The balance of interests in US copyright law

By Michael J. Remington, Kexin Li,[Patent]

Introduction

What is a copyright in the US? It is not only the copyright owner’s exclusive rights to control and exploit a copyrighted work through licensing and infringement actions, if necessary, but also a set of different, or maybe even conflicting, interests set forth in limitations and exceptions to copyright protection. In the US, to achieve a well-functioning copyright system, the rights of authors and copyright owners are often counter balanced with other societal interests, such as those of distribution entities and end-users. Although balance is not always achieved, a long-standing and strong school of thought feels that if equilibrium results among three groups - authors (owners), distributors of copyrighted works, and consumers - the public interest will be served. Copyright law also operates in a larger environment that includes respect for freedom of speech and enforcement of policies that promote competition.


For more than two centuries, US legislators, courts and administrative entities (like the Library of Congress and the Copyright Office) have devoted enormous efforts towards achieving a balanced system. Recently, when testifying about a growing need to update the US copyright law, Maria A. Pallante, Register of Copyrights, emphasized that Congress should keep “the public interest at the forefront,” “look to the equities of the Copyright Act as a whole, and strive for balance in the overall framework.” In Pallante’s view, an effective copyright law can and should achieve a balance that “combines safeguards for free expression, guarantees of due process, mechanisms of access, and respect for intellectual property.”


The constitutional basis for US copyright protection

In the US, every federal law must have a firm foundation rooted in the US Constitution. Federal copyright protection derives from the Constitution’s Patent and Copyright Clause, Article I, Section 8, Clause 8, which authorizes the US Congress “to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries…” The Constitution does not establish copyrights. It simply provides Congress with the authority to grant such rights as it deems appropriate and as long as the provisions in Clause 8 are respected.


The Clause functions as a double-sided coin. On one side, it gives Congress the power to establish a system that grants a copyright owner a bundle of exclusive rights, somewhat analogous to real property rights, to incentivize and reward the creation of “writings.” On the other side, this bundle of rights is more limited than real property rights. The US Supreme Court once said, “the monopoly privileges that Congress may authorize are neither unlimited nor primarily designed to provide a special private benefit.” Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 429 (1984).


More importantly, as noted by Congress itself in two historic revisions of copyright law - in 1909 and 1976 - the enactment of copyright legislation is not based on any natural right that an author has in his writings but upon the grounds that the welfare of the public will be served through the progress of science and useful arts. The US Supreme Court made it clear that “the immediate effect of our copyright law is to secure a fair return for an ‘author’s’ creative labor. But the ultimate aim is, through this incentive, to stimulate artistic creativity for the general public good.” Twentieth Century Music Corp. v. Aiken , 422 U.S. 151, 156 (1975). Theoretically, the public benefits twice from a copyrighted work: when the work is created and made available and when it goes in to the public domain due to the expiration of its copyright term. Simply stated, copyright is a limited statutory grant designed to stimulate good for the public, although its direct beneficiaries are authors and copyright owners.


The Framers of the US Constitution assigned to the US Congress, the most politically representative of the three branches of the government, the role of defining the scope of the limited monopolies granted to authors and owners in exchange for public access to their works. By conferring authority on elected officials, the Framers therefore envisioned a political assessment and weighing of equities between the proprietary rights of creators and the public good. Congress struck a balance in 1790 when it enacted the first American copyright law. In the meantime, as changes occurred and new technologies were developed, Congress periodically adjusted the copyright law, with varying degrees of success to respect proprietary and public interests.


The Constitution also provides for a judicial branch of government.See Article III. The founding fathers contemplated a common law system similar to that of the United Kingdom in comparison to the civil law systems of continental Europe, permitting American judges to play a significant role in interpreting and enforcing statutory enactments. Pursuant to an historic Supreme Court decision-Marbury v. Madison, 5 U.S. (Cranch 1) 137 (1803)-the federal courts were found to have authority to declare congressional enactments unconstitutional. This power serves as a check on legislative failure to respect constitutional boundaries. Furthermore, when judges interpret the language of statutes, the function of the courts is “…to construe the language so as to give effect to the intent of Congress.” United States v. American Trucking Assoc., Inc., 310 U.S. 534, 542 (1940). For foreign observers, it may appear at first glance that the judiciary does not play a lead role in the development and evolution of US copyright law. This view is mistaken; the judiciary’s role is central.


The three-legged stool: achieving balance between three groups in the digital environment

The congressional architect of the 1976 Copyright Revision Act and the Berne Convention Implementation Act, Representative Robert W. Kastenmeier (D-Wisconsin) often talked about the triumvi r a t e of copyright players: authors, distributors (including publishers), and users (including libraries which promote users’ interests). He warned that a certain equilibrium was necessary to maintain the balance of a three-legged stool. If the rights, privileges and interests of the three groups are kept in mind, according to Kastenmeier, the requisite balance promised in the constitutional grant of authority to Congress and elected officials to promote the progress of science and the useful arts could be accomplished. If one leg is dramatically shortened, then the stool will tip or fall. The three-legged stool approach is a departure from the traditional, European view of copyright as being binary between authors and users (be they distributors or consumers). Today, continental Europeans complain about their binary world becoming more like the American one. And, at the same time, American copyright law inexorably is becoming more statutory (like civil law countries).


Even before the digital era, the creative and personal use (one leg) of copyrighted works came into conflict with the wishes of distribution interests (another leg) to control commercial use or to receive transmission rights at low costs. For example, a historian would feel free to quote others liberally but would not want to be quoted extensively without compensation. In the post-digital era, members of the three groups frequently change positions. Users become authors, and vice versa. Both may become distributors of their own works or the works of others peer-to-peer merely by turning on their computers.


To further complicate matters, the growth of distribution interests in the information society has been phenomenal. In the US, the seminal Copyright Revision Act of 1976 Act was held up for resolution of issues related to cable television, but who could have predicted and resolved satellite carriage (distant and local-to-local), interactive web-casting, streaming, the entry of local and long distance telephone carriers, wireless and broadband. Printers, photofinishers, on-line service providers, web-casters, and others fall in the zone between copyright owners and consumers. Copyright owners themselves, like motion picture companies, publishers and the major record labels, are not ready to cede distribution to others. But, on the Internet space, almost anyone can be a distributor.


Despite these dramatic changes, the user’s position - to have access to a wide variety of materials at the lowest possible price - has remained fairly consistent. So has that of the author, who responds to economic incentives and wants to be rewarded for creativity through either sales of copyrighted works or licensing, thereby creating a continuing flow of income. The development of a vibrant, competitive, and sometimes destructive distribution zone has made the three-legged stool very unsteady. All the while, the economic implications of the copyright industries are expanding wildly in a global environment.


Statutory law developments in US copyright law

The statutory amplitude of US copyright law likely exceeds Chinese readers’ imagination. The Copyright Act has been amended many times since its birth to include new subject matters (like architectural works), to incorporate new transmission technologies (such as cable television, satellite carriage, and webcasting), and to calibrate infringement penalties in various forms of liability. Many incremental amendments incorporated judicial doctrines into the law. Other amendments harmonized US law with international treaty standards.


One notable trend is the fact that the US copyright term has become increasingly longer. The US Congress first exercised its power under the Patent and Copyright Clause to provide copyright protection with the enactment of the Copyright Act of 1790, which granted authors the exclusive right to publish and sell maps, charts and books. The initial copyright term was 14 years, and the copyright could then be renewed for another 14-year term if the author was living at the end of the original term. The Copyright Act of 1831 extended the initial copyright term to 28 years (with an option to renew for 14 years if the author or the author’s widow, child or children were living at the end of the initial term), and the Copyright Act of 1909 further increased the renewable additional term to 28 years (with no requirement that the author, the author’s widow, child, or children be living).


The Copyright Revision Act of 1976 set the fundamental framework for modern copyright protection in the US and paved the way for the US to join the world’s most important copyright treaty - the Berne Convention - by extending the term to 75 years with a term of protection of 28 years and a renewal term of 47 years for works by corporate entities or the lifetime of the author plus 50 years. In 1992, Congress eliminated the renewal registration requirement. More recently, the Copyright Term Extension Act (CTEA) of 1998 made another 20-year extension to copyright term. Political debate about the CTEA was heated. Constitutional challenges reached the Supreme Court and, after due consideration, the CTEA was held constitutional in Eldred v. Ashcroft , 537 U.S. 186 (2003). In reaching its decision, the Court highlighted the importance of facilitating international copyright harmonization, noting that European countries have copyright terms of the author’s lifetime plus 70 years.


Another notable trend is the growing length and complexity of US copyright law. There were only two pages and seven chapters in the Copyright Act of 1790. Congress has been adding text ever since, and it has been especially active in the past fifteen years. One milestone is the Digital Millennium Copyright Act of 1998 (DMCA), which addressed a variety of contemporary problems such as online intermediaries, anti-circumvention prohibitions, and digital rights management (DRM) measures. To this day, the emergence of the Internet, with its digital, reproduction, distribution and public performance issues, has presented serious challenges to the fabric of US copyright law. In any event, the current volume of the Copyright Act, found at Title 17 of the US Code, has reached 280 pages and thirteen chapters. Overall, the judiciary continues to be a key dispute resolution player and interpreter of statutory law.


Despite the Act’s amendments and common law interpretations, Register Pallante still recently observed that “the law is showing the strain of its age.” According to Pallante, currently “authors do not have effective protections, good faith businesses do not have clear roadmaps, courts do not have sufficient direction, and consumers and other private citizens are increasingly frustrated.” One may not fully understand Pallante’s statement by merely reading the Act’s provisions because the Act operates in the context of cultural, technological and economic change. Policy questions seem to be ever-increasing. For example, what should be done when copyrighted works are orphaned: that is, when the author (or owner) of a copyrighted work cannot be found? Due to an extremely expensive litigation system in the US, should small copyright courts be created? What should be done about endemic digital piracy and international counterfeiting?


Case law developments in US copyright law

In a changing society, controversies often emerge when courts are called upon to construe copyright law, apply it to a specific set of facts, and, in difficult cases, determine what Congress intended. The following four recent cases - two of which are district court decisions and do not represent the last word - are illustrative of the role that courts play in the US copyright system.


First, in Bikram’s Yoga College of India v. Evolation Yoga, LLC (2012 U.S. between rewarding creativity and allowing the public to practice yoga sequences at affordable costs. Second, a core issue in copyright litigation across the globe is whether a copyright has been infringed and, if so, what damages should be awarded. In China, many people are shocked by learning that under most circumstances they should pay for music downloaded from the Internet. This view illustrates two competing interests: on one hand, the public interest in enjoying music at prices as low as possible (even free); and, on the other hand, the need for songwriters and record labels to be rewarded for their musical works and sound recordings. In Capitol Records, Inc. v. Thomas-Rasset (692 F.3d 899 (8th Cir. 2012)), a Minnesota woman, Jammie Thomas-Rasset, downloaded 24 sound recordings via Kazaa, a files-haring computer program, and left them in the default file-share folder so that others could download the music. A copyright infringement suit was brought by several record companies against Thomas-Rasset. After three trials in federal district court, a jury verdict awarded the companies $222,000 in statutory damages (but no actual or punitive damages). The US Court of Appeals for 8th Circuit refused to set aside the award, finding that a standard established by the Supreme Court controls: a statutory damages award comports with the due process clause so long as it cannot be said to be “so severe and oppressive as to be wholly disproportioned to the offense or obviously unreasonable.” St. Louis I.M. & S. Railway Co. v. Williams, 251 U.S. 63, 67 (1919). The court also rejected 2012)), Bikram Choudhury, a world famous yogacharya from India, designed his own “Bikram yoga,” consisting of a sequence of twenty-six yoga poses and two breathing exercises. Discovering that some former trainees of a course he taught had opened several yoga studios of their own and were teaching the same sequence without his permission, he brought copyright infringement claims in California against them. But can a sequence of yoga poses receive copyright protection? To be copyrightable, creative works must fall within one of eight “works of authorship” categories set forth in §102(a) of the Copyright Act (literary works; musical works, including any accompanying words; dramatic works, including any accompanying music; pantomimes and choreographic works ; pictorial, graphic, and sculptural works; motion pictures and other audiovisual works; sound recordings; and architectural works). On the other hand, an item that falls within any of the eight categories in §102(b) (idea, procedure, process, system, method of operation, concept, principle, or discovery) is not eligible for copyright protection. In its opinion, the district judge identified a line between creative “pantomimes and choreographic works” (which are copyrightable under §102(a)(4)) and functional systems or processes designed to improve one’s health (which are not copyrightable under §102(b)) and found that a sequence of yoga poses falls within the latter. In effect, the result of this case maintained a statutory balance between rewarding creativity and allowing the public to practice yoga sequences at affordable costs.


Second, a core issue in copyright litigation across the globe is whether a copyright has been infringed and, if so, what damages should be awarded. In China, many people are shocked by learning that under most circumstances they should pay for music downloaded from the Internet. This view illustrates two competing interests: on one hand, the public interest in enjoying music at prices as low as possible (even free); and, on the other hand, the need for songwriters and record labels to be rewarded for their musical works and sound recordings. In Capitol Records, Inc. v. Thomas-Rasset (692 F.3d 899 (8th Cir. 2012)), a Minnesota woman, Jammie Thomas-Rasset, downloaded 24 sound recordings via Kazaa, a filesharing computer program, and left them in the default file-share folder so that others could download the music. A copyright infringement suit was brought by several record companies against Thomas-Rasset. After three trials in federal district court, a jury verdict awarded the companies $222,000 in statutory damages (but no actual or punitive damages). The US Court of Appeals for 8th Circuit refused to set aside the award, finding that a standard established by the Supreme Court controls: a statutory damages award comports with the due process clause so long as it cannot be said to be “so severe and oppressive as to be wholly disproportioned to the offense or obviously unreasonable.” St. Louis I.M. & S. Railway Co. v. Williams, 251 U.S. 63, 67 (1919). The court also rejected a challenge raised by Thomas-Rasset against the constitutionality of statutory damages. Finally, the court issued an injunction against Thomas- Rasset precluding her from making the companies’ sound recordings available to the public through an on-line media distribution system. Despite a declination the US Supreme Court to review of the lower court's decision, some parties still argue that the judicial review standard is outdated and too deferential to copyright-owner interests and, in this regards, distorts the balance of interests in US copyright law.


It is noteworthy that, at several points in the lengthy litigation process, Thomas-Rasset rejected settlement offers that were far less than the final award. In the US, the concept of statutory damages also adds balance to the author and copyright owner side of the equation because the actual damages caused by the infringement of a single work - be it a song, photograph, or painting - is often far less than attorneys’ fees and litigation costs. Consequentially, it may be extremely difficult for a young author or small business with limited resources to protect copyright rights. In any event, policy critiques cannot overturn existing laws in the US. If Congress decides to embark on an omnibus revision of copyright law, the restructuring of statutory damages would likely be discussed.


Third, a recent case invoked the fair use privilege which operates as a limitation on the exclusive rights of copyright owners. Set forth in 17 U.S.C. §107, the fair use of a copyrighted work is not a copyright infringement. Fair use includes criticism, comment, news reporting, scholarship, research, teaching, which all serve important public interests, but is not limited to these categories. Courts determine fair use on a case-by-case basis by applying a statutory four-factor analysis. A question arose: what about news aggregators? Relatively new in the US, news aggregators collect news articles via the Internet and use excerpts of those articles to compile daily newsletters sent to subscribers. In The Associated Press v. Meltwater U.S. Holdings, Inc. (Case 1:12-cv- 01087-DLC (S.D.N.Y. Mar. 21, 2013)), a well-known news cooperative owned by 1,400 newspapers in the US, the Associated Press (AP), sued Meltwater, an international news aggregator, for copyright infringement based on redistribution practices. AP has licensed agreements with three news clipping services that are Meltwater competitors. In response to Meltwater’s fair use defense a federal district court in New York found that Meltwater’s infringing activities were not excused. According to the court, Meltwater “is an expensive subscription service” and acts as “a substitute for news sites operated or licensed by AP,” without paying AP a penny. Such practices injure AP’s ability to perform an essential function of democracy - news reporting. Additionally, “permitting Meltwater to avoid paying licensing fees gives it an unwarranted advantage over its competitors who do pay licensing fees.” Meltwater also argued that AP should be barred from enforcing its copyrights because - by engaging in price-fixing with competing news organizations in violation of the antitrust laws - AP had misused its copyrights. This defense was rejected by the court.


Fourth, a decision in a landmark case, Kirtsaeng v. John Wiley & Sons, Inc. (No. 11-697 (S. Ct. Mar. 19, 2013)), was recently issued by the US Supreme Court. The case addresses the reach of the “first sale doctrine” (17 U.S.C. §109). Supap Kirtsaeng, a Thai citizen, sold copies of foreign edition English-language textbooks that he purchased in Thailand in the US. The prices of foreign edition textbooks are generally significantly less than US editions. The publisher plaintiff, John Wiley & Sons, brought a copyright infringement suit against Kirtsaeng, alleging that he infringed the publisher’s exclusive right to distribute and an import prohibition elsewhere in the Copyright Act. Kirtsaeng raised the first sale doctrine as his main defense. The doctrine delineates the extent to which a copyright holder can control its copyrighted work. It provides that, “not withstanding the distribution right, the owner of a particular copy or phonorecord lawfully made under this title…is entitled, without the authority of the copyright owner, to sell…that copy or phonorecord.” An important question arose: does the first sale doctrine permit copyrighted works lawfully made and sold outside the US from later importation and resale in the US for profit? On March 19th, 2013, the US Supreme Court answered the question affirmatively; construing words “lawfully made under this title” as meaning “in accordance with” or “in compliance with” the Copyright Act. By clarifying this limitation on copyright holders’ exclusive rights, the Court broadly construed the statutory language. The Court’s decision manifests the impact that US copyright law has on international markets. A cautionary note is necessary: the first sale doctrine applies to sales. Because some entertainment services increasingly use download and cloud-based access services based on licenses (not sales) that permit copyright owners more control over their content, the decision may have different impacts on different industries. Legitimate commercial enterprises may decide to engage in arbitrage opportunities (making profits from price differences between two or more markets) for hard-product sales. And industries that provide streaming and transmission services pursuant to licenses may gain competitive advantage. Time will tell.


Receptivity of copyright law to societal changes

Few areas of American law reflect change more dramatically than copyright law, which mirrors societal transformations. The shifting patterns in the fabric of copyright law are systematic responses: to new threads of creative expression; to technologies of reproduction, distribution, and public performance; and to uses of copyrighted works by the public. The law contains provisions to accommodate maps, charts , books , photographs , piano rolls, broadcast radio and television, cable and satellite retransmissions, musical works and sound recordings, architecture, the visual arts, computer software, semiconductor chips, digital audio recording technology and the Internet. Although many changes are legislated based on what elected officials believe to be in the best interests of the nation, other refinements accrue through judicial decision-making and the resultant body of common law. The fabric has stood the test of time, but is frayed in certain places. The digital era has placed substantial pressures on a copyright system that is neither well-equipped to predict technological changes nor able to provide a rapid response to them. Since 1999, the system has had to deal with Napster, Grokster, YouTube, DMCA takedown notices and safe harbors, cloud computing, satellite technologies, digital archiving, MegaUpload, Aereo and many other issues. Some issues await dispositive resolution.


To fill the gap between Congress and the courts, proposals have been made to give the Copyright Office substantive rulemaking authority. These proposals raise issues with Congress about giving power to an administrative entity. They address also the perils and pitfalls of government by regulation. As an example of these pitfalls, the Office recently issued a rule in an area within which it is allocated rulemaking authority - the circumvention of digital rights management technologies - and barred the unlocking of digital phones. Immediately thereafter, the White House opposed the new rule and five bills were introduced in Congress to override it. Currently, it is unclear whether Congress will give the Office expanded rulemaking authority or override the Office’s anti-circumvention rule.


Conclusion

As contemplated in Article I, section 8, clause 8 of the US Constitution, as crafted by Congress over more than two centuries, and as interpreted by the judicial branch of government, the balance of interests in US copyright law creates a constructive tension among copyright owners (who, through authorship, are incentivized to create and share copyrighted works), distributors (be they publishers, television or radio stations, web-casters, and/ or on-line service providers), and the public interest (consumers, students, and other end-users). Every encounter between copyright law and a new technology presents a stark choice for lawmakers: whether to expand copyright so that authors and copyright owners can be compensated appropriately for the value of their works or whether to withhold protection, in which case users might benefit from “free” content and distribution interests reap rewards from the popularity of their services. Invariably, in the US, statutory amendments involve some sort of a political compromise between competing interests.


In the US, is copyright an author’s right? Do distribution interests have affirmative responsibilities? And are users the beneficiaries of the copyright system? The answer to all these questions is “yes.”


Copyright balance is not easy to achieve - as is the case in all life matters. But, in the US, the pursuit of balanced interests in the copyright law is thought to be well worth the effort.

 

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