2014 Symposium: Legislating Digital Exhaustion

BTLJ is excited to welcome Aaron Perzanowski of Case Western Reserve University Law School and Jason Schultz of New York University Law School on April 3–4, 2014 to the 18th Annual BTLJ/BCLT Symposium: The Next Great Copyright Act.

This is a summary of the authors’ topic of discussion and forthcoming article:

The shift to a digital distribution model, from one premised on selling physical artifacts to one defined by transferring data, is among the most important changes in the markets for copyrighted works since the enactment of the 1976 Copyright Act. The disconnect between our current statutory rules and this new reality of the copyright marketplace is particularly evident when it comes to the question of exhaustion. The first sale doctrine in Section 109 was constructed around a mode of distribution that is rapidly becoming obsolete. As a result, the benefits and functions it has long served in the copyright system are at risk. Building on our earlier work, this Article will argue that a meaningful exhaustion doctrine should survive the digital transition. After explaining the two primary hurdles to digital exhaustion under the existing statutory regime, we outline two possible approaches to legislating digital exhaustion, concluding that a flexible standards-based approach that vests considerable authority with the courts is the better solution.

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The Computer Fraud and Abuse Act: Circuit Split and Efforts to Amend

The Ninth Circuit’s 2012 decision in United States v. Nosal created a circuit split regarding the interpretation of the phrase “exceeds authorized access” in the Computer Fraud and Abuse Act (CFAA).  The Ninth Circuit (since joined by the Fourth Circuit) held that one “exceeds authorized access” to a computer by violating an access restriction (e.g., do not access File X), but not by violating a use restriction (e.g., do not use the computer for non-business purposes).  This interpretation conflicts with the First, Fifth, Eighth, and Eleventh Circuits, which have held that use restrictions are within the scope of “exceeds authorized access.”

This post compares the Ninth Circuit’s access-only interpretation of the CFAA with the use-and-access interpretation, and suggests these two positions are not that different.  This post then discusses the alternative, code-based interpretation and recent efforts to amend the CFAA.

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Canada’s Approach to Intermediary Liability for Copyright Infringement: the Notice and Notice Procedure

In 2012, Canada adopted the Copyright Modernization Act as a comprehensive reform of Canadian copyright law and addressed the issue of liability for copyright infringement by online intermediaries. Rather than adopting a “Notice and Takedown” procedure like the United States did at § 512 of the Digital Millennium Copyright Act (DMCA), Canada’s new Copyright Act enacts a “Notice and Notice” procedure at §§ 41.25 and 41.26. Those provisions are not yet in force, but the Canadian Government announced in October 2013 that they would be in the “near future.”

This post describes the differences between the respective approaches of the United States and Canada, addresses their pros and cons, and discusses how the recently leaked Trans Pacific Partnership agreement may require a harmonized approach in the two countries.

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A Futile Effort? Efforts to Clarify the Entire Market Value Rule

Company A owns a patent that tells the difference between CDs and DVDs. Company B infringes on A’s patent by incorporating A’s technology into the laptops B manufactures, which incorporates thousands of other patents. Generally in calculating damages, total royalties awarded equal the royalty base multiplied by the royalty rate. Should the proper royalty base be the value of all the infringing laptops sold or the value of all infringing disc-drives sold? Suppose there was some evidence customers were buying the infringing laptops because of A’s patent?   This hypothetical, based on LaserDynamics Inc. v. Quanta Computer, Inc., illustrates an area of patent reform subject to debate regarding the proper scope of the Entire Market Value Rule (EMVR). Company B may pay hundreds of millions more in damages in this multi-component patent case depending on whether EMVR applies yet the present case law describing when EMVR applies is murky. Despite efforts by the Federal Circuit to clarify EMVR’s application, uncertainties remain. This post reviews some of the present uncertainties and surveys commentary regarding EMVR.

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Advocacy and the Start-up Recording Artist

On February 8, 2014, California Lawyers for the Arts presented this year’s 31st annual Music Business Seminar at Berkeley Law School. Music industry professionals gathered around the theme theme, “21st Century Musician: Making a Living Making Music.” As the name suggests, the event included panels and breakout sessions that were designed to inform artists and legal professionals on how to navigate complicated statutes and processes in order to help recording artists financially benefit from their creative endeavors. Artists also had the opportunity to meet with a lawyer for a 20-minute consultation throughout the day. Several performers infused the event with live shows, including Real Vocal String Quartet, Jeffrey Lipinski, Steep Ravine Band, and The Northerlies.

Thomas Leavens delivered the keynote address by identifying several trends and forecasts in the music industry. Leavens observed that the digital age has provided a platform for consumers to express their desire for content. As a result, music consumption has changed. This includes the trend of having alternatives to file-sharing, such as streaming. As a result, music consumption has gone from ownership to access. Accordingly, Leavens speculated there will be a rise of questions surrounding whether consumers will acquire music through ownership or license. Proponents of ownership advocate for the right to resell digital music. In response, others say that the act of reselling is just making a digital copy. As the debate boils on, Leavens encouraged artists and lawyers to nevertheless ensure that digitized creative works’ metadata are complete and correct. As music consumption patterns evolve, precise metadata is essential for payment streams that will adequately compensate artists.

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Jury Awards in File-Sharing Cases Add Fuel to Debate on Copyright Act Reform

The cases

Capitol Records, Inc. v. Thomas-Rasset

The plaintiffs, Capitol Records, Inc., Sony BMG Music Entertainment, Arista Records LLC, Interscope Records, UMG Recordings, Inc., and Warner Bros. Records, filed suit against Jammie Thomas-Rasset under the Copyright Act seeking statutory damages and injunctive relief in the first file-sharing copyright infringement lawsuit in the US to reach a jury.

After the 2007 trial, Thomas-Rasset was found liable for copyright infringement after she willfully distributed 24 songs on the file-sharing site KaZaA. Thomas-Rasset was ordered to pay $222,000 in statutory damages. Initially, Thomas-Rasset, a mother of four, declined a settlement offer of $5,000. In 2008, the court granted a motion for a new trial, holding that the original jury instructions, which stated that Thomas-Rasset violated copyright owners’ exclusive distribution right by “making available” the copyrighted songs through file-sharing, were in error. After reviewing the precedent and close examination of the Nimmer on Copyright treatise, the court concluded that “making available” did not constitute distribution and granted Thomas-Rasset a new trial. Thomas-Rasset declined a second settlement offer of $25,000.

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EU’s Attempt to Address the Thorny Orphan Works Problem

The Orphan Works Directive 2012/28/EU was published in the Official Journal of the European Union on 27 October 2012. This post provides an overview of the main provisions set forth by the Directive and describes the approach used by the European institutions in a first tentative step towards tackling the modern issues concerning the use of orphan works, particularly in connection with mass-digitalization projects.

The problem with exploitation of orphan works

Orphan works are works of any kind of art (such as books, newspapers or magazine articles, films, etc.) which remain protected by copyright, but whose authors and/or right holders cannot be identified or, even if known, cannot be tracked down.

This situation is a significant obstacle for those persons, companies, institutions or entities that seek to make such works available to the public. Before the adoption of the Directive, the impossibility of identifying or locating the author of the orphan work normally led to a situation of stall. The organization interested in making use of the work was unable to obtain a license and consequently unwilling to use the work, due to the fear of eventually being charged with copyright infringement.

With the advent of the Internet era and with the rise of large-scale digitalization projects (such as Google Books and Europeana) the issues concerning the availability to the public of orphan works came under the spotlight.

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Online Copyright Infringement: Search for Solutions Continues

After the failures of Stop Online Piracy Act (SOPA) and Protect IP Act (PIPA), the Obama administration’s Internet Policy Task Force has recently put forward a new proposal to making it a felony to stream copyrighted works, along with a Green Paper and call for comments on the future of copyright law in the digital economy. Meanwhile, several studies have examined the impact of piracy on media industry with controversial results. This post reviews efforts to combat online copyright infringement in Europe and in the United States.

Norway’s  Copyright Act Amendment

An amendment to Norway’s copyright law has recently provided copyright holders the power to obtain access to the internet addresses of infringers and to monitor the Internet Service Providers (ISPs) that host infringing materials, prompting comparisons to reincarnated SOPA. The previous law allowed only a single licensed  company to have the permission to locate both website owners and end-users of unauthorized material online, but under the current law, copyright holders will be able to do so directly. When the website owner cannot be identified, the case may be decided without the presence of the defendant. Then, the ISP must follow the court order and block access to the website violating the copyright protection of the right-holder. Moreover, when a legal claim has been submitted, the amendment provides an exemption from the privacy protections of the Electronic Communication Act, which means that the ISP is not obligated to protect the confidentiality of the suspected user’s electronic account.  

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Google Books Litigation Update

The advent of mass digitization via Google Books has ignited a series of copyright-related actions filed by book publishers and authors. There are two issues: whether Google and the owners of affiliated digital libraries are entitled to a fair use defense for library use, including providing access to print-disabled individuals, and whether Google may display snippets of books in online searches. The resolution of the fair use questions debated in the two oral arguments this fall will have significant implications for library and online access to a wide range of works. There are three stories worth noting on this topic:

1. American Association of Publishers v. Google

In 2005, five publishers (Simon & Schuster, McGraw-Hill, John Wiley & Sons, Penguin Group, and Pearson Education) sued Google for copyright infringement, seeking injunctive relief. After 7 years of litigation, the publishers and Google settled privately in 2012. Because the settlement was between the named parties, the court was not required to approve its terms. The 2012 settlement allows publishers to choose whether or not to allow Google to digitize their books. If Google does digitize, it will also provide publishers with a digital copy for their own use. For books that have been scanned, Google allows users to access to 20 percent of the book online.  In order for users to access the entire book, they must purchase it from the Google Play store, and Google will then share the revenue with publisher of that book.

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Vermont Takes A Leap: First State To Pass Law To Combat Patent Trolling

Patent trolls have been in the spotlight of national attention in the past year, as President Obama addressed the problem in his Fireside Hangout and a White House report attempted to quantify the impact of abusive litigation. Officially known as Patent Assertion Entities, or PAEs, these companies purchase patents and bring patent infringement claims as a business model. The Federal Trade Commission (FTC) has recently announced a proposal to obtain more data on approximately 25 PAEs in order to better understand their impact on innovation and the economy. Meanwhile, Vermont has become the first state to take matters into its own hands with a state law to combat patent trolls. While it is not clear whether Vermont has the legal authority to regulate patent activities, its innovative “threats action” approach may prove to be successful enough to be adopted more widely.

Background: National Efforts To Prevent Patent Trolling        

On September 16, 2011, President Obama signed into law the Leahy-Smith America Invents Act (AIA), a major amendment to the 1952 Patent Act that has governed patent law for nearly sixty years.  While the primary purpose of the AIA was to encourage innovation by modernizing the patent application and review process, several provisions in the Act were aimed at patent trolls. Following the AIA, additional measures to combat patent trolling have been introduced in Congress. Three of the most high profile proposals are: (1) the Saving High-tech Innovators from Egregious Legal Disputes (SHILED) Act “forces patent trolls to financial responsibility for frivolous lawsuits”; (2) the Patent Quality Improvement Act expands the AIA by allowing more businesses to be covered under the transitional program for business method patents; and (3) the End Anonymous Patent Act, which requires the owner of patents to register with the UPSTO. While these proposals are being debated in Congress, Vermont has become the first state in the nation to pass its own law to combat patent trolls.

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