against the public benefit remains at the fore. If this cannot be easily construed, how can a fair use doctrine be similarly defined? Perhaps this accounts for the difficulty of the current US regime and is the reason for much emphasis placed on the importance of each case turning on its own facts. In the UK, the exceptions for fair dealing are much narrower in scope which means flexibility is sacrificed in favour of some notion of certainty. The UK government continues to consider extending the exceptions but even this will not put the UK provisions in line with the US. Meanwhile, in a decision which is interesting to consider in relation to the US case, the UK government has recently announced its intention to make all publicly funded scientific research available under Open Access by 2014. The debate about open access to scientific knowledge and research may well prove an additional consideration in the Wiley and AIP cases which already require the court to perform a delicate balancing act of numerous conflicting interests.

Romney and Obama: it's just not fair

A very quick post to relay some news that is making waves over the pond where copyright has reached presidential levels.

As part of his presidential campaign Mitt Romney recently released an advert on YouTube including a clip of President Obama singing one line of Al Green's "Let's Stay Together". The Obama clip is 9 seconds long. You can watch a longer version here.

This use of Al Green's work prompted BMG to issue a takedown notice causing YouTube to remove the advert from its site. Of course the political ramifications of the decision can be argued at great length, and commentators have used the takedown as evidence of all sorts of allegiances, however the fundamental question is whether using 9 seconds of a song in a political campaign constitutes fair use.

The short answer: there is no definition of the meaning of "fair" in the US and there is no single threshold above which use becomes unfair. Instead the courts look at a number of  factors including the amount of the work used, as well as the purpose of the use. In this instance it seems that YouTube was right to remove the content as following Henley v. DeVore, 733 F.Supp.2d 1144 (C.D. Cal. 2010) use by a political campaign of a song protected by copyright is not fair.

What would happen if Cameron employed similar tactics? The mind boggles…

Fleck's Five: SCC ruling no.2 - Photocopies for Primary and Secondary School Instruction

From our very good friend, lawyer and fellow blogger Lorraine Fleck (Hoffer Adler LLP, Toronto) comes the second of her series of analyses of the handing down by the Supreme Court of Canada of five major decisions on fair dealing defences to an action for copyright infringement. The 1709 Blog is delighted to be able to share Lorraine's efforts with its own readers.

Supreme Court of Canada: Photocopies for Primary and Secondary School Instruction Constitutes Fair Dealing

This is the second in a series of five posts about the Supreme Court of Canada’s copyright decisions released on Thursday July 12, 2012.

On Thursday, July 12, 2012, the Supreme Court of Canada (SCC) issued its decision in Alberta (Education) v Canadian Copyright Licensing Agency (Access Copyright), 2012 SCC 37. The decision is significant because it clarifies the test to assess whether use of copyright materials for research and private study is "fair dealing". "Fair dealing” is an activity that allows users of copyright materials to engage in activities that might otherwise constitute copyright infringement. Research and private study are activities which may constitute fair dealing.

Background

Access Copyright represents authors and publishers of printed literary and artistic works. It filed a proposed tariff with Canada's Copyright Board for royalties to be paid on photocopies of printed literary and artistic works – mainly textbooks – for use in elementary and secondary schools in all Canadian provinces and territories except Quebec. The Board concluded that copies made at the teachers' request and which students were to read per the teachers' instruction were made for the purposes of research or private study. However, the Board found that the copies did not qualify as fair dealing – because they were made by the teachers for instructional purposes – and were therefore subject to a royalty. On appeal, the Federal Court of Appeal agreed with the Copyright Board. A coalition of provinces, territories and Ontario school boards (the “Coalition”) appealed to the SCC.

The Supreme Court’s Decision

The SCC, in a 5-4 split, allowed the appeal and remitted the matter back to the Copyright Board for reconsideration. The SCC found that the copies were fair dealing after applying its two-prong fair dealing test set out in CCH Canadian Ltd. v Law Society of Upper Canada. The fair dealing test has two steps:

Is the dealing for the purpose of either “research” or “private study” (the two fair dealing purposes allowed under the Copyright Act)?

Is the dealing “fair”? Factors in assessing fairness include: the purpose, character, and the amount of the dealing; the existence of any alternatives to the dealing; the nature of the work; and the effect of the dealing on the work.

Before the SCC, there was no dispute that the photocopies were made for the purpose of research or private study. Therefore, the appeal hinged on whether the dealing was “fair” – step 2 of the test.

The SCC disagreed with how the Board applied step 2 of the fair dealing test. The Board looked at the purpose of the copies as being from the perspective of the teachers, not the students, and therefore found the purpose of the copies was for instruction, not research or private study – reversing its finding in step 1 of the test. Because the copies no longer constituted fair dealing, they were not royalty free. The SCC’s view, however, was that the purpose of the copies in step 2 of the test should be looked at from the perspective of the user – in this case, the students. Given that the teachers’ had no ulterior or commercial motive for making the copies, and the teachers’ were there to facilitate the students’ research and private study and enable the students to obtain the material needed for their studies, the dealing was fair.

The SCC noted that while the purpose for making the copies should typically be examined from the user’s perspective, the copier’s perspective is not always irrelevant if the copier hides behind the user’s permitted copying in order to engage in activities that can make the dealing unfair. Such activities include commercial use.

In applying the rest of the fair dealing factors, the SCC found:

 That the Board was required to determine whether the proportion of each of the excerpts copied in relation to the whole work was fair. Examining the total number of copies was the incorrect approach.

 With respect to alternatives to the dealing, it was unrealistic to purchase books for every student as opposed to copying short excerpts to supplement student textbooks.

 Regarding the effect of the dealing on the works, there was no evidence of a link between photocopying short excerpts and declining textbook sales.

The SCC also noted that the word “private” in “private study” does not mean that users are to view the copyright works in isolation.

Significance

The SCC’s decision is significant in that it clarifies the test for analyzing fair dealing for the purposes of research and private study. The relevant perspective for assessing the purpose for the dealing is typically the user, not the copier, unless the copier is hiding behind the user’s dealing to make copies that would otherwise be infringing. The SCC’s decision – along with the Canadian copyright reform bill scheduled to become law this fall – also means that school boards will be able to photocopy reasonable excerpts from textbooks for educational purposes for the foreseeable future.

This post can also be found on Lorraine's IP Address blog, here.
Fleck's Five: SCC ruling no. 1 - Free Music Previews can be read here and here.

Copyright in an Etched Floral

A recent spat between UK designer Rachael Taylor and retail giant Marks and Spencer demonstrates just how important it is for designers to protect their intellectual property.

Rachael Taylor created her "Etched Floral" hand drawn design in 2008 and since then she has produced various products bearing the design, including wallpaper, oven gloves, lampshades and tea towels. These products have been featured in a number of magazines, therefore one assumes that the design is relatively well-known in the world of etched floral designs.

M+S recently launched a new range of t-shirts bearing what Taylor calls a "strikingly similar" design. M+S's t-shirts can be seen alongside Taylor's products on her blog, so you can decide for yourself how similar the designs are. Pretty similar, is this blogger's conclusion.

© Holly Hayes

Taylor complained to M+S about a month ago and they responded saying that they were "unaware of the design". If they didn't copy her design it's not copyright infringement, however Taylor went a step further and decided to use social media to complain more publicly. Without admitting liability, M+S then pulled the product, saying: "We are sorry for any disappointment caused to Rachael Taylor Designs from the sale of a T-shirt that we bought in good faith from a direct supplier. After investigating the complaint we immediately withdrew the product from sale."

Taylor's request to high street retailers is that they publicly sign up to a pledge initiated by the Anti-Copying in Design Group, set up to protect independent designers from copyright infringement and to represent them in disputes. John Lewis, Next and Selfridges have signed up and have promised to commission rather than copy designs.

Copyright cannot be registered in the UK. This clearly benefits independent designers who may not know how or may not have the resources to register copyright in each of their designs, however it also means that in cases like this designers need to show copying in order to prove that copyright in their work has been infringed. It also means that retailers have no way of checking whether their suppliers are providing them with original works or not.

Taylor could of course have registered her design, which would have made her battle much easier, however many designers aren't aware that they can register designs, and even in larger companies the right is under-used. Registered designs are seen as complicated and niche rights however as this case demonstrates, in order to protect designers it is time that registered designs became more mainstream.

Easy Music Licensing: or will it be ...?

Last week the 1709 Blog briefly mentioned the draft EU Directive on Music Licensing and Collecting Societies. Phil Sherrell (Bird & Bird LLP) has subsequently circulated some thoughts on the draft Directive, which he is happy for us to share with our readers. Phil's comments on enforcement and the proposal's likely consequences appear below, with this blogger's comments in red:

"Enforcement

A potentially significant development in respect of enforcement is the requirement that licensees (or potential licensees) be able to submit disputes with licensing bodies to a court. Such disputes are currently referred to a variety of bodies across different member states, some of which are unlikely to satisfy this requirement. The Directive and its recitals are currently silent as to what will constitute a court for these purposes, but in many member states this is likely to lead to a greater ability on the part of licensees to challenge the terms of licences offered by collecting societies [the UK's Copyright Tribunal has done a great deal to improve its performance in the past few years but it's still handicapped by the need to adjudicate on matters that require economic and financial as well as legal competence. Once the regime for the resolution of licence disputes becomes part of harmonised EU law, one imagines that a significant number of difficult disputes will be kicked into the long grass of Court of Justice references].

Member States will also have to provide an additional alternative dispute resolution procedure for disputes between collecting societies and their users, members and other collecting societies regarding multi-territorial licences of online rights in musical works.

Consequences of the Directive

Some musical rights collecting societies have already taken significant steps towards facilitating pan-European licensing of online rights. If passed, the Directive should reinforce this trend, leading to greater availability of collective licences which meet the needs of pan-European music service providers. The larger societies are likely to take on greater responsibility for cross-border licensing, creating a more streamlined licensing market.

It remains very unlikely, however, that any society will be in a position in the future to offer a pan-European licence for the repertoire of all or even most of the EU collecting societies. The proposal expressly rules out the enforced creation of a one-stop shop of this kind on competition grounds [it's difficult to imagine that many collecting societies -- even small ones -- will be in a hurry to vote or negotiate themselves out of existence, especially those that provide the only effective voice for articulating their members' anxieties and making themselves heard at national level].

A side-effect of the increased regulation of all collecting societies is likely to be an increase in disputes between members and users of smaller collecting societies, many of whose procedures are likely to fall short of those required by the Directive [this should only be a short-term side-effect, as the publication of the results of the resolution of the first round of disputes is likely to give firm pointers as to what procedures, and what level of performance within them, is likely to be regarded as satisfactory or otherwise]".

For more information please contact: phil.sherrell@twobirds.om Patrick Charnley

Copyright and Innovation: The Untold Story

"Copyright and Innovation: The Untold Story" is the published result of some research by respected US academic Michael A. Carrier (Rutgers University School of Law). Soon to be published in the Wisconsin Law Review, it is is currently accessible on SSRN, here. The abstract runs like this:

"Copyright has an innovation problem. Judicial decisions, private enforcement, and public dialogue ignore innovation and overemphasize the harms of copyright infringement [of these three factors, the first two can be reasonably expected to ignore innovation at the expense of harm since they are part of a process of seeking to remedy actual or perceive harm. It's difficult to know how to assess the effect of public dialogue, though. Does public debate over orphan works over-emphasise the harms, or does it give equal weight to the need for innovation? Likewise the debate over sampling? Much is a question of definition and perception]. Just to pick one example, “piracy,” “theft,” and “rogue websites” were the focus of debate in connection with the PROTECT IP Act (PIPA) and Stop Online Piracy Act (SOPA). But such a debate ignores the effect of copyright law and enforcement on innovation. Even though innovation is the most important factor in economic growth, it is difficult to observe, especially in comparison to copyright infringement.

This article addresses this problem. It presents the results of a groundbreaking study of 31 CEOs, company founders, and vice-presidents from technology companies, the recording industry, and venture capital firms. Based on in-depth interviews, the article offers original insights on the relationship between copyright law and innovation. It also analyzes the behavior of the record labels when confronted with the digital music revolution. And it traces innovators’ and investors’ reactions to the district court’s injunction in the case involving peer-to-peer (p2p) service Napster.

The Napster ruling presents an ideal setting for a natural experiment. As the first decision to enjoin a p2p service, it presents a crucial data point from which we can trace effects on innovation and investment. This article concludes that the Napster decision reduced innovation and that it led to a venture capital “wasteland.” The article also explains why the record labels reacted so sluggishly to the distribution of digital music. It points to retailers, lawyers, bonuses, and (consistent with the “Innovator’s Dilemma”) an emphasis on the short term and preservation of existing business models.

The article also steps back to look at copyright litigation more generally. It demonstrates the debilitating effects of lawsuits and statutory damages [in the US there are grounds for saying this, but one might wonder why other jurisdictions, where damages are compensatory and lawsuits so far have proved far less chilling, have not seen a demonstrable surge in the sort of innovation that seems to come from the US or not at all]. It gives numerous examples, in the innovators’ own words, of the effects of personal liability. It traces the possibilities of what we have lost from the Napster decision and from copyright litigation generally. And it points to losses to innovation, venture capital, markets, licensing, and the “magic” of music.

The story of innovation in digital music is a fascinating one that has been ignored for too long. This article aims to fill this gap, ensuring that innovation plays a role in today’s copyright debates".

Thoughts, anyone?