Entertainment & Media, Law, Music, Technology
| Sirius XM Radio (which claims to be the largest radio broadcaster in the United States) features several niche “oldies” music stations, including those for the 40s, 50s, 60s and 70s. Sirius XM understands the nostalgic pull of classic tunes from days gone by and has programmed channels specifically to capture the audience of fans of music from those eras. However, a recent California decision soon may alter that. |
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| Flo & Eddie, Inc. (“Flo & Eddie”) was formed and is owned by Howard Kaylan (aka “Flo”) and Mark Volman (aka “Eddie”), two of the founding members of the 60s and 70s band, The Turtles. Today, Flo & Eddie owns all of the rights to The Turtles’ master recordings, including their number one hit in 1967, Happy Together. Sirius XM routinely has broadcast and streamed The Turtles recordings on its 60s and 70s channels and has never paid any public performance royalties to Flo & Eddie with respect to those performances.
Flo & Eddie filed suit in Los Angeles Superior Court (a California state court) alleging that these performances violated the provisions of a California state statute. The case was removed to Federal District Court in California based on Federal diversity of citizenship jurisdiction. This is important to note because at issue is an interpretation of California state copyright law, not an issue of Federal copyright law. The Federal District court had to interpret the meaning of the California copyright statute.
A little background on music copyrights is in order. A recording of a song actually consists of two separately copyrighted works: (a) the “musical work” (i.e., the music and lyrics); and (b) the “sound recording”, (i.e., the actual performance of the song as captured on the record). Musical work copyrights normally are owned by music publishers (or songwriters, if unpublished). Sound recording copyrights normally are owned by record companies (or artists, if they self-release an album). The protection afforded to these two types of works differs under the U.S. Copyright Act. Specifically, there is a “public performance right” for musical works, but NOT for sound recordings (unless the public performance is a digital performance, such as internet radio). Even for digital performances, the Copyright Act provides NO protection for sound recordings first created prior to 1972. A 1971 amendment to the Copyright Act (which became effective on February 15, 1972) states specifically that recordings made prior to that date were not subject to Federal statutory copyright protection.
So, in the case of “Happy Together” (which was written in 1967), when the song is performed by a band live, or played on the radio, public performance royalties are payable to the music publishing owners. Public performance royalties with respect to musical compositions are paid through ASCAP, BMI or SESAC. However, when the Turtles’ original recording of that song is played on the radio, no royalties are paid to Flo & Eddie because they do NOT own the copyrights to the musical composition, only the recording of it. (While changes to the Copyright Act which were enacted in 1998 as part of the Digital Millennium Copyright Act provided some protection for digital performances of sound recordings, those changes had no impact whatsoever on pre-1972 recordings which still do not enjoy a public performance right, analog or digital, under the Copyright Act.)
The 1971 amendment made clear that, unlike most of US copyright law that DOES pre-empt any equivalent state laws on point, the Federal Copyright Act will not pre-empt state protection for sound recordings until 2047. So, state laws still matter in this one area. At the present time, 49 states have enacted or extended state law protections to pre-2/15/72 sound recordings. (Only Vermont has no state law in this area.) Most of these laws, however, are anti-piracy statutes, designed to prevent unauthorized copying of recordings. These state laws do not apply to the over-the-air broadcast performance of sound recordings. In fact, all but one of the 49 states offering protection to older sound recordings have explicit carve outs specifying that the laws do not create any public performance right in broadcasting. (Tennessee is the lone exception on this front.)
The primary issue in the Flo & Eddie cases is whether those state statutes protect any non-broadcast “public performances” of the recordings such as digital streaming services and other digital performances of the type provided by Sirius XM, Pandora, Spotify, etc.
Flo & Eddie (acting on their own and on behalf of a class they had certified) decided to file suit against Sirius XM alleging a violation of their rights under the California statute. Their argument is that the California law that granted them “exclusive ownership” of their pre-1972 sounds recordings includes the exclusive right to control and be paid for digital performances of those recordings. While the case eventually was removed to Federal District Court, it still was decided on the basis of California state law, not Federal law. Flo & Eddie also filed similar lawsuits in New York and Florida alleging violations of those states’ laws protecting pre-1972 sound recordings. On their heels, major record labels (who own the lions’ share of these pre-1972 recordings) also have filed suits against Sirius XM and against Pandora.
Two weeks ago, the U.S. District Court for the Central District of California granted Flo & Eddie’s motion for summary judgment on their California sound recording claims insofar as the digital public performances are concerned. The basis for the Court’s decision was its interpretation of Section 980(a)(2) of the California Civil Code. That section expressly vests “exclusive ownership” of any pre-2/15/72 recording in the recording’s copyright owner. Sirius XM had argued that since Section 980(a)(2) does not explicitly include a right of public performance they did not owe Flo & Eddie any money, even though they did not deny digitally broadcasting Flo & Eddie’s pre-1972 recordings. The Court disagreed with this position and held that the concept of “exclusive ownership” in this context includes the exclusive right to digitally perform those recordings, even though the digital public performance right is not explicitly listed in the statue. Consequently, the Court ruled that Sirius XM’s repeated playings misappropriated Flo & Eddie’s property interest in the sound recordings under California law and will entitle them to damages (which will be another phase of the case).
So what impact will this California case have? All of the Flo & Eddie cases, including those filed in New York and Florida, are class actions. It is likely that other similarly situated sound recording owners will jump into the fray to try to recover substantial damages for past royalties that should have been paid. It is important to keep in mind, however, that the Flo & Eddie Court’s ruling was by a Federal judge interpreting a California statute. So, for example, the Flo & Eddie Court’s opinion could be contradicted by a California state court hearing a similar case if it were to hold that the Federal court misinterpreted California law. Also, there is no assurance that courts in other states, including Florida and New York, will agree that the “exclusive ownership” language under their respective state statutes should be viewed as broadly as the California law has been interpreted. Further, Sirius XM has already prevailed in a separate but similar lawsuit, also in California, filed by record labels. So even this case could go away.
In the short run, however, the Flo & Eddie decision could have a major impact on digital broadcasters, such as Sirius XM, which have niche “oldies” channels that consist almost entirely of pre-1972 sound recordings. (Flo & Eddie have just filed suit against Pandora in California based on the Sirius XM decision there.) The number of recordings that potentially are impacted by this Flo & Eddie decision is huge, including not only the Turtles, but also the Beatles, the Rolling Stones, Jimi Hendrix, Led Zeppelin, the Beach Boys, Elvis Presley, Roy Orbison, the classic Motown acts, and the classic “British Invasion” bands, to name just a few. These artists, and their recordings, still are popular today, more than forty years after the initial release of their recordings. So, unless the case is overturned, at the very least, Sirius XM will now have to pay royalties when it has not been doing so. We’ll have to wait to see what impact this decision this will have on their willingness to continue to offer this programming, or on the costs that they try to pass along to their subscribers.
Finally, there is nothing stated in the Flo & Eddie decision that limits the scope of the California statue to violations of public performance by means of digital audio transmission (such as those made by Sirius XM and Pandora). Therefore, the Flo & Eddie ruling might be viewed broadly to give sound recording copyright owners a general public performance right in pre-February 15, 1972 sound recordings (i.e., analog, as well as digital public performances), a broad right that expressly is not recognized under current Federal copyright law. That means that traditional “over-the-air” radio and television broadcasters, who currently are expressly exempted under Federal copyright law from paying public performance royalties with respect to post-February 15, 1972 sound recordings, may be the next group targeted. |
Entertainment & Media, Music, Technology
As the owners of iPhones know, the band U2’s latest album, Songs of Innocence, was recently loaded automatically and without charge on all Apple devices with iTunes accounts. U2’s decision to give away this music for free (we’ll discuss that notion in a second) has been met with a variety of reactions. Some people were angry that Apple could simply “load” the music onto their devices without their permission. Some in the music industry have reacted angrily to U2’s doing so as a sign that even they, as artists, placed no commercial value on recorded music. Still others see it as another sign of the slow and painful death of the recorded music industry. Finally, there are those who see U2’s decision as a clever way to create new income streams for themselves, notwithstanding, the “free” giveaway.
It is no secret that sales of recorded music, especially album (CD) sales, have been on a steady decline for many years. The reasons for the decline are varied. For instance, the 33 1/3 LP featured often beautiful artwork covers that were considered an integral part of the album. When CDs became popular, the smaller size seemed to lessen the importance of album artwork and that made the experience of owning an album less enjoyable for some people. Although some felt the sonic clarity of the CD format was a valuable tradeoff to the smaller and less elaborate album covers, others decried the sterile sound of the all-digital format.
A much more profound blow to the traditional “album” came with the advent of mp3s. This new format, which allowed a user to easily carry around hundreds and then thousands of recordings on a device no larger than a cell phone (and later, mostly ON a cell phone) came with some significant costs. For music purists, it spelled poorer quality music because the already sterile digital sound was being compressed in order to allow for larger and larger quantities to be stored and because music was now being played through tiny ear buds instead of large speakers. The digital download craze further diminished the importance of album artwork. From a musical standpoint, because the music could now be readily acquired one song at a time, much less emphasis was placed on creating a cohesive “album” as opposed to a mere aggregation of songs. Artistically, this was a major step backwards to the times before the mid-1960s when thematically cohesive albums (such as The Beach Boys’ Pet Sounds and The Beatles’ Sgt. Pepper’s Lonely Hearts Club Band) raised the album concept to new heights. Even classic jazz albums, like Miles Davis’ Kind of Blue, were built on the concept of an album as opposed to a mere aggregation of random compositions.
Digitizing music so that it was translated into a series of 1’s and 0’s not only made it easy to carry around in large quantities, it made it easier to steal. Many people who would never steal a physical object because it was morally wrong saw nothing wrong with downloading and swapping music with their friends without paying the record companies or artists. Gene Simmons, the self-promoting but often astute bass player in the band Kiss, recently proclaimed that “rock music is dead,” blaming it on illegal downloading and file sharing.
Record companies also bear their share of blame. The emphasis on great creative masterworks (think of albums like Stevie Wonder’s Songs in the Key of Life, Michael Jackson’s Thriller and Donald Fagen’s The Nightfly) was greatly reduced. Nurturing the development of new and existing artists creatively was de-emphasized. For these reasons, many – myself included – feel that the quality of recorded music has declined greatly. Simmons blames record executives for focusing on “mindless, synthetic dance/pop” and claims that the industry’s focus on that formula has discouraged musicians from learning their craft and advancing the art form. Certainly, in the case of the major labels, there is a lot of truth in what he says. Even the so-called “indie labels” are full of releases featuring artists and songs that are indistinguishable from one another.
While illegal downloading still remains a serious problem, even legitimate, legal downloading services, such as iTunes, have continued to erode sales of albums.
On the heels of both illegal and then legal downloading (which failed to generate the same type of artist royalties that had been earned from albums and CDs), the next blow came from streaming music services such as Pandora and Spotify which pay artists even less. These advertiser supported subscription services have become very popular with music fans because of the ready access to enormous variety and quantity of music on any device that connects to the Internet. Unfortunately, the royalties that are paid to recording artists from streaming (as opposed to album sales) are miniscule. The services claim that they cannot afford to pay larger royalties either to the songwriters/music publishers or artists/record labels.
While this ready access to music may seem like the “golden era of recorded music” to fans, I fear that there eventually will be a price to be paid: if artists are no longer fairly compensated for their artistic works, they will cease to produce them.
This brings me back to U2. Bono and company publicly claimed that they were not making money on the sale of physical CDs anyway, so why not just give it away to their fans for free? First, U2’s position is misleading, if not outright deceptive. True, those with the iOS (at least through mid-October) are receiving the album for free. However, the New York Times has reported that in order to obtain the right to release U2’s album free, Apple paid the band and Universal Music an unspecified fee as a blanket royalty and committed to a marketing campaign for the band worth up to $100 million, according to several people briefed on the deal. Considering the very lackluster sales of U2’s previous album and its desire to once again seek to market itself to music fans, perhaps U2 will make a great deal more money on this deal. Even apart from that huge payday, the band hopes that the widespread distribution of the album will serve as a springboard for another mega-tour in which they will make many times that amount from live performances.
The real issue, however, is that the recorded music industry is still struggling to find a sustainable revenue model in the new digital era, and many in the industry are very unhappy with this U2/Apple “Fremium” giveaway. Labels routinely require that recording artists sign so-called “360 Deals” in which the labels share in the artists’ revenues from live touring, merchandising and music publishing—three areas that traditionally were outside of the earnings reach of record labels. They also charge management fees because the labels now claim to be taking a more active role in the overall handling of their artists’ careers. They justify this new position by stating that they are doing more than ever to manage their artists and that the economics of the modern recording business demand it. Many artists have responded to this by self-releasing albums or doing indie releases that are with labels which don’t insist on this type of a 360 deal.
The music business certainly looks dramatically different today than it did twenty or even ten years ago. How things will shake out over the next ten years is anybody’s guess.
Law, Technology
In a 6 to 3 decision, the United States Supreme Court, in the case of American Broadcasting Cos., Inc., et al. v Aereo, Inc., has just ruled that Aereo, an Internet service that allows customers to watch free broadcast TV programs on mobile devices, violates U.S. copyright laws. This case was closely watched by those in both the broadcasting and technology industries. At issue for the Court was whether or not the Aereo service constituted infringing ”public performances” of the Broadcasters’ copyrighted content or, instead, was an innovative technological end run around existing copyright law.
Among the rights owned by copyright owners under the Copyright Act of 1976, is the “public performance right.” The Act states that one of the ways to perform a work publicly is to “transmit…the work…to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.”
Aereo, which started about two years ago and now offers its service in eleven cities in the United States, is a service that allows its subscribers to watch television programs over the Internet at about the same time the programs are broadcast over the air. While cable television providers pay very large licensing fees to broadcasters to allow their content to be provided to their cable subscribers, Aereo does not pay the broadcasters any license fees. This enables Aereo to sell the service to its subscribers for as little as $8 per month, far less than what the cable TV services charge.
Shortly after the service was launched, the nation’s major broadcast networks filed a lawsuit claiming that Aereo illegally retransmitted their programs without paying for them. Lower federal courts issued contradictory rulings on Aereo’s legality.
Aereo argued that it was not engaged in the unauthorized public performance of the works because of the unique way its system was designed (which Aereo executives admitted was designed to take a technological end run around the public performance provision of the Copyright Act). Essentially, Aereo works this way: when a user chooses a broadcast program to watch, a single micro antenna, about the size of a dime, is assigned to receive the chosen station. The signal then is sent to a sector of a video recorder dedicated to that choice and then streamed to the individual Aereo customer. Aereo claimed that this technological arrangement did not create “public performances” of the works. Aereo argued that even if thousands of users were watching the same program, it merely created thousands of individual performances, not a public performance.
In response to this, the broadcasters argued that the proper test of a “public performance” under Copyright Act was “whether an alleged infringer is transmitting a performance to the public, not whether multiple people are capable of receiving each transmission.” They further argued that even if the use of thousands of individual antennas, as utilized by Aereo, might not clearly be a public performance, the clear intent of Congress when it enacted the copyright act was clear.
Prior to the enactment of the Copyright Act, community access television (CATV), the forerunner of today’s cable TV systems, in a series of ruling by the Court, was held not to be publicly performing broadcast television programs. However, Congress made it clear, when the Copyright Act was revamped in 1976, that cable television providers were publicly performing works and would have to pay license fees. This statutory change negated the Court’s prior rulings. The broadcasters in the Aereo case argued that the Aereo service, despite its technological distinction, is no different than the services offered by a cable television provider which Congress clearly has stated must involve the payment of a license fee to the broadcasters.
The 6-3 majority of the Court agreed with the broadcasters and held that Aereo performs the works publicly within the meaning of the Copyright Act. The Court cited Congress’ intent regarding CATV systems and said that “Aereo’s activities are substantially similar to those of the CATV companies that Congress amended the [Copyright] Act to amend.”
In a lengthy dissent, Justice Scalia argued that the Aereo service is, from a legal analysis standpoint, akin to a copy service where one takes materials to a place like Kinko’s and chooses which copies to make, without the control of Kinko’s. This, he argued, is different from a video-on-demand service (like Netflix—which pays licensing fees), which arranges and offers a menu of available content (and is considered to be “publicly performing” such works). Scalia stated that, while the Court may not like what Aereo is doing, it appears to fall within the technological loophole in the current Copyright Act which requires a “public performance” in order to be prohibited. As such, Scalia and the other two dissenting Justices felt that it is up to Congress, not the Court, to remedy that situation.
As a result of this decision, which the Court stated should be read narrowly (there was concern that a decision adverse to Aereo could impact the legality of other cutting edge technologies such as cloud storage services), Aereo likely will shut down. Justice Breyer, writing for the majority, stressed that it was a limited decision that will not “discourage the emergence or use of different kinds of technologies.”
Billions of dollars were at stake in this case. For Aereo, it truly was a “bet the business” case. Its very future was at stake. Broadcasters feared a ruling in favor of Aereo could undercut the legal foundation that currently obligates cable and satellite services to pay very substantial copyright fees to carry network programs, a key source of revenue for the broadcasters.
Had the decision gone the other way, the broadcasters had threatened to remove much of the content that is now available as free over the air broadcasts (such as major sporting events) and would have moved broadcasts exclusively to pay cable services.
Given the ideological makeup of the Court, I thought that there was a good chance that the Court would have sided 5-4 with Aereo, on the theory that the Copyright Act loophole should be closed by legislative branch, not by the Court. However, this decision shows that it is never a safe bet to assume how this Court will rule on any case before it.
Law, Technology
On July 1, 2014, the first of several phases of Canada’s sweeping new Anti-Spam Law (“CASL”) passed in 2010 will become effective after a long “phase in” period. CASL, while containing significant tools to combat bad spam and to make e-mail marketing more user-friendly and respectful, will require businesses and charities doing business in Canada to devote significant attention (and resources) to re-qualifying their procedures for e-mail communications.
CASL should be of keen interest to any organization, for profit or non-profit, that sends electronic messages (i.e., not just emails, but also text messages) to recipients in Canada in connection with a “commercial activity.” Anyone doing business with Canadian companies or residents, including American companies and organizations, will have to comply with CASL or face the consequences of failing to do so.
The first part of CASL aims to protect consumers from unsolicited electronic messages (which includes not only emails but also text messages) by giving consumers control over who can send them a commercial electronic message or business email. Primarily a law to counter spam, CASL will have a major impact on how businesses conduct operations and market their products in Canada. New rules for electronic communications will compel companies to review their current email practices and, most likely, require them to re-qualify their email customer/contact lists to make them compliant. Persons and businesses in violation of the new laws may face significant financial penalties.
The basic prohibition contained in CASL is against sending “commercial electronic messages” unless the recipient has consented to receiving the message and the message contains certain prescribed information, including the identity of the sender and the sender’s contact information, as well as the unsubscribe mechanism. What is considered “commercial” under CASL is very broad. It is defined to include “any offer to transact any product or service or an interest in land, offer an economic opportunity (including gambling) or to promote any of these activities.” The mechanism to unsubscribe from receiving emails has to remain operative for 60 days and an unsubscribe request must be acted on within 10 days.
Canada’s new law represents a significant and tougher stance against unsolicited commercial emails and is far more restrictive than the United States’ CAN-SPAM Act. The US law is an “opt-out” system. CAN-SPAM only applies to emails Under current US law, as long as an email header (i.e., the subject line) is not misleading, companies are allowed to send one unsolicited commercial email (i.e., SPAM) to a recipient, so long as the email message contains a link to allow the recipient to opt out of receiving future emails and the company then removes the recipient from their mailing lists if they opt out. Canada’s new system, on the other hand, is an “opt-in” system that will require prior to consent to receive emails or texts “in connection with a commercial activity,” subject to a proviso that “implied” consent may be used within specifically defined circumstances such as a contractual relationship with a recipient.
The CASL does include some exclusions and exemptions. For example, several broad categories of messages are excluded entirely from the CASL prohibition or, while governed by it, will have no consent requirement. Excluded entirely are messages between individuals having a family or other personal relationship and business-to-business inquiries or applications. A second category of messages will be required to comply with the required “content” provisions described above, but not the consent requirement. This category broadly includes commercial communications that have a consensual basis, specifically: providing a quote in response to a request, facilitating a commercial transaction, providing warranty, product recall or safety information about a purchased product, providing information regarding the ongoing use of a purchased product or service or an employment relationship, or delivering a product or service (including upgrades) for a previously purchased product or service, to which the purchaser is entitled.
One important group of electronic communications that is exempt from the consent requirement are those falling under the category of “implied consent.” The most important of these are communications relating to an “existing business relationship” or an “existing non-business relationship.” The term “implied consent” is defined to include only specified circumstances. In addition to the two categories just listed, it includes a person posting an e-mail address in effect inviting communications or providing an e-mail address to a sender with no indicated intent not to receive messages, provided that any message sent is relevant to the person’s business.
While the “implied consent” exemption may appear to be an easy “out” from having to comply with CASL’s opt-in requirements, the scope of the “implied consent” rule is limited by the explicit definitions given to the terms “existing business relationship” and “existing non-business relationship.” In both cases, the required element is either an existing commercial relationship (e.g., a recent product or service purchase or a written contract) or a non-commercial relationship (e.g., a gift or donation, volunteer work or membership in an organization).
So how does a company whose messages are not going to be exempted under CASL acquire the required opt-in consent? The request for consent must set out clearly the purposes for which it is sought and, in a prescribed manner, identity information of the requestor. CASL places the legal burden on the organization to prove that consent was, in fact, obtained.
The second phase of CASL will become effective on July 1, 2015. That phase will prohibit the unsolicited installation of computer programs or software, as well unauthorized interference with private electronic messages. This portion of CASL seeks to protect consumers from potentially damaging and deceptive electronic threats (such as identity theft, phishing and spyware) by allowing them to decide who is allowed to put computer programs on their electronic devices. The general rule is that express consent is required to interfere with a message or to download. Furthermore, if downloaded software will perform functions such as collecting the user’s personal information, changing settings already installed on a computer, or interfering with stored data, this fact must be described clearly, prominently, and separately apart from the license attached to the software. Downloading of certain computer programs, such as cookies, where it is reasonable to assume the user’s consent, as well as upgrades to existing programs that have been installed previously with the user’s consent, are deemed to have received express consent.
The third phase, which will become effective on July 1, 2017, pertains to a person’s right to commence an action in court in response to a violation of CASL.
Once CASL is fully phased in, the penalties for failing to comply with it will be significant. These penalties include: (i) monetary penalties in amounts of up to $1,000,000 for individuals and $10,000,000 for other entities; (ii) criminal penalties for obstructing an investigation; and (iii) a private right of action for persons suffering actual loss or damage as a result of non-compliance with CASL. With respect to both the violations and the criminal offences, directors and officers who authorized an organization’s non-compliance will be personally liable. Further, the private right of action (which does not exist for violations of the US CAN-SPAM Act) is significant and potentially far-reaching. It will be available to any individual or other person who has suffered damage as a result of non-compliance. While it will be necessary to prove actual damages, in certain cases it may be possible for a large class of individuals impacted by a violation to file a large and costly class action suit.
The bottom line is that CASL represents a significant change to existing Canadian law, and it should be considered carefully by anyone doing business in Canada.
Entertainment & Media, Technology
This past week, YouTube sent out thousands of notices to parties who have posted video game reviews (including game play walk throughs) on YouTube. While the vast majority of these “reviewers” are amateurs who are video game enthusiasts who simply like to share their experiences with YouTube’s viewers, many are serious, well-funded enterprises who have operated as “professional” reviewers of video games and have monetized that activity. What Siskel & Ebert were to movies these folks are to the world of video gaming.
What caused YouTube to take this action? To be sure, these game reviews and game play walk throughs contain actual video game audio and video—both protected by copyright. However, by all accounts, the owners of the copyrights, the game publishers, were not the driving force behind YouTube’s decision. It appears that YouTube simply decided on its own accord to remove the content, just in case the copyright holders were to decide to pursue claims against them.
This is odd for several reasons. First, under the Digital Millennium Copyright Act, YouTube, as an “internet service provider” under the Act, enjoys immunity for copyright infringement with respect to postings made by others on its site as long as it provides for a mechanism to remove infringing posted materials if the copyright owner of such materials sends the internet service provider a notice demanding that such materials be removed from the site. This is known as a “Takedown Notice.” Second, most video game publishers have welcomed the publicity that these game reviews bring to their games. They have viewed it as a form of advertising for their games and, in many cases, even provide the games to the more professional reviewers specifically for the purpose of creating reviews to be posted on YouTube. Finally, “reviews” have long been a favored type of use under the Copyright Act’s “Fair Use Doctrine” (which I have discussed previously on this blawg: Homage or Rip-Off? and Go Ahead and Copy It). While it is true that many of these reviewers earn a good deal of money as a result of ad sharing revenues from YouTube, the fact that they are earning money from these reviews which incorporate copyrighted content does not negate the applicability of the fair use doctrine.
Even more bizarre in this case is that most of the game developers have NO idea why reviews of their games are being taken down. The video game developers did not send Takedown Notices to YouTube claiming that their copyrighted works were been posted illegally. Some suspect that YouTube’s notices informing the video game reviewers that their reviews/gameplay walkthroughs were taken down was the result of an automated program instituted by YouTube that sniffs out copyrighted content and automatically generates a notice removing such content, regardless of the manner in which it is used or even if it is used with permission.
For companies who have been earning a living from the revenues generated from their game reviews, this is more than a bit troublesome—it could be a “bet the business” kind of moment. I know of at least one such company that has moved its reviews to a different platform as a consequence of this action by YouTube.
Certainly, YouTube (and any other content host, such as Facebook, Instagram and Google) can decide if it will host any content. It could change its longstanding revenue model of sharing ad revenues with those parties who post content on the site and simply rely on other non-infringing content that is uploaded by users who do not expect to be paid anything. This would certainly make the creators of content such as movies, television shows and music happy, as they would no longer have to worry about their product being given away for free on YouTube. However, the video game industry is a bit different. By and large, game developers and publishers have seen these game reviewers and game play posters not as parties who are violating their copyrights but, rather, as effective publicists for their games.
If this wave of Takedown Notices simply was the result of a software algorithm gone bad, perhaps YouTube will straighten it out and once again welcome the posting of this type of content. On the other hand, if this was a conscious business decision made by YouTube, perhaps it will rethink that decision. The community of professional and amateur game reviewers are eagerly waiting to see what YouTube’s next step will be.
Entertainment & Media, Law, Technology
An expensive nine year legal battle between Google and The Authors Guild, the nation’s largest organization of published authors, has ended in a victory for Google. Federal Judge Denny Chin, of the influential U.S. District Court for the Southern District of New York, awarded a summary judgment to Google with respect to copyright infringement claims brought by the Authors Guild and several other named authors as a result of Google’s mass digitization of literary works for its “Google Books” project. In legal parlance, a “Summary Judgment” is a judgment rendered by the court prior to a verdict because no material issue of fact exists and one party or the other is entitled to a judgment as a matter of law. In other words, the facts that are material to the decision are not disputed by the parties and, therefore, the judge can render a decision based on the relevant law.
So what started this massive lawsuit? For several years now, Google has embarked on a massive project, called Google Books, to make digital copies of entire books (not just portions of them) to enable full-text searching of the texts. While many of the books are no longer protected by copyright, an enormous number of them still are. So far, Google has digitized approximately twenty million books. The Authors Guild and the group of individual authors (collectively, the authors) sued Google, claiming that such copying amounted to a massive copyright infringement of millions of books.
The District Court held that Google’s use of digital copies for full-text searching was “transformative” (I’ll explain that in a minute) and thus constituted “fair use.” As a result, the court held that Google may make full digital copies of the works without authorization of the Authors.
I have discussed the Copyright Act’s fair use doctrine in a previous post. It continues to be one of the most litigated issues in copyright law. Just to recap from that earlier post, the Copyright Act sets forth a non-exhaustive list of four elements that the courts must consider in determining if any unauthorized use of a copyrighted work is a “fair use.” They are: (1) the purpose and character of the work (which is claimed to be a fair use); (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work. In addition to those four factors, the statute states that the court may consider other factors it deems relevant to the analysis.
As a result of the landmark 1994 U.S. Supreme Court decision in the case of Campbell v. Acuff-Rose Music (a case involving rapper Luther Campbell’s unauthorized cover version of Roy Orbison’s classic song, Oh, Pretty Woman), the courts have established another element to be considered: whether or not the unauthorized use is a “transformative use.” As I noted in the previous post, while some consider this to be a new “fifth element” to be considered, most legal scholars consider the “transformative work” test to be an element to be considered as part of the analysis of the first of the four statutory factors, i.e., the purpose and character of the work.
The Campbell Court stated that a derivative work becomes a “transformative work” (and, thus, entitled to fair use treatment) if it uses a source work in a completely new or unexpected way. In other words, even though the statute says that a copyright owner may stop others from preparing derivative works based on their copyrighted work, if that new work is “transformative” enough, the copyright owner may not be able to stop the use, even if the other four fair use factors set forth in the statute weigh against a finding of fair use. One thing that has led to quite a bit of confusion over the years is that the definition of a “derivative work” includes a work that is “transformed.” The test often applied is whether the new work “supplants” the original work. If so, it is not transformative.
OK, so how did the Google court apply the fair use analysis? Incorrectly, in my opinion.
In analyzing the first factor, i.e., the purpose and character of the Google works, the court concluded that Google’s use was “highly transformative” and, thus, that factor weighed heavily in favor of a finding of fair use. The court was impressed by Google’s digitization as a transformation of the books into a comprehensive word index that is designed to allow people to search through entire texts based on inputting search terms for any terms contained within that text. I fail to see how simply making copied text searchable is “transformative.” (I suspect the court of appeals might agree with me.) The court seemed to place a great deal of weight on the fact that Google’s scanning makes it easier for students, teachers, researchers and the public to find books. While the court acknowledged that Google’s use was commercial (which would tend to weigh against a finding of fair use) it nonetheless was impressed that researchers could use the indexed text without direct payment. What the court conveniently overlooked was that Google is a commercial enterprise and it generates millions of dollars in revenue as a result of ads and traffic on its site, including the Google Books pages.
The next factor the court discussed, the nature of the copyrighted work, i.e., books, once again would seem to weigh against a finding of fair use. However, the court said that the vast majority of the digitized books were non-fiction and thus entitled to little protection. Again, I disagree with that. While facts contained in non-fiction books are not protected by copyright, the choice of the way to express those facts is. While certain non-fiction works (for example, parts catalogs and phone directories) may have a very “thin” layer of copyright protection, other non-fiction works are highly creative. For example, does the court really think that Truman Capote’s classic, In Cold Blood, is not worthy of strong copyright protection just because it is not a work of “fiction?”
In analyzing the third factor, i.e., the amount and substantiality of the portion used, the court decided to use reason and stated that Google’s digization of entire works did weigh against a finding of fair use, but only “slightly” because Google takes steps to keep people from viewing complete copies of books online (even though the entire text is searchable).
In applying the final fair use factor, namely, the effect of the use on the market for the underlying work, the court opined that since Google does not sell the digitized versions, and only allows “snippets” of books to be viewed, Google Books are not a substitute for the original and will actually boost sales for the original works. The court stated that Google Books has given “new life” to “out-of-print and old books that have been forgotten in the bowels of libraries.” While Google’s legion of fans may love the convenience of being able to search millions of books this way, it is important to keep in mind that the authors feel that they have been economically harmed by this, notwithstanding the court’s view that the authors would benefit from it.
Judge Chin felt that the value of Google Books to researchers and other academics was compelling, stating that “Google Books provides significant public benefits.”
What is the impact of this decision (assuming that it is not overturned on appeal)? The decision gives a legal greenlight to search services that include images, text and other portions of works in the search results. Already, the courts have held that use of thumbnail images as part of a search engine is fair use. So long as such a search result does not act as a substitute for content by showing readers all of it, and instead simply shows where to find the rest of the content, the usage will be permitted.
Frankly, the court’s decision left me scratching my head wondering how it could reach some of these conclusions. My criticism of the decision is not so much the end result of a finding of fair use, but, rather, the court’s position on each of the four factors that led to that result. It is important to keep in mind that this decision (strangely taking nine years to get to summary judgment) likely will be appealed. I suspect that the court of appeals will agree with me and overturn this decision, but one thing that I have learned in my 28 years of law practice is that, when it comes to fair use cases, expect the unexpected. You can be certain that I (and others) will be watching this case closely.
