Rebecca Tushnet

Digital First Sale

Panelists: Karyn T. Claggett, U.S. Copyright Office

History repeating: we studied digital first sale before studying digital first sale was cool.  PTO is now having a series of roundtables on these issues—next will be in Boston, June 25.

What has changed since 2001?  Is there tech that could now overcome issues we identified about expanding digital first sale?  Is there “transporter” technology to move a material object and not leave a copy at the point of departure?  ReDigi argued that it had created that kind of tech.  Court disagreed.  It didn’t matter whether there was an additional copy, because the issue was that the reproduction right—a new copy—was implicated.  There was no move, and that was the most significant aspect. But as a policy matter, transporter tech would be very important. (Suppose we do get a transporter.  Could you carry a book through a portal without infringing?)

Courts are confused about sale/ownership.  Cases like Vernor v. Autodesk; international law (CJEU UsedSoft case) doesn’t comport with how we’ve considered the issue of ownership v. licensing.  If courts are confused, consumers are even more confused.

John Villasenor, Brookings Fellow and Professor of Electrical Engineering and Public Policy at UCLA

What would happen if we had digital first sale?  Consider 1 million music fans who each like to listen to a particular song that last 3 minutes once a week.  How many copies of that song would there need to be for there to be a good chance that you could borrow it and listen it at a time of your choosing, then give it back?  Answer: a few hundred.  Could we restrict transfers so you can’t loan a work for a few seconds?  If you try to draft language to allow reasonable transfers but restrict others, it turns out to be impossible, or at least he hasn’t seen it.   (I guess we’re about to conduct a natural experiment on this w/software in the EU.)

We’ve already moved to a licensing based system of digital distribution. When there’s no sale, then there’s no issue of §109 expansion, because there’s no ownership.  In today’s license-based ecosystem, permissible downstream uses are addressed by a mix of contract and IP.  (And consumer protection law, if you live in the EU.)  Much of the argument for digital first sale stems from consumer frustration about limits.  There is a legit concern consumers face with their ability to dispose of works; we should acknowledge those concerns.  You can get more content now than 5-10 years ago, but that doesn’t erase the concerns about the messaging we give consumers. 

Consumers who buy copies of digital works are often subject to complex agreements saying they’re licenses.  If you asked a person on the street what it means if you hit the “buy” button for a movie, there’s an enormous amount of confusion (RT: where “confusion” means “beliefs I don’t like”), and that’s not on them. There is at least an ethical and possibly a legal obligation under deceptive marketing laws to properly inform consumers about what they’re getting. This should not be addressed through copyright law, or through law altering the kinds of agreements providers are allowed to offer consumers, but it is an important issue. Solving the problem of better disclosure will go a long way to put to rest the clamor for a digital first sale doctrine. Market forces would lead to license-based content that would give consumers more options than they have. Letting market develop on its own, not one size fits all statutory approach.  Licenses could explicitly be designed to permit reasonable downstream dispositions.  Could emulate the rules about tangible copies.

(This is an interesting approach, and has a fair amount of logical force.  The problem it will face is that disclosures, as a class, struggle to work even when the consumer is motivated and attentive to the relevant information.  Consumers will not be motivated to attend to this information, and that means it will be all but impossible to “educate” them about the terms the copyright owner would like to impose.  I do not believe that it is possible to have your cake and license it too here.  There’s a reason the button doesn’t say “license.”  It says “buy” or “rent.”  And I expect it will continue to do so.)

Janet Cullum, Cooley LLP

ReDigi did not avoid the cloud model. Suppose you have a legit copy, stored in the cloud.  You transfer your account to me, losing access while I have it, and I listen to the copy. ReDigi decision itself doesn’t put that off limits.  Contracts?

Apple and Amazon are thinking about how to facilitate this consumer desire to be able to resell their works. Patent applications: Apple has contemplated a Bitcoin-like encryption model, where your digital copy needs a key to access.  To transfer for sharing/sale you’d give that key to the next user.  Why would Apple contemplate this?  These reflect desires to create a userbase/keep it happy. Walled garden! You’ll buy more music/more devices. 

Qwest TV commercial, circa 1999: In the middle of nowhere, small motel with few amenities: but all rooms have every movie ever made, in any language, anytime, day or night.  The future is here! Does ownership make sense? Or should I just rent/stream?  Like renting a Zipcar.  In the future, will consumers tell themselves they don’t need to possess anything, either digitally or physically, because they can get anything, any time, in a seamless fashion?

(RT: Note the implicit assumption that there is a fixed pool of creators who create stuff, and users who consume stuff, and never the twain shall meet, certainly not at the point of fair use. How one crosses over to become a creator is an exercise left for the reader—or should I say the renter.  And that’s even setting sociology/psychology aside, though a renter class behaves differently than an owner class for those reasons as well.  Another observation: if the people in this room buy this story, then they really should go for net neutrality. A country in which our internet service is much slower and more expensive than that in other developed countries is not one where it makes sense for consumers to switch and be at the mercy of Verizon.)

Streaming probably won’t eclipse all models—slower in books than in music. Cons: Economic model isn’t sufficient for compensation right now, even though pros are that consumers discover more works, lower manufacturing costs, and possible replacement for piracy.  Consumers have to give up resale right; depend on provider keeping things current/having internet access. But the pros for them are greater: vast quantities of content, convenient.

Studios and labels are winners: broader audiences, cut deals with streaming platforms that give them increased control—generate royalties, ownership interest in some platforms.  To the extent platforms are successful, they too reap economic rewards.  (I wonder how the Hachette/Amazon fight works as evidence here.  The platforms love not studios/publishers/etc.)

Smaller players have it harder: they don’t have the bargaining power that large legacy rightsholders do.  NYT: trade groups representing 1000s of independent labels and musicians appealed to the EC, accusing YouTube of unfair contracts for a planned music service, and threat to block labels’ content if they don’t sign.  Am Ass’n of Indep Music has asked FTC to stop YouTube from blocking its members’ content, abuse of a dominant position.

For streaming services: profitability challenges are huge.  50,000 foot view—if they can continue this kind of growth, they can monetize audiences.  People wondered whether Facebook could make money not long ago. ASCAP consent decree must be revamped.  Tensions in marketplace: Pandora won case on whether rightsholders could pull out from streaming.  Ultimately, regulation + market will get us past the profitability challenge.

Q: if there’s digital first sale, what prevents HathiTrust or other mass digitizers from selling their copies?

A: Nothing.

Claggett: concern would be if they’re lawfully made copies, they could be sold/resold.

Interplay between contracts and exceptions—should contract be able to override fair use?  Many communities argue we should have presumption in favor of exceptions so contract couldn’t trump them.

Q: what about the legal force of the “buy” statement on the button?  If they present it as a sale, don’t consumers have the right to treat it that way?

Villasenor: good case law on the difference between license and sale from 9^th Circuit, though Vernor is specific to software. UMG v. Augusto: UMG distributed promo CDs, the court rightly found that recipients weren’t bound by the statement on the CDs that they were promotional.  Contract providers have a need for simplicity. But they pay a downstream price. Content providers would do us/themselves a service by providing more clarity that they’re not selling ownership; lack of clarity annoys consumers, gives consumers reasons to complain to legislatures, and gives plaintiffs ammunition to say they’re owners.  Judge/jury’s reaction to a big “buy” button is of concern.

Claggett: EU case: found that there was actually a sale.  It may be claimed to be a license, but court found it to be a sale for, among other things, policy reasons—otherwise there’d never be a first sale if even unlimited licenses were found to be just licenses and not sales.

Cullum: typical consumer—but that case will never be brought.  Harder to bring a class action.  Intermediary drives the case law: who’s making the market? Harder to predict in that context.

Q: how do you counsel clients in the EU?

Cullum: you have to look at local law.

Villasenor: extraterritorial recharacterization of what the content owner thought were licenses as sales is of concern, especially given Kirtsaeng.

Claggett: look at key aspects of UsedSoft case that made it sale.  Are there additional restrictions on licensors you could put?

Villasenor: without agreeing w/the decision, the court cited the perpetual nature of the license as dispositive in terms of recharacterizing. 

We aren’t ever confused when we rent cars about whether we actually own things, even though the car contract is long. Companies could do a lot to provide more clarity/flexibility if they wanted to, but they shouldn’t be forced to, but they could distill messages to consumers.  (RT: Yeah, because when you rent a car you return it, and it’s gone. That’s not like the Placebo track I bought eight years ago, which lives to this day in my iTunes.  Try to distill the message that supposedly needs to be conveyed here, which is quite distinct from the message Hertz sends you: it’s yours forever, but you don’t own it.  I don’t think that works as well.  I’m also perplexed by the idea that it’s shocking that a perpetual license should be characterized as a sale, since the very reason you want to end the transaction having purchased access to the content forever is so that you won’t lose it for failing to pay the rent: conventionally speaking, you wish to own it.)

Villasenor continues by noting that content owners would love to stop selling things across the board, but that would create various provisions.

Claggett: there are arguments for giving various rights/privileges to the lawful possessor of content, whether or not it’s owned.

Cullum: evolution to expectation of “free.”  Production cost is cheaper, but that expectation must be changed—and she thinks it will, because business models can provide value-adds like prepopulated playlists and additional services that are worth paying for and can be ratcheted up in price over time until they start making lots of money. 

Keynote Speaker: Congresswomen Judy Chu (D-CA) (House Judiciary, IP Subcommittee)

There can be bipartisan agreement; there’s no obvious Democratic/Republican point of view, and we could get something done.  Copyright is important in her district—Pasadena/LA.  Influenced by entertainment industry, not with chart-toppers but set designers, makeup artists, lighting technicians.  Copyright is fundamental to this country.  Constitution, American economy/culture.  More than $1 trillion to GDP; $142 billion foreign sales/exports.  Always positive trade balance.  Original works can’t be duplicated anywhere else (RT: although it helps if they’re filmed in New Zealand). 

Reform: Multiple stakeholders have views on best approach.  She advocates for the everyday creator, who often doesn’t have a voice in Congress.  We all witnessed unraveling of SOPA.  She supported SOPA as a way to combat rampant piracy in this country.  (In this country?  I thought you told us it was to deal with pirates outside the reach of US law ….) Was dismayed by hysterical accusations about breaking the internet.  Defeat made clear that concerns of creative community weren’t heard.  Thus, she launched Congressional Creative Rights Caucus, with her chair Coble.  To help members of Congress understand everyday Americans whose jobs rely on these industries and rely on Congress to protect their rights.  53 members strong over 17 states, bipartisan.  Active in hosting educational briefings/events—songwriters talked about absurdly low payments for digital streaming; photographers speak about thumbnail images being higher quality so their livelihood is threatened when users don’t click through; recording artists talk about lack of compensation for terrestrial radio; next month a briefing for authors/publishers.  Upcoming: Rock the House competition, modeled on a competition in Parliament, to stop eyes from glazing over. Challenged members to choose the best song from groups w/in their districts.   Greatest victory: members of Parliament became engaged in IP issues, and eventually copyright law changed for the better.

Judiciary IP subcommittee: going section by section into the Act.  Needs of creators/public have evolved so much since last major action.  New tech poses challenges, as fair use and digital first sale hearings showed.  Most witnesses agreed no action on fair use was required for parodies/quotes, but recent decisions have allowed the expansion of fair use in Google Books, and an increasing number of remixes/mashups allow significant sections of an artist’s work to be inserted without compensation—should Congress intervene?  Should Congress intervene in first sale? 

She is hopeful we can move the needle on key issues, particularly in music licensing.  Fair compensation for all artists across all platforms.  Cosponsored Songwriter Equity Act—not fair that songwriter only makes 8 cents for 1000 digital streams.  Music licensing is not working for all creators on digital radio—rates need to be updated to reflect fair market value under willing buyer/willing seller standard, and rate courts should be able to consider other royalties when considering digital royalties. Also supports efforts to reform consent decree which has kept streaming rates artificially low.  DoJ is reviewing the consent decree—an important step forward.

Another bill: RESPECT Act—Respecting Senior Performers as Essential Cultural Treasures Act (sigh).  All artists should be fairly compensated regardless of platform, but because of federal statutory license, legacy artists get nothing for digital radio if their works predate 1972. Entire channels are dedicated to music from 40s, 50s, and 60s where no artist gets compensated, losing estimated $60 million in royalties in 2013. Many can’t make a living touring/selling records because of their age. This legislation would fix disparity in state/federal law.  Some of the biggest digital radio companies take advantage of this loophole. 

Performance rights for terrestrial radio: the long fight.  Nearly all the industrialized countries compensate for radio play, but we’re like North Korea and Iran.  (I fully support this reform, though I’d rather move us out of the holdout category for paid maternity leave first.)  Also we can’t take advantage of reciprocity in foreign countries.  Session artists etc. really need this income.

SOPA: where can we make change on piracy? Voluntary agreements show a lot of promise.  Internet infringement costs $250 billion/year and robs American workers of 750,000 jobs.  Lose $16.3 billion in earnings/year to infringement.  Copyright Alert system is voluntary, with progressive series of notifications.  Fair, user-friendly, with built-in consumer protections.  After 1 year, the program has been smooth and successful, with 1.3 million copyright alerts.  Slated to double notices in the coming year. 

Voluntary efforts can also improve notice and takedown’s whackamole problem.  Current system is ineffective, forcing industry to employ armies of employees just to issue takedowns. The individual creator doesn’t have armies.  Marie Schneider testified that she struggles against endless sites offering her music illegally, and takedown system is frustrating because when she issues a takedown the music reappears on similar or even the same site.  PTO is now conducting roundtables on how to make these work better. These notices should at least be standardized.

Role of search.  Congress was concerned that infringing sites are still prioritized in Google search results, and autocomplete makes finding infringing content easier, even after Google’s algorithm change in 2012.  At that hearing, she put “watch 12 Years a Slave” on her iPad, and the first/second sites were infringing.  (Now the first result is Google Play, BTW.)  Not much has changed.  Search engines play a critical role in leading consumers to infringing sites—more than 4 billion referrals a year, and millions sought infringing content during one month alone. Search engines could do a better job of deprioritizing illegal sites, since over 90 legit services download/stream content. Voluntary agreements need to find a way to make this happen.

The administration plays a key role.  IPEC: Victoria Espinel was key in coordinating Copyright Alert system.

CO: Congress is central to 21^st Century CO.  Supports funding the effort to have multiyear technical upgrade, including digital repository and reengineering recordation.  Result: $1.2 million more than CO’s overall budget request, with $1.5 million for the project. Now it’s up to the Senate.

Stories of artists who have to tour because they can’t afford not to, or die in poverty because they don’t get radio royalties.  (Artists are just an instance of our large social transfer of risk to individuals.  How about a guaranteed basic national income? Why should you have to write a hit song to avoid dying in poverty?)

The 21st-Century Copyright Office   

Moderator: Jacqueline Charlesworth, U.S. Copyright Office

Review of history of Office; long history of small budget, big job.

Panelists: Allan Adler, Association of American Publishers

Rulemaking authority of CO: most of the change in copyright has been legislative and judicial, because rulemaking has always been somewhat circumscribed/in question.  Congress has Art. I sec. 8 cl. 8 authority, and judges are judges, but the nature of their processes challenges copyright reform. Congress politicizes everything, which in more genteel times was viewed by many as esoteric and arcane; as a species of property law, supported by both political parties. Democrats thought of it as engine of free expression and Republicans thought of it as property. But Congress can’t satisfy the many stakeholder communities that have an interest today. (RT: Side note: the neoliberal capture of the American political imagination is nowhere better reflected than in the widespread idea that policymaking addresses “stakeholders” rather than “citizens,” especially in issues of technology and free expression in which every citizen has a stake.)  Courts can only deal with change one case at a time, which takes a while.  And there’s a lot of conflict in and across circuits.  Both are extremely awkward in how to adapt technological innovation to copyright law, which is the main issue in how we reach the next great © Act.

Sometimes Congress has specifically given direct authority to the CO.  DMCA 1201(a) is the primary example.  Because of the dissatisfaction with that process among stakeholders, it’s not necessarily an example to hold up of why the CO should be given additional substantive rulemaking authority.  But because some have argued that the statute is so heavy, difficult to parse, perhaps additional substantive rulemaking is what’s necessary to address concerns.  (Will rules be easier to parse?)  If regulatory copyright is the current state of the Act (as Joe Liu has so persuasively argued), looking more like rulemaking than legislation because it addresses industries distinct from each other rather than applying broad rules, then maybe we should rethink.  If the Act is regulation and not general statutory guidance, giving the CO more substantive authority is the better solution. Regulation is more flexible than legislation, more nuanced, more specific.  Can adapt and be more readily and adroitly changed.  CO has the expertise and the legislative and judicial branches have relied on it for years.  (RT: And here the constitutional problem rears its head.  I was under the impression that the Copyright Office, located in the Library of Congress, was part of the legislative branch.)

What issues?  Fair use, whose substance/meaning is in the eye of the federal judge.  (If you can’t win in the courts, change the forum!)  Opinion letters, as SEC does, which would help people resolve some of the problems on a daily basis but would be broadly applicable to large populations.  Substantive rulemaking would be more broad—currently CO only addresses its own ministerial functions like deposit, or what Congress orders it to do.  Could the CO expand in this way?  Administering compulsory licenses; use 1201 rulemaking to craft new exemptions based on a more full record of technological changes.  (More full record?  Did the AAP participate last time?  Because it seemed extensive to a fault to me. (Note: I found 2003 and 2009 by a quick search; I imagine they’re part of the Joint Commenters on a regular basis, but I’m not sure what they think was missing from the record.))

CO can provide participatory balance as well as transparency, key for public understanding and trust. This is important now that some of the public thinks copyright is like civil rights, despite the SCt’s repeated insistence that copyright is not bounded by the First Amendment.  CO must realize that in order to examine the law and execute further changes to accommodate tech innovation, rulemaking authority should be addressed broadly sooner rather than later.

Susan Chertkof, The Recording Industry Association of America (RIAA)

Many tech challenges.  User fees can’t really be raised high enough to upgrade to full electronic registration and recordation (including electronic deposit of sound recordings, images, etc.).  How can we go beyond keyword searching—possibility of audio fingerprinting, image search?  Seems to be a disconnect between fee collection and registration/certificate department.  We’ve sent in money through the deposit account, but the people with the documents say we haven’t paid. 

Incentives for registration/recordation—reinstituting formalities? We wouldn’t favor that. It’s fine to create true incentives, like discounts.

June Besek, Kernochan Center for Law, Media and the Arts

We all want faster, better registration; image recognition.  The CO needs more money and a better IT infrastructure to do this.  They can’t just buy off the shelf, literally or figuratively.  The budget is 2/3 fees and 1/3 appropriations now.  Need a really large investment!  The CO would like to keep fees for individuals low, and there are statutory obstacles to raising fees, but even if it could be done, then appropriations would just go down.

So how could we get increased appropriations?  The CO’s dealings with Congress go through the Library of Congress.  The CO is a line item.  Library picks its priorities, understandably doesn’t give the CO everything it asks for. Ideally, the CO should be extricated from the LoC appropriations process to make its own case for what it needs.  Need ability to do year to year projects—fees aren’t a good basis for long term planning.

Fees.  Makes sense to uncouple CO from LoC.  The CO is a business office and needs a dynamic fast paced system, and the LoC currently supplies a lot of the IT.  They have different priorities; CO is in line with other constituents.  The CO needs a system better designed for what it does.  Security is a big issue.  Commercially relevant records don’t always track library needs.

Gov’t shutdown last year: websites that were up at CO were static; you couldn’t register or file.  There’s no reason why you shouldn’t have been able to see the CO’s records, but it took days to get the website back up just in static form because IT people at LoC didn’t think it should be done.  Why are they telling CO management what CO should be doing, as a business office for the copyright industries? 

This is our gov’t. We’re the only ones who can make changes: the customers.  (Which puts an interesting spin on “this is our gov’t.”)  We have to persuade Congress that the system is inadequate.  The patent bar has been extremely good at getting changes to the funding of the patent system; their fees sometimes exceed spending and Congress raids the money, but the principles are the same.  We can do something similar.

David Carson: as recent CO alum, note of caution/concern.  1201 rulemaking isn’t the Register’s in final form—all regulations are subject to Librarian’s approval. Historically it hasn’t been much of a problem, but not always, and in recent years it can be difficult (cf. 1201 overruling on access to print disabilities).  Actuarial tables suggest Librarian will change soon, and if you look at the political environment among library associations, the likelihood that the next Librarian will be hostile to copyright is high.  (Hostile to overextension isn’t the same as hostile to copyright, but that’s this crowd.)  Which leads to Adler’s points. They might welcome substantive rulemaking authority with the right leadership.

International Copyright Developments

Moderator: Robert Brauneis, George Washington University Law School

Covering not the world, but focusing on certain important areas. Also focused on new rights/limitations rather than issues of jurisdiction and procedure.  Tomorrow: event on Marrakesh Treaty at AU—come!

Panelists:

Jiarui Liu, University of New Hampshire School of Law

Chinese backlash to Chinese copyright law: authors, musicians, and artists voiced their views in public.  Coverage in media was relatively impartial.  Rare treat to see gov’t agency called controversial and irritating.  In a country with 90% piracy rates, the general public appears to be sympathetic to authors and approve of their efforts against rent seeking. 

In response, the Copyright Office presented three different drafts.  Most controversial: extended collective license, orphan works, mechanical licenses.  ECL pioneered by Nordic countries.  Limited to special cases—copying for research, preservation, etc. Authors may sometimes opt out.  First draft of Chinese proposal: substantially different from Nordic model, not limited to special cases—any collecting society (China has 5 now) could apply. Existing societies: Musical works, music videos, literature, photos, and motion pictures—all the commercially significant types except software; potentially quite expansive. Authors would only be entitled to royalties if the user/infringer obtained a license from collecting society; opt out would not increase royalties.  Key difference: Chinese collecting societies are far from representative.  Objections: undermine remuneration, harms both users and authors, might violate Berne’s three-step test.  90% is not a special case. 

Pressure resulted in dramatic turnaround—collecting society that was driving force behind first draft pulled its support.  Admitted that the society was “too narrow minded” and short-sighted and insensitive to authors’ needs. 

But the ECL system does have its merits.  Lowers transaction costs for potential users.  Increases bargaining power of collecting society.  Example: collecting society approached Google, as only society for Chinese literature.  But only represent 10% of Chinese authors—pay us and there’s still a 90% chance of getting sued. Google rationally walked away.  The less representative a society is, the more it wants ECL. Many Chinese societies currently offer indemnity to users, holding users harmless.  So Chinese collecting societies not uncommonly fight with Chinese authors.

ECL is not the only way to increase representativeness—could improve service/attract more. ECL would undermine incentives to offer better terms/better services.

Orphan works. Should user have to pay royalty before author emerges?  China sides with Canada/compulsory license because it creates opportunities for rent-seeking for collection societies.  The US approach (no royalty before author emerges) makes more sense.  Alternative is worst of both worlds: user tax with no incentive for authors. Well-functioning market benefits entire society.

If all producers get from gov’t, nobody has any need to negotiate prices or terms—central planning.  Not favored by Chinese public.  Market economy produced growth: lesson is that lower transaction costs don’t justify abandonment of markets.

Madeleine Lamothe-Samson, Norton Rose Fulbright

Canada: New right of making available.  ESA v. SOCAN (2012): is a musical work communicated to the public by telecommunication when video game w/work in it is transmitted for download?  Answer: No.  Likewise for downloads of music, though yes for streams.

But that was before the law changed to introduce making available.  Is the Supreme Court decision still relevant?  Hot debate in Copyright Board now.  Rightsholders say the legislator has spoken; for this change to be meaningful there has to be a new right to comply with our international obligations.  Right to get paid separately from the download, which triggers the reproduction right.  (Don’t they get paid for downloads too?)  Opponents say that it’s a clarification, not a new right.  Decision probably before Christmas.

Fair use: two step test—allowable purpose and fair?  Before Nov. 2012, there was a list: research, private study, criticism or review, and news reporting.  Purpose of the dealing, character, alternatives to dealing, nature of the work, and effect of dealing on the market—similar to US test for fairness, but fixed list of purposes.  SOCAN v. Bell Canada: 30-second previews of muscal works were fair dealing for the purposes of research.  Purpose must be the purpose of the end user, not the purpose of the service provider.  Thus Bell was helping individual consumers w/their own private research of music of interest.  Another case: Access Copyright, SCt said that student’s purpose allowed institutional copying by teachers of book excerpts.  Universities have now reacted and there is a big fight going on.

New era for private copying: time and format shifting now legal without compensation; so is backup copying; so is reproduction for private purposes—CD to iPod.  Exciting times!

Axel Nordemann, Boehmert & Boehmert

EU: 28 different copyright laws.  Not even Benelux, with unified TM law, has unified © law. One tool for harmonization is EU directives.  May not be stricter or looser: copyright term.

EU doesn’t have a general exemption, like fair use.  Rather there’s a conclusive list of exceptions for certain uses provided by law.  Three-step test on top.  Always difficult to achieve lack of prejudice to rightsholder.  (!)  Private copying exemption: member states may but need not exempt it.  Luxembourg and UK do not; but this is due to change soon.  Only the copying is exempt, not distribution/making available.  Private copy must always be made from lawful source. 

oyalty on storage media: controversial, and differs substantially across countries.  Mess.  Hard drive may be expensive, or free of tariff.  The company trying to make the most out of this mess is Amazon, whose EU business is organized to contract/invoice always through Amazon EU in Luxembourg, thus doesn’t pay tariff. But shipping/return centers are usually centrally located, mainly in Germany. Refuses to pay royalties for recording devices because Luxembourg has a zero royalty.  But this is no longer justified.  The rule of the member state in which the end consumer is located is applicable.

Photocopies are also exempted, if related to reproduction on paper/similar medium. Photographic techniques or processes having similar effects.  Not applicable to sheet music.  Fair compensation must always be made. Digital copies are not exempted.

Collecting societies sometimes have territorial monopolies—we thought CJEU might kill this as against free movement of goods/services, but CJEU allowed member states to give a monopoly, but pricing is subject to checks on abuse.

Right of citation is also exception/limitation.  Citing a work must be in accordance w/fair practice, and source including name of author must be indicated.

Exhaustion/first sale: we only have regional exhaustion, first sale in EU. Prevailing opinion was: must relate to material medium, thus only CDs etc., not to downloads. This has changed since the Usedsoft decision of CJEU.  Now you can sell downloaded software. Main reason for judgment: economic point of view—sale of computer program on CD v. by download is similar.  Does that affect digital exhaustion of downloaded music?  (Why not yes?)

Shira Perlmutter, United States Patent and Trademark Office

At WIPO/multilaterally.  WIPO internet treaties established new rights, such as making available, and relied on permissive system for making exceptions w/in the three step test.  After over 15 years of inactivity, new developments in both rights and exceptions.  Two treaties in 3 years: one with new rights, and one with new exceptions. Beijing Treaty on audiovisual performances and Marrakesh Treaty for print-disabled access.  We may not be done, because current agenda involves another possible new rights treaty and several categories of exceptions.

Beijing Treaty: update rights of performers in AV works to deal with realities of current technological world.  In 1996, AV performers were carved out of internet treaties mostly because EU and US couldn’t agree.  Conflict over transfer provision—in what circumstances the movie producer could exercise the performer’s exclusive rights.  US WFH doctrine is controversial, and motion picture industry wanted to keep it in place when films were exploited in other countries and other countries didn’t want to agree.  Finally, this sticking point was resolved.  Solution: each country’s law can decide how to deal w/transfer, but that’s made explicit in the treaty.  Each country may provide that consent to fixation means that exclusive rights of authorization shall be owned/exercised by/transferred to producer, subject to any contract w/the producer. Countries could provide for equitable remuneration despite transfer rules.

Actors get economic rights as in WPPT, and moral rights, but agreed statement puts a number of specifics in place.  Explicitly permits modifications in normal course of exploitation, including compression, formatting, and dubbing.  Term, formalities, rights management information/TPMs also covered.  Agreed statement: nothing in the TPM article prevents  acontracting party from adopting measures to ensure the benefit of limitations and exceptions, where TPMs have been applied and there is legal access to the content, and where appropriate and effective measures haven’t been taken by rightsholders to enable the beneficiary to take advantage of the limitations and exceptions. Every word there was carefully negotiated, among other things to be consistent w/DMCA rulemaking. How does that affect interpretations of past treaties, which doesn’t have that agreed statement, or future treaties? 

Botswana, Syria, and Slovakia have ratified; EU will take us over the threshold of 30 countries ratifying.  US is working on ratification and implementation.

(What is the need that this treaty is solving?)

Proposed broadcasters’ treaty.  No question that there’s a need to update from the Rome Convention.  (Really? Because I have that question.)  US proposed a treaty for broadcasters, cablecasters, and webcasters—anyone who invested in programming and sent it to the public.  That wasn’t popular.  Copyright owners expressed concerns about their rights to license.  User groups worried about ability to make private copies.

Signal-based approach instead of content-based approach—what exactly does that mean? Confusion about meaning has been rife.  The work stagnated for a few years. Last year, US made a new suggestion: time to break impasse.  More targeted approach: something we can all agree on.  Fundamental problem of broadcasters: signal piracy over any medium.  Proposal would have provided a single right to authorize simultaneous or near-simultaneous transmission of their signal to the public, allowing only for delays due to technical requirements or to time differences.  No protection for subsequent uses of fixations of the signal.  That would be content protection. Would avoid concern over extra layer of protection requiring authorization for post-fixation use.

Current status: discussions are continuing.  Some progress on clarifying subject matter of protection.  Looking at which rights are necessary and ways in which past proposals could be narrowed.  Public briefing at PTO coming June 11.

Marrakesh: Debate over whether treaty was necessary, or whether it could be done voluntarily between publishers and authorized entities. Int’l copyright has historically been “flexible” rather than requiring specific obligations for exceptions. Here there was a unique humanitarian need, for a limited class of users, not the general public.  Messy treaty. Countries are free to impose requirement that exception is only available if copies aren’t available on reasonable commercial terms. Three-step test continues to apply, repeated throughout.  Needs 20 countries to go into force.  Zero so far, but a lot are working on it, including US.

On agenda: exceptions for libraries, archives, educational uses, other disabilities.  Text-based work was our first priority; still an open Q what kind of text is at issue. Developing countries want treaties, but industrialized countries oppose them. US: these are important issues and libraries are key to vibrancy of system; we have exceptions in our law that work very well, but we need int’l flexibility for countries to tailor to their own conditions/needs.  (RT: You know, like rights are tailored to countries’ conditions and needs ….)  We don’t want a treaty.  Objectives and principles should be agreed on: countries should have an exception allowing libraries to make preservation copies under appropriate conditions.

There was a big fight over what text-based means.  More to come.

Q: how does EU know whom to compensate for copying onto digital media?

Nordemann: not sure. Same problem with radio broadcasting in EU member states.  But there the stations will deliver lists/schedules of songs.  Nobody can know whether that’s similar to private copying.

Lamothe-Samson: Same for Canada.  Distributed to different collectives, who have access to radio statistics.  (I’m sure that’s helpful for determining non-music distribution!)

Q: the idea is that there is a correlation–SCt of Canada accepted try before you buy because of the idea that in fact the use generated sales.  

Lamothe-Samson: that’s one way of seeing it.  (laughter)

Q: in new Canadian mashup exception, how is commercial defined?

Lamothe-Samson: It’s not!  We are all wondering.  If you become a viral hit on Facebook, and you end up starting a business, where does it stop?  We don’t have any definition or guidelines from cases yet.  A lot of undefined new vocabulary in the act–private use, private purposes, noncommercial purposes.  Very confusing.

Copyright Society of the USA Annual Meeting

[self-promotion: I’m here to pick up an award for Performance Anxiety.]

The View from the Copyright Office

Maria A. Pallante, Register of Copyrights, U.S. Copyright Office

Petrella and Aereo through the perspective of the government’s briefs.

Petrella waited 18 years to sue; MGM spent a bunch of money investing in a new version of the film.  Concern is for equity to defendant.  9^th Circuit was too generous to MGM, but should the court consider the delay in some way?  Copyright Office was concerned about threat to three-year rolling statute of limitations.  Middle position between what CO saw as parties’ extreme views, arguing that 3-year period should not be subject to laches, but delay could be considered w/r/t equitable remedies such as injunction, where user has invested in derivative works.  Gov’t prevailed.

9^th Circuit wrongly held that laches should be a complete bar where any part of the conduct occurred outside the statutory period—could deprive owners of their copyrights decades before the statutory term has run.  (RT: Of course, one can be deprived of other property that has noexpiration date; other causes of action run out.) 

Dicta: is registration a requirement, or just application?  10^th and 11^thcircuits use a registration approach: registration or refusal is required.  5, 7, 9^th use application approach.  Petrella passage suggests that Ginsburg & the 5 Justices who joined her agree with registration approach: registration reduces the need for extrinsic evidence—“registration must be on file with the Copyright Office before the copyright owner can sue.”

Aereo: performance can be most valuable right; 2d Circuit could undermine streaming models. But it’s important to preserve some cloud models, and the SCt focused on drawing a line.  CO: transmit clause makes the relevant audience the ones capable of receiving the performance, and Aereo’s promise to transmit to any paying member of the public makes each transmission one to the public even though each one goes ultimately to a single subscriber.  Could enjoin this infringement without questioning innovative tech for allowing consumers to store lawfully acquired copies.

Observations from oral arguments: Sotomayor asked about other services; Ginsburg asked about whether Aereo’s view was compatible with int’l obligations.  Another query of note: how do you deal with Cablevision? (laughter)

Many current reform initiatives, including PTO/NTIA green paper.  Multistakeholder dialogue on improving DMCA notice and takedown; also soliciting comment on specific legal issues such as first sale, statutory damages, remix.  Signature theme of IPEC (coordinator) was voluntary cooperation—between ISPs, music labels, movie studios. Led to copyright alert system, which just released its first report.  Copyright ecosystem: everyone benefits, so everyone including ISPs, payment processors, advertisers, search engines should contribute to its robustness. Civil and criminal liability is important, but voluntary practices can do a lot. Question: what’s gov’ts role in monitoring/setting practices?

Congressional hearings are underway, on House Judiciary website.  13 hearings by the end of the month.  They’ve had lots of copyright owner groups testify, MPAA to Getty Images to media photographers. Tech platforms; Library of Congress preservation experts; law professors.  Next Congress: more indication of what/whether we’ll have an omnibus bill or connected series of small bills.  Also unclear: what decisions Congress might send to the CO.  Courts are important but don’t weigh the public good; voluntary practices are good but a private sector deal won’t necessarily benefit public policy. SCt confirmed Congress’s role in Eldred. If the CO were to have more authority to update certain things, that might help.  Congressional Q: How to avoid picking favorites when it comes to tech and not allow piracy?  That’s the million-dollar question.

Does the existing Copyright Act adequately protect right of communication to the public under WIPO treaties?  CO believes there’s uncertainty in implementation, which has clouded the certainty required. Legislative clarification of making available would be beneficial; is it possible?

US implemented treaties in 1998 w/DMCA.  Congress and CO concluded that authority was already governed by combination of reproduction, distribution, and public display/performance.  Congress’s intent was to comply with the treaties, and the US takes the position that we comply. But some courts have not understood/been inconsistent, especially in questions over whether infringement requires actual distribution.  Nimmer: both sides recognize distribution right. Point of disagreement: quantum of proof required to demonstrate that distribution took place—uploading, or uploading plus proven downloads. (RT: Um, some of us think that a download is an unauthorized reproduction, not a distribution since no copy is transferred; secondary liability for the unauthorized reproduction takes the place of distribution liability.)  Prof. Lunney disagreed.  Notice of Inquiry: what would the contours be?  If Aereo wins, what is to be done?

Orphan works: years of study.  Picked it up again because of cases applying fair use. Had another public hearing on this.  What should be a good faith diligent search? What should the role of private and public registries be? Should photographs be treated differently, because they’re difficult to trace ownership and a category of works of a very vulnerable population of owners because so frequently targets of unauthorized use?  Mass digitization has been conflated with other issues.  CO is leaning towards view that mass digitization should be uncoupled from orphan works; need legislative solution because even if mass digitization for search/print disabilities is ok, that doesn’t solve other needs if access to works is what the public wants, so Congress should put a framework in place with remuneration for authors.

Small claims: 2-year study. Many small creators want to pursue claims but it’s expensive; we should not pay attention to those who don’t care about asserting their rights because they don’t have a problem, but these small creators do.  Songwriters’ Guild: combined impact of small claims is death by a thousand cuts.  Pro bono assistance for lower-income artists: people who do it wanted alternatives to federal litigation.  We recommended an alternative voluntary system (has to be voluntary, constitutionally) under supervision of the Register but general direction of Librarian, administered through online and teleconferencing, without personal appearances.  Three adjudicators, two with experience in copyright law and one in alternative dispute resolution.  Focus: no more than $30,000 in damages, actual or statutory, but statutory are $15,000 per work or $7500 per unregistered work; registration required before action.  Executive summary bears reading.  We expect a hearing.  Photographers want this; very few can afford suit without this. Dramatist Guild and National Writers Union also agree.

Music:  if there’s a primary focus in policy now, it’s in music. In the middle of 8 hearings/CO roundtables.  Licensing: Commerce Task Force roundtable too.   Lyle Lovett: struggle remains to convince music users and policymakers that music makers should get paid.  Analog/digital divides, etc.

Asking many questions about revenue divisions, opportunities for gov’t to encourage microlicensing and/or standards for ID’ing musical works and sound recordings. Current licensing is broken and should be fixed if not done away with completely: that’s the consensus. Question is what should replace it?  Musical works reproduction/performance licensed together?  Maybe with sound recordings?  Musical work folks want to move to “free market”; others don’t.  Transparency/competition concerns in collective licensing. Some frustrated music publishers have been offering rights to digital services directly. Challenge: how to reconcile competition issues with beneficial aspects of collective management, which is still very important.  DoJ is going to conduct its own parallel review of the operation/effectiveness of BMI and ASCAP consent decrees—whether and how they should be modified.  Comments due Aug. 6!

New bills in Congress: Songwriter Equity Act, changing CRB rates to willing buyer/willing seller and eliminated §114(i) which prohibits consideration of sound recording royalties in setting musical work royalties. Another: require payment of royalties for pre-1972 recordings for any service availing itself of §112 licenses on the same terms.  Other pre-1972 issues would remain before Congress.

CO: we’ve been stuck in time, in budget and otherwise.  Given the changes, we need modernization.  Nimble and forward-thinking; interoperable with marketplace we serve.  We’ve done everything we can do without money: talking/research. The registration system needs a faster/better interface; secure repositories for digital works; identifiers that match how works are created; automated recordation for assignments, licenses etc. that would be publicly indexed; metadata to connect to outside registries; need to finish digitization of pre-1978 works and integrate them into a useful chain of title for public record.

We can’t be fee-funded unless the statute were changed to allow us to recover capital costs for long term projects like IT.  We could if the statute were changed also ask larger © owners to pay a surcharge to make it remain affordable for smaller owners. Under our statute, we can’t raise fees beyond literal cost, but we can keep some deflated. Most have gone from $35 to $55 but we’ve kept it lower to allow for single applications to stay at $35.

Shoutout to Bob Brauneis, who’s working on modernizing registration as a scholar in residence.  Parterned with Stanford University Law & Policy Lab; also Barbara Ringer honors program, 2 year paid fellowships like clerking for a judge.