Should a licensing market require licensing?

Law and Contemporary Problems

Volumn 70, Issue 2, 2007, Pages 185-204

  Lemley, Mark A ^a,b  

^a STANFORD LAW SCHOOL   (United States)

^b Keker and Van Nest LLP ^*  (United States)

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EID: 35248858873     PISSN: 00239186     EISSN: None     Source Type: Journal    
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References (175)

1. See, e.g., Wendy J. Gordon, Fair Use: Threat or Threatened?, 55 CASE W. RES. L. REV. 903 (2005);
2. Michael J. Madison, Rewriting Fair Use and the Future of Copyright Reform, 23 CARDOZO ARTS. & ENT. L.J. 391, 393 (2005) ("Both abstractly and concretely, however, fair use has been spectacularly unsuccessful as a substantive player in copyright theory and practice.").
3. I wrote about this expansion in Mark A. Lemley, Romantic Authorship and the Rhetoric of Property, 75 TEX. L. REV. 893 (1997), and that was before the passage of the Digital Millennium Copyright Act and the Sonny Bono Copyright Term Extension Act or the judicial creation of a right against inducement.
4. See MGM v. Grokster, 545 U.S. 913 (2005).
5. But see Paul Goldstein, Copyright's Commons, 29 COLUM. J.L. & ARTS 1, 3 (2005) (denying that copyright has expanded greatly in recent years).
6. On the recoding of copyrighted works, see Rebecca Tushnet, Payment in Credit: Copyright Law and Subcultural Creativity, 70 LAW & CONTEMP. PROBS. 135 (Spring 2007). I take for granted in this paper the desirability of allowing some such tinkering, and leave for elsewhere the defense of this basic goal.
7. Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569 (1994).
8. Glynn Lunney has criticized this conclusion as a misreading of the statutory language and of Sony, see Glynn S. Lunney, Jr., Fair Use and Market Failure: Sony Revisited, 82 B.U.L. REV. 975, 989 (2002), but given that the Supreme Court treats it as a defense it is likely to remain a defense. Cf. Princeton Univ. Press v. Mich. Doc. Servs., 99 F.3d 1381 (6th Cir. 1996) (en banc) (placing the burden of proof on the plaintiff if the use is noncommercial and on the defendant if the use is commercial, in an effort to reconcile Campbell and Sony).
9. LAWRENCE LESSIG, FREE CULTURE: HOW BIG MEDIA USES TECHNOLOGY AND THE LAW TO LOCK DOWN CULTURE AND CONTROL CREATIVITY 187 (2004). To be fair, whenever a legal rule is sufficiently uncertain it is susceptible of the same characterization; copyright owners may justifiably claim that many of the rights they have in the statute are similarly impractical to enforce.
10. See R. Polk Wagner, The Perfect Storm: Intellectual Property and Public Values, 74 FORDHAM L. REV. 423, 428 (2005). This fact may create a substantial practical freedom within which people can make uses that would likely be fair, though the searchability of private work in the online era and the fact that commercial publishers will not take similar risks both limit the scope of that practical freedom. I am indebted to Paul Goldstein for this point.
11. The American Intellectual Property Law Association Report of the Economic Survey of its members reports mean litigation costs in copyright cases at roughly $700,000 per side in medium-sized cases ($1 million to $25 million at stake) and $1.6 million in high-stakes copyright cases (more than $25 million at stake). AIPLA, REPORT OF THE ECONOMIC SURVEY 24 (2005).
12. For examples, see LESSIG, supra note 5, at 95-99, 187-88. In part this may be because they have no vested interest in strengthening fair use rights, which will be used against them at least as often as it benefits them. Or it may be because their effors-and-omissions insurers are risk-averse.
13. A striking counterexample is Houghton-Mifflin v. Sun Trust Bank, 268 F.3d 1257 (11th Cir. 2001), in which a publisher was willing to challenge the copyright owners of Margaret Mitchell's Gone With the Wind.
14. See, e.g., Am. Geophysical Union v. Texaco, Inc., 60 F.3d 913 (2d Cir. 1994).
15. It may also reinforce the procedural problems, since no lawyer can advise a client as to whether a use is fair without investigating whether a market for licensing uses of the client's ilk exists or could reasonably be expected to develop.
16. See, e.g., Pierre N. Leval, Toward a Fair Use Standard, 103 HARV. L. REV. 1105, 1124 (1990) ("By definition, every fair use involves some loss of royalty revenue because the secondary user has not paid royalties.");
17. William W. Fisher III, Reconstructing the Fair Use Doctrine, 101 HARV. L. REV. 1659, 1671 (1988);
18. Sara K. Stadler, Forging a Truly Utilitarian Copyright, 91 IOWA L. REV. 609 (2006);
19. Christina Bohannon, Reclaiming Copyright, 23 CARDOZO ARTS & ENT. L.J. 567, 597-98 (2006);
20. Matthew Sag, God in the Machine: A New Structural Analysis of Copyright's Fair Use Doctrine, 11 MICH. TELECOMM. & TECH. L. REV. 381, 393-94 (2005);
21. Lydia Pallas Loren, Redefining the Market Failure Approach to Fair Use in an Era of Copyright Permission Systems, 5 J. INTELL. PROP. L. 1, 38-39 (1997).
22. 17 U.S.C. § 107 (2000).
23. See, e.g., Harper & Row, Publishers, Inc. v. Nation Enters., 471 U.S. 539, 566 (1985) (calling the fourth factor "undoubtedly the single most important element of fair use.").
24. But see David Nimmer, "Fairest of Them All" and Other Fairy Tales of Fair Use, 66 LAW & CONTEMP. PROBS. 263, 280 (Winter/Spring 2003) (finding that the market-effect factor lined up with a fair use finding only fifty percent of the time, but using a narrower definition of market effect than the courts do).
25. The classic cite for this proposition is Wendy J. Gordon, Fair Use and Market Failure: A Structural and Economic Analysis of the Betamax Case and Its Predecessors, 82 COLUM. L. REV. 1600 (1982).
26. Glynn Lunney has critiqued this approach as overly narrow, see Lunney, supra note 4;
27. Gordon has argued that her work has been read too narrowly and that she understands fair use to be based upon more than transactions costs, Wendy J. Gordon, Market Failure and Intellectual Property: A Response to Professor Lunney, 82 B.U. L. REV. 1031 (2002).
28. Cf. Robert Merges, Are You Making Fun of Me? Notes on Market Failure and the Parody Defense in Copyright, 21 AIPLA Q.J. 305 (1993);
29. Richard Posner, When Is Parody Fair Use?, 21 J. LEGAL STUD. 79 (1992).
30. See, e.g., Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569,579 (1994) ("The central purpose of this [fair use] investigation is to see, in Justice Story's words, whether the new work merely 'supersede[sc] the objects' of the original creation, or instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message; it asks, in other words, whether and to what extent the new work is 'transformative."');
31. Am. Geophysical Union v. Texaco, Inc., 60 F.3d 913, 920 (2d Cir. 1994) (emphasizing the role of transformative use in the first factor, and questioning whether nontransformative copies should ever qualify as fair use).
32. For the origins of the idea of transformative versus superseding uses, see Folsom v. Marsh, 9 F. Cas. 342 (C.C.D. Mass. 1841);
33. Pierre N. Leval, Toward a Fair Use Standard, 103 HARV. L. REV. 1105 (1990);
34. LEON E. SELTZER, EXEMPTIONS AND FAIR USE IN COPYRIGHT 24 (1978).
35. See WILLIAM M. LANDES & RICHARD A. POSNER, THE ECONOMIC STRUCTURE OF INTELLECTUAL PROPERTY LAW 153-57 (2003) (making this argument as a justification for the transformative-use doctrine).
36. There is another, smaller class of cases that does not fit easily into this analysis - those cases in which the public-interest nature of the use predominates. See, e.g., Time, Inc. v. Bernard Geis Assocs., 293 F. Supp. 130 (S.D.N.Y. 1968) (finding a scholar's surreptitious photography of the Zapruder film of the Kennedy assassination to be fair use, largely because of the extreme newsworthiness of the copyrighted work). Alan Cranston's full translation of Mein Kampf to expose its anti-Semitism surely ought to fit into this category, though in that case the courts actually found copyright infringement.
37. See Houghton Mifflin Co. v. Noram Publ'g Co., 28 F. Supp. 676 (S.D.N.Y. 1939);
38. see also Houghton Mifflin Co. v. Stackpole Sons, Inc., 104 F.2d 306 (2d Cir. 1939).
39. Those cases are discussed further infra note 48 and accompanying text.
40. See also Neil Weinstock Netanel, Locating Copyright Within the First Amendment Skein, 54 STAN. L. REV. 1, 15-16 (2001) (citing other examples).
41. The copying of music using music-specific media is protected under 17 U.S.C. § 1008. But similar copying done via computer - as almost all music file sharing is these days - is not protected by the statute.
42. See A&M Records, Inc. v. Napster, Inc., 239 F.3d 10049 1024-25 (9th Cir. 2001).
43. Modifications to an existing copy of a copyrighted work that as a whole add copyrightable expression are infringing derivative works. See 17 U.S.C. § 106(2). In some circuits, the modifications need not even rise to that level.
44. See Mirage Editions, Inc. v. Albuquerque A.R.T. Co., 856 F.2d 1341 (9th Cir. 1988);
45. Midway Mfg. Co. v. Arctic Int'l, 704 F.2d 10099 1014 (7th Cir. 1983) (speeding up the play of a video game creates a derivative work).
46. But see Lee v. A.R.T. Co., 125 F.3d 580 (7th Cir. 1997);
47. Gracen v. Bradford Exch., 698 F.2d 300 (7th Cir. 1983) (requiring new copyrightable expression to create a derivative work).
48. See DAVID NIMMER, NIMMER ON COPYRIGHT § 3.0 (noting this implication of Mirage).
49. But cf. Munoz v. Albuquerque A.R.T. Co., 829 F. Supp. 309 (D. Alaska 1993) (attempting to distinguish framing a picture from gluing the picture to a tile on the ground that the former is not a permanent change), aff'd, 38 F.3d 1218 (9th Cir. 1994) (unpub.).
50. Public performance of a musical work is copyright infringement. 17 U.S.C. § 106(4). A performance is "public" if it occurs at a place open to the public.
51. 17 U.S.C. § 101. The Third Circuit has held that a place is open to the public if it is for rent, even if it is occupied by only one person at a time. Columbia Pictures Indus. v. Aveco, Inc., 800 F.2d 59, 63 (3d Cir. 1986) ("The Copyright Act speaks of performances at a place open to the public. It does not require that the public place be actually crowded with people. A telephone booth, a taxi cab, and even a pay toilet are commonly regarded as 'open to the public,' even though they are usually occupied only by one party at a time.");
52. Columbia Pictures Indus. v. Redd Horne, 749 F.2d 154, 158 (3d Cir. 1984).
53. But see Columbia Pictures Indus. v. Prof'l Real Estate Investors, 866 F.2d 278 (9th Cir. 1989) (reaching the opposite conclusion). If a hotel room is a public place, singing there without authorization is infringement.
54. See, e.g., Mark A. Lemley & R. Anthony Reese, Reducing Digital Copyright Infringement Without Restricting Innovation, 56 STAN. L. REV. 1345 (2004) (making this point about digital music).
55. To take just one example, the definition of an infringing copy, which once required substantial similarity, if not identity, has been eroded to the point where some courts have held that any literal similarity, no matter how small, is a copy. See, e.g., Bridgeport Music v. Dimension Films, 401 F.3d 647 (6th Cir. 2004) (finding no de minimus exception to infringement in the special context of copying of phonorecords under section 114).
56. 17 U.S.C. § 106(2).
57. Frank Pasquale traces the development of this idea to Justice Blackmun's dissent in Sony, which argued that "the infringer must demonstrate that he had not impaired the copyright owner's ability to demand compensation from ... any group who would otherwise be willing to pay." Universal Studios v. Sony Corp. of Am., 464 U.S. 417, 485 (1984) (Blackmun, J., dissenting).
58. Pasquale describes Blackmun's idea as coming "out of thin air, grounded neither in the relevant statutory language nor in any convincing economic or moral analysis...." Frank Pasquale, Breaking the Vicious Circularity: Sony's Contribution to the Fair Use Doctrine, 55 CASE W. RES. L. REV. 777, 778 (2005).
59. 60 F.3d 913 (2d Cir. 1994).
60. Am. Geophysical Union v. Texaco, Inc., 802 F. Supp. 1, 7 (S.D.N.Y. 1992).
61. 60 173d at 914 (majority);
62. id. at 932 (dissent).
63. Id. at 30. Whether Texaco would in fact have been willing to make such a payment to the Copyright Clearance Center (CCC) is unclear. The CCC's fees are-quite high, often $1.00 per page or above, and it may well have been cheaper to buy extra copies of the journals. The CCC also offers a blanket fee for access to all of its journals, though it uses econometric measures to calculate the fee so that it approximates the per-copy cost - that is, it is not a discount.
64. STANLEY M. BESEN & SHEILA NATARAJ KIRBY, COMPENSATING CREATORS OF INTELLECTUAL PROPERTY: COLLECTIVES THAT COLLECT (1989). If Texaco was not willing to make that extra payment, it is not clear why it would have been willing to pay such a high license fee. This is particularly true because the likely alternative to photocopying in the Texaco case was probably for Texaco's scientists to take notes about the facts and unprotectable ideas in the articles that interested them rather than to buy a new copy of every journal they read. In any event, the court did not consider Texaco's willingness to pay in rendering its decision.
65. See, e.g., Princeton Univ. Press v. Mich. Doc. Servs., 99 F.3d 1381 (6th Cir. 1996) (en banc); Basic Books v. Kinko's Graphics Corp., 758 F. Supp. 1522 (S.D.N.Y. 1991).
66. The dissent pointed out this circularity, Am. Geophysical, 60 F.3d at 937 (Jacobs, J., dissenting), and others have criticized the majority opinion for it as well.
67. See supra note 25 (citing commentators).
68. Am. Geophysical, 60 F.3d at 930;
69. Field v. Google Inc., 412 F. Supp. 2d 1106, 1122 (D. Nev. 2005) (rejecting a claim of injury to a market for licensing caching of Internet works because "there is no evidence before the Court of any market for licensing search engines the right to allow access to Web pages through 'Cached' links").
70. The Second Circuit has recently imposed a potentially far more significant limitation on Texaco. In Bill Graham Archives v. Dorling Kindersley Ltd., 448 F.3d 605, slip op. at 20-21 (2d Cir. May 9,2006), the Second Circuit seemed to hold that Texaco did not apply to works that were sufficiently transformative. If that is true, and those uses are held fair notwithstanding the potential loss of licensing revenue, the problem addressed in this paper will be significantly abated.
71. The problem may be worse than that. As Jim Gibson observes, if potential copyright defendants are risk-averse, they may take licenses even when they would have had a good claim of fair use. And if they do so, the licensing-market theory will over time expand copyright to cover their conduct, even though they were unreasonable at the time in seeking a license rather than relying on fair use. James Gibson, Risk Aversion and Rights Accretion in Intellectual Property Law, 116 YALE L.J. 882, 887 (2007).
72. For earlier elaboration of this problem, see Ann Bartow, Educational Fair Use in Copyright: Reclaiming the Right to Photocopy Freely, 60 U. PITT. L. REV. 149 (1998);
73. Lydia Pallas Loren, Redefining the Market Failure Approach to Fair Use in an Era of Copyright Permission Systems, 5 J. INTELL. PROP. L. 1 (1997). This is a particularly significant problem given the documented tendency of many publishers to require licensing even of uses that seem clearly fair.
74. See LESSIG, supra note 5 (giving examples).
75. The Copyright Clearance Center, in its infancy when American Geophysical was decided, has grown to manage copyrights for over 1.75 million works and counts most of the world's largest companies as buyers. Copyright Clearance Center Corporate Overview, http://www.copyright.com/ccc/do/viewPage?pageCode=au1 (last visited Sept. 24, 2006). Its revenues in 2005 were more than five times what they were in 1994.
76. COPYRIGHT CLEARANCE CENTER 2005 ANNUAL REPORT, http://www.copyright.com/media/pdfs/AR_CCC_05_Spreads.pdf (last visited Sept. 24, 2006).
77. See Netflix News & Info., http://www.hackingnetflix.com/2005/ 10/apple_licenses_.html (last visited Sept. 24, 2006) (discussing the iPod TV show licenses).
78. See Olufunmilayo B. Arewa, From J. C. Bach to Hip Rop: Musical Borrowing, Copyright and Cultural Context, 84 N.C. L. REV. 547, 634-38 (2006);
79. Carlos Ruiz de la Torre, Digital Music Sampling & Copyright Law, 7 VAND. J. ENT. L. & PRAC. 401, 402 (2005);
80. Carlos Ruiz de la Torre, Digital Music Sampling and Copyright Law: Can the Interests of Copyright Owners and Sampling Artists Be Reconciled?, 8 VAND. J. ENT. L. & PRAC. 503 (2006) (discussing the market for licensing samples in rap songs).
81. Weird Al Yankovic, who writes spoofs of popular music, pays to license the rights to the songs he parodies. He describes rights clearance as the hardest part of his job. Gerry Galipault, 'Weird Al' Has a License to Shill, Sept. 5, 1999, http://www.pauseandplay.com/ weirdal.htm. He may do so, however, for reasons related to social norms in Hollywood rather than legal compulsion.
82. On fan fiction norms and how they interact with copyright, see Tushnet, supra note 3.
83. Cf. Ty, Inc. v. Publ'ns Int'l, 292 F.3d 512 (7th Cir. 2002) (discussing the possibility of a license for criticism).
84. Perfect 10 v. Google Inc., 416 F. Supp. 2d 828 (C.D. Cal. 2006) (rejecting a fair use claim for a search engine's use of thumbnail images because, after that use began, the plaintiff began selling thumbnail images for viewing on cell phones).
85. See, e.g., Sara K. Stadler, The Incentives Trap, or Why Copyright Is Like a Corkscrew 7 (Emory Law and Economics Research Paper No. 06-01, 2006) ("[B]y making it easy to take a license in those markets, copyright owners increasingly have redefined an 'unfair use' as an unlicensed one.").
86. See Alex Kozinski & Christopher Newman, What's So Fair About Fair Use?, 46 J. COPYRIGHT SOC'Y 513 (1999) (making this point and arguing that copyright owners should be entitled only to damages).
87. See, e.g., Woods v. Universal City Studios, 920 F. Supp. 62 (S.D.N.Y. 1996) (enjoining distribution of the film 12 Monkeys during its initial release because the movie featured a copyrighted chair in three scenes);
88. Jeff Leeds, Judge Freezes Notorious B.I.G. Album, N.Y. TIMES, Mar. 21, 2006, at B2 (noting a court decision enjoining sales of multi-platinum rap album because it contained unlicensed samples from Funkadelic).
89. I am not the first to suggest this separation of compensation and control. See Wendy J. Gordon, A Property Right in Self-Expression: Equality and Individualism in the Natural Law of Intellectual Property, 102 YALE L.J. 1533, 1573-76 (1993);
90. Olufunmilayo B. Arewa, Copyright on Catfish Row: Control and Compensation in Porgy and Bess 93 (working paper 2005) ("This connection between control and compensation, however, is neither inevitable nor necessary. It would be possible, for example, to structure an intellectual property system that offered a compensation mechanism without entitling the holder to control rights in their current form.").
91. Arewa goes on to suggest giving the heirs of copyright owners compensation rights but only limited control rights, id. at 76, a laudable proposal but one outside the scope of this article.
92. See also Tehranian, infra note 83, at 1241-42 (suggesting a liability rule for transformative uses with profit-sharing rather than damages calculation).
93. See Merges, supra note 13;
94. Posner, supra note 13 (discussing the problems with a market for licensing parodies).
95. Although it is true that some parodists do manage to obtain licenses for their works, see supra note 35 (discussing Weird Al Yankovic), it is not a good idea to give copyright owners such control. Many will not license the right to make fun of them, while others may license relatively tame parodies but not more biting ones.
96. For example, Roy Orbison's music company was unwilling to license the rights to remake "Pretty Woman" to 2 Live Crew at any price. See Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569 (1994). The record is silent on why that is, but one plausible explanation is that it did not see the value in rap music.
97. See Mark A. Lemley, The Economics of Improvement in Intellectual Property Law, 75 TEX. L. REV. 989, 1048-72 (1997) (discussing the myriad reasons efficient copyright licensing might not occur).
98. For a detailed discussion of this problem and how it affects the choice between property and liability rules, see Mark A. Lemley & Philip J. Weiser, Should Property or Liability Rules Govern Information?, 85 TEX. L. REV. 783 (2007). Our basic point there is that property rules can facilitate holdup where the scope of the property right cannot be well tailored to preclude only infringement, but of necessity ends up banning noninfringing material as well. That is likely to happen when a court enjoins a transformative use of a copyrighted work.
99. See, e.g., Time, Inc. v. Bernard Geis Assocs., 293 F. Supp. 130 (S.D.N.Y. 1968).
100. Indeed, Cranston himself was held to violate Hitler's copyright. See Houghton Mifflin Co. v. Noram Publ'g Co., 28 F. Supp. 676 (S.D.N.Y. 1939).
101. See, e.g., Los Angeles News Service v. Tullo, 24 U.S.P.Q.2d 1026 (9th Cir. 1992) (videotapes of news events are copyrightable);
102. Los Angeles News Serv. v. KCAL-TV, 108 F.3d 1119 (9th Cir. 1997) (television station could not broadcast videotape of the Reginald Denny beating without permission from the copyright owner; the court relied on the existence of a licensing market for the tape);
103. David Nimmer, Copyright in the Dead Sea Scrolls. Authorship and Originality, 38 HOUS. L. REV. 1 (2001) (discussing, Israeli Supreme Court decision upholding copyright over the Dead Sea Scrolls in those who had been reconstructing and translating them).
104. See, e.g., 17 U.S.C. §§ 111, 114, 115, 118, 119 (2000).
105. See BMI v. CBS, Inc., 441 U.S. 1 (1979) (discussing private collective licenses for public performances of musical compositions).
106. WILLIAM W. FISHER III, PROMISES TO KEEP: TECHNOLOGY, LAW AND THE FUTURE OF ENTERTAINMENT 199-258 (2004);
107. Neil Weinstock Netanel, Impose a Noncommercial Use Levy to Allow Free Peer-to-Peer File Sharing, 17 HARV. J. L. & TECH. 1 (2003).
108. Arewa, supra note 34, at 638-41.
109. H.R. 5439, §514(b)(1)(A), 109th Cong. (2d Sess. 2006).
110. See also UNITED STATES COPYRIGHT OFFICE, REPORT ON ORPHAN WORKS (2006), available at http://www.copyright.gov/orphan/ orphanreport-full.pdf.
111. For an argument for a much broader right to control the integrity of copyrighted works and the way the audience experiences them, see Justin Hughes, "Recoding" Intellectual Property and Overlooked Audience Interests, 77 TEX. L. REV. 923 (1999).
112. But see Tushnet, supra note 3, at 157 (discussing the positive social value of such recoding).
113. 17 U.S.C. § 106A (2000).
114. In Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, 37 (2003), the Supreme Court held that trademark and unfair competition law could not prevent misattribution of a work because the interests of those laws concerned only the source of the particular copy rather than the originator of the work.
115. For cogent criticism of Dastar, see Laura A. Heymann, The Birth of the Authornym: Authorship, Pseudonymity, and Trademark Law, 80 NOTRE DAME L. REV. 1377 (2005);
116. Greg Lastowka, The Trademark Function of Authorship, 85 B.U. L. REV. 1171 (2005);
117. Jane C. Ginsburg, The Author's Name as a Trademark. A Perverse Perspective on the Moral Right of 'Paternity' (Columbia Law Sch. Pub. Law & Legal Theory Working Paper Group, Paper No. 05-91, 2005), available at http://ssrn.com/abstract=724343.
118. But see Jonathan Band & Matt Schruers, Dastar, Attribution, and Plagiarism, 33 AIPLA Q.J. 1, 2 (2005) (defending the decision on both legal and policy grounds);
119. David Nimmer, The Moral Imperative Against Academic Plagiarism (Without a Moral Right Against Reverse Passing Off), 54 DEPAUL L. REV. 1 (2004).
120. At least one court has awarded injunctive relief but no damages for copyright infringement. Rubin v. Brooks/Cole Publ'g Co., 836 F. Supp. 909,922 (D. Mass. 1993).
121. 17 U.S.C. § 106A(a)(3).
122. Cf. Mark A. Lemley, Rights of Attribution and Integrity in Online Communications, 1995 J. ONLINE L. art. 2 (May 1995), http://www.wm.edu/law/publications/jol/95_96/lemley.html.
123. Kozinski & Newman, supra note 40.
124. See also Jed Rubenfeld, The Freedom of Imagination: Copyright's Constitutionality, 112 YALE L.J. 1 (2002) (arguing for only damages in all derivative works cases).
125. On the importance of parody and satire in Western literature and culture, see Tyler T. Ochoa, Dr. Seuss, the Juice, and Fair Use: How the Grinch Silenced a Parody, 45 J. COPR. SOC'Y USA 546 (1998).
126. Cf. Neil Weinstock Netanel, Copyright and a Democratic Civil Society, 106 YALE L.J. 283, 378 (1996) ("[I]n many instances [though not all] the elimination of the exclusive derivative right would undermine the incentive that copyright provides for the creation of the original work.").
127. James E. Krier & Stewart J. Schwab, Property Rules and Liability Rules: The Cathedral in Another Light, 70 N.Y.U. L. REV. 440 (1995);
128. Richard A. Epstein, A Clear View of The Cathedral. The Dominance of Property Rules, 106 YALE L.J. 2091,2093 (1997).
129. Sometimes such claims are really efforts to obtain moral rights that the law does not grant copyright owners. Those moral rights may be good or bad, but the law should grant or not grant them on their merits, and not permit copyright owners to obtain moral rights through the back door by claiming harm to an illusory licensing market.
130. Am. Geophysical Union v. Texaco, Inc., 60 F.3d 913, 932 n.19 (2d Cir. 1994) ("[W]e note that the context of this dispute appears to make ill-advised an injunction .... If the dispute is not now settled, this appears to be an appropriate case for exploration of the possibility of a court-imposed compulsory license.").
131. On the First Amendment problems with copyright injunctions, see, e.g., Mark A. Lemley & Eugene Volokh, Freedom of Speech and Injunctions in Intellectual Property Cases, 48 DUKE L.J. 147 (1998).
132. Phil Weiser and I have generalized this point in a companion paper. See Lemley & Weiser, supra note 46.
133. 17 U.S.C. § 502(a) (2000) ("Any court ... may ... grant temporary and final injunctions on such terms as it may deem reasonable to prevent or restrain infringement of a copyright.") (emphasis added). In addition, the United States is immune from injunctive relief, see 28 U.S.C. § 1498 (2000),
134. and a number of specific uses are subject to a compulsory license, see David Nimmer, Codifying Copyright Comprehensibly, 51 UCLA L. REV. 1233, 1353-54 (2004).
135. See Dun v. Lumbermen's Credit Ass'n, 209 U.S. 20,24 (1908) ("[W]e think the discretion of the court was wisely exercised in refusing an injunction and remitting the appellants to a court of law to recover such damage as they might there prove....");
136. New York Times Co. v. Tasini, 533 U.S. 483, 505 (2001) ("[I]t hardly follows from today's decision [finding infringement] that an injunction ... must issue.");
137. Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569,578 n.10 (1994) ("[C]ourts may also wish to bear in mind that the goals of the copyright law ... are not always best served by automatically granting injunctive relief.").
138. See also Abend v. MCA, Inc., 863 F.2d 1465, 1479 (9th Cir. 1988) (denying injunctive relief after a finding of copyright infringement), aff'd, 495 U.S. 207, 236 (1990) (leaving undisturbed the appellate court's remedial analysis).
139. Further, the Supreme Court interpreted a similarly worded patent statute to require consideration of traditional equitable principles in every case. eBay, Inc. v. MercExchange LLC, 126 S. Ct. 1837 (2006).
140. 17 U.S.C. § 506(a).
141. Id. § 504(b).
142. Id. § 504(c)(1);
143. Feltner v. Columbia Pictures Television, Inc., 523 U.S. 340 (1998).
144. 17 U.S.C. § 504(c)(2).
145. Id. § 505.
146. The copyright-fee-shifting rule is even-handed, however, see Fogerty v. Fantasy, Inc., 510 U.S. 517 (1995), and attorneys' fees do represent a cost to the copyright owner, so it may not properly count in the panoply of supracompensatory remedies.
147. On the American Association of Publishers lawsuit, see Association of American Publishers Sues Google over Library Digitization Plan, http://blog.searchenginewatch.com/blog/051019-115424 (last visited Sept. 24, 2006). On the Authors' Guild lawsuit, see Press Release, Authors Guild, Authors Guild Sues Google, Citing "Massive Copyright Infringement," (Sept. 20, 2005), http://www.authorsguild.org/news/ sues_google_citing.htm. The publishers are apparently not asking for damages from the court, though they presumably would settle for a payment from Google that is a function of what they could collect in damages if they prevailed.
148. This assumes that the books Google is copying contain copyright notices. Since such a notice was required before 1989 and since most copyright owners use it today, this seems a reasonable assumption. If the book contained no copyright notice and Google was unaware of the claim of copyright, its damages might be reduced to $200 per work, or a lower limit of $400 million.
149. Because such a rule would not create an exception to copyright, but the equivalent of a compulsory license, it should be fully compliant with the Agreement on Trade-Related Aspects of Intellectual Property (TRIPs) art. 13 treaty requirement limiting exceptions to copyright, at least as long as it satisfies the treaty standards for compulsory licenses.
150. This approach would also require deleting the second sentence of section 504(c)(2), which sets a lower floor for innocent infringement.
151. Courts already have the discretion to tailor statutory damages within the range, and David Nimmer has argued that courts should anchor statutory damages to some estimate of actual harm to the copyright owner, much as liquidated damages provisions in contracts are permissible only if they are designed to compensate for injury rather than to punish. NIMMER, supra note 18, § 108.11. But courts don't always do this, see UMG Recordings, Inc. v. MP3.com, Inc., 2000 U.S. Dist. LEXIS 13293, at *18 (S.D.N.Y. Sept. 6, 2000) (awarding $118 million in statutory damages in a case in which the market harm was dubious), and in any event they cannot reduce the award below the minimum even if there is no market harm at all.
152. Courts apply the statutory damages rules with full force to indirect infringers. See, e.g., A&M Records, Inc. v. General Audio Visual Cassettes, Inc., 948 F. Supp. 1449, 1458 (C.D. Cal. 1996) (applying statutory damages award to indirect infringer);
153. Microsoft Corp. v. V3 Solutions Inc., 2003 WL 22038593, at *41 (N.D. Ill. Aug. 28, 2003) (holding direct and indirect infringers jointly and severally liable for statutory damages);
154. Blue Ribbon, Pet Prods., Inc., v. Hagen (USA) Corp. and Hagen (Canada) Corp., 66 F. Supp. 2d 454, 464 (E.D. N.Y. 1999) (same);
155. RCA/Ariola Int'l. Inc. v. Thomas and Grayston Co., 845 F.2d 773, 777-79 (8th Cir. 1988) (same).
156. Statutory damages and other copyright-deterrence rules make little sense when applied to companies that are not themselves infringing copyright, but merely providing a product or service that others can misuse. This is particularly true in the digital environment, since because of an accident in the way statutory damages are calculated, anyone who is found liable for indirect infringement on the Internet faces liability of billions of dollars. If an innovator is at risk of losing her whole company (and her house and her children's education), even a very small chance of liability will be enough to deter valuable innovation. Contra Doug Lichtman, Holding Internet Service Providers Accountable, 14 SUP. CT. ECON. REV. 221 (2006) (suggesting that imposing liability on Internet service providers and other intermediaries will have beneficial effects). Although Lichtman would impose liability on Internet intermediaries to internalize the costs of the intermediary's action, under a statutory damages regime there is no way to limit such liability to the costs it imposes. Damages will radically exceed the harm an intermediary has caused in most cases.
157. Congress could relieve much of the pressure copyright law puts on innovation by limiting liability for indirect infringement to the actual damages caused by any such infringement. This would compensate copyright owners for their losses and force indirect infringers to bear the cost of any harm their conduct causes, but would not over-deter innovation. A discretionary rule for statutory damages would permit (but not require) judges to achieve the same result in any given case.
158. Feltner v. Columbia Pictures, 523 U.S. 340,353 (1998).
159. Cf. John Tehranian, Whither Copyright? Transformative Use, Free Speech, and an Intermediate Liability Proposal, 2005 B.Y.U. L. REV. 1201, 1237 (2005) (noting that despite suggestions from the Supreme Court, "courts have demonstrated a remarkable reluctance to embrace a pure liability regime for copyright law").
160. "Congress is presumed to be aware of [a] ... judicial interpretation of a statute and to adopt that interpretation when it re-enacts a statute without change." Lorillard v. Pons, 434 U.S. 575 (1978). The situation here is a bit different, since Congress would not be reenacting a statute without change. But when Congress acts in one way to deal with a problem and leaves another ruling intact, courts will sometimes find the intact ruling to have been ratified by Congressional action.
161. See U.S. Postal Serv. v. Flamingo Indus., 540 U.S. 736, 745 (2004).
162. That is what happened when Congress enacted 17 U.S.C. § 117(c) in 1998, overruling the specific result in MAI Sys. Corp. v. Peak Computing, 991 F.2d 511 (9th Cir. 1993), but leaving intact that court's problematic ruling that loading a computer program into RAM memory makes a copy.
163. See Bill Graham Archives v. Dorling Kindersley Ltd., 448 F.3d 605 (2d Cir. 2006), slip op. at 20-21;
164. see also Castle Rock Entm't, Inc. v. Carol Publ'g Group, 150 F.3d 132, 146 n.11 (2d Cir. 1991) (questioning the application of licensing markets in derivative works cases).
165. True, there is a risk of circularity here, too. If the licensing-market model becomes so entrenched that no reasonable person could think a use fair if a licensing market exists, this standard would not apply even in licensing-market cases. But that risk does not seem particularly great. The licensing-market theory remains controversial, as the Bill Graham Archives case demonstrates. More generally, despite the alleged primacy of the fourth factor, courts periodically depart from equating fair use with the absence of market harm. See, e.g., Clean Flicks of Colo. v. Soderbergh, 2006 WL 1876624 (D. Colo. July 6, 2006);
166. Nimmer, supra note 12, at 280.
167. U.S.C. § 504(c)(2).
168. U.S.C. § 104A(d)(3)(A)(ii). That there is a section 104A(d)(3)(A)(ii) and that it has to my knowledge never been litigated lends some credence to Tony Reese's claim that the Copyright Act bears more and more resemblance to the tax code.
169. See Lydia Pallas Loren, Digitization, Commodification, Criminalization: The Evolution of Criminal Copyright Infringement and the Importance of the Willfulness Requirement, 77 WASH. U.L.Q. 835, 885 (1999) (discussing the use of the term "tax-codification" to describe recent changes in copyright law).
170. U.S.C. § 104A(d)(3)(A)(ii),(B).
171. Section 104A is specifically authorized by article 18 of the Berne Convention. Expanding the exception would require some other justification to be consistent with our international treaty obligations. This does not seem to pose a problem, however. The exemption in question would simply cover cases that would have been held to be fair use before American Geophysical. Assuming the fair use defense more generally complies with Berne and TRIPs - an issue on which reasonable people can differ, see Ruth Okediji, Toward an International Fair Use Doctrine, 39 COLUM. J. TRANSNAT'L L. 75 (2000) - the proposed exemptions should, too.
172. H.R. 5439, §514(b)(1)(A), 109th Cong. (2d Sess. 2006).
173. Supracompensatory damages deter borderline uses because users fear that legal conduct will be misclassified as illegal. See Michael K. Block & Joseph G. Sidak, The Cost of Antitrust Deterrence: Why Not Hang A Price Fixer Now and Then?, 68 GEO. L.J. 1131, 1132, 1138 (1980).
174. On the problems of such "chilling effects" in copyright, see, e.g., Junelle Harris, Beyond Fair Use: Expanding Copyright Misuse to Protect Digital Speech, 11 TEX INTELL. PROP. L.J. 83, 99 (2004);
175. Joseph P. Liu, The DMCA and the Regulation of Scientific Research, 18 BERKELEY TECH. L.J. 501 (2003).