Internet Task Force Examines Copyright In the Digital Age

Remixes make valuable contributions to society in providing expressive, political, and entertainment content. It is important that the copyright framework continues to allow the broad range of remixes to thrive, ensuring that a vibrant fair use space coexists with effective licensing structures.

Id. at 4.

Toward this end, the task force offers several recommendations that would “make it easier for remixers to understand when a use is fair and to obtain licenses when they wish to do so.” Specifically, the task force recommends pursuing three goals: 1) The development of negotiated guidelines providing greater clarity as to the application of fair use to remixes; 2) expanding the availability of a wider variety of voluntary licensing options; and 3) increasing educational efforts aimed at broadening an understanding of fair use.

The task force considered but rejected a statutory carve-out exempting user-generated content from copyright liability, such as the one passed in Canada in 2012, and more generally declined to suggest any changes to the existing act in connection with remixes: “The task force concludes that the record has not established a need to amend existing law to create a specific exception or a compulsory license for remix uses.”

Instead, the task force urged stakeholders to develop best practices and guidelines for remixing, with or without government involvement, focused on identifying “those activities that can be agreed to be clearly fair use or clearly not fair use” in this area. Id . at 29. The task force also highlighted emerging licensing structures, such as YouTube's payment of license fees to creators whose works are included in YouTube videos, and gave its encouragement to new “micro-licensing” efforts being undertaken by the recording and music publishing industries.

First Sale

The task force's discussion of first sale focuses on the extent to which the Section 109(a) limitation on the copyright owner's exclusive right to control distribution of physical copies should be expanded into the digital realm: Should the law allow, for example, an iTunes user to “resell” digital files online with the same freedom a CD buyer can resell physical discs in a used record store?

The Copyright Office analyzed this issue in detail in its 2001 “Section 104 Report” and concluded decisively that existing law does not permit such free online re-distribution of digital files. See, U.S. Copyright Office, “A Report of the Register of Copyrights Pursuant to '104 of the Digital Millennium Copyright Act.” The task force reviewed the issue and reached the same conclusion, finding that there have been “no significant changes in technological capabilities” since 2001 to warrant a different view, or an amendment to the statute.

Summarizing the record it had compiled from written comments and roundtables, the task force noted:

[W]e have been presented with persuasive arguments that there would be a significant risk of harm to the market for creative works if the first sale doctrine were extended to digital transmissions. There is the potential for substitution in the market from perfect copies, with one-to-one substitution of customers; and the potential multiplication of copies is not today clearly avoidable through the use of technology. We do not believe that the compromises put forward by commenters would adequately address these problems. Most included as a necessary component the automatic deletion of the transmitter's copy, which does not at this point seem feasible and which does not address the harm from “used” digitally transmitted copies competing in the marketplace with new copies.

White paper at 67.

Therefore, the task force declined to endorse any statutory change, but did sound a note of caution with regard to the apparent disconnect between the perceptions of online downloaders who believe they have “bought” a particular song or audiovisual work, and the legal reality that such downloaded copies are often merely licensed. The white paper encourages stakeholders to establish best practices for informing consumers about what they may do with copies obtained by means of digital transmissions.

Two specific suggestions were: 1) alternatives to the “buy” button, that would communicate what it is that the consumer is paying for without affirmatively suggesting that he or she is obtaining ownership of a copy; and 2) best practices on how to inform consumers about the terms of EULAs (End-User License Agreements) regarding whether they “own” the copies provided and what they may do with them. White paper at 69.

Statutory Damages

Unlike its treatment of remixes and first sale, the white paper's analysis of statutory damages leads to specific ' albeit limited ' recommendations for amending the Copyright Act. Noting the inconsistent and arguably “excessive” statutory damage awards in a few high-profile online infringement cases, the task force focuses on three particular areas of concern: 1) the amount of statutory damages recoverable per work; 2) the availability of reduced statutory damages for “innocent infringers;” and 3) whether courts should be given discretion to award statutory damages on a basis other than per-work-infringed, in cases of non-willful secondary infringement of large numbers of works. The white paper offers recommended statutory amendments in each area.

As to the standard per-work amount of statutory damages, currently set by Congress at $750 to $30,000, with an increased ceiling of $150,000 where infringement is found to be willful, the task force recommends adding a list of factors for courts to consider when picking a number from the statutory range. The goal is “a greater degree of predictability.” The proposed new statutory language to be added to Section 504(c), drawn largely from existing model jury instructions, reads as follows:

Factors to Consider: In making any award under this subsection, a court shall consider the following nonexclusive factors in determining the appropriate amount of the award:

(1) The plaintiff's revenues lost and the difficulty of proving damages.

(2) The defendant's expenses saved, profits reaped, and other benefits from the infringement.

(3) The need to deter future infringements.

(4) The defendant's financial situation.

(5) The value or nature of the work infringed.

(6) The circumstances, duration, and scope of the infringement, including whether it was commercial in nature.

(7) In cases involving infringement of multiple works, whether the total sum of damages, taking into account the number of works infringed and number of awards made, is commensurate with the overall harm caused by the infringement.

(8) The defendant's state of mind, including whether the defendant was a willful or innocent infringer.

(9) In the case of willful infringement, whether it is appropriate to punish the defendant and if so, the amount of damages that would result in an appropriate punishment.

White paper at 87.

Whether greater predictability would be achieved by incorporating these factors into the Act's provision on statutory damages is, at best, speculative.

The task force's other two recommendations about statutory damages might, if enacted, have a greater impact on actual results for litigants. First, the white paper proposes that Sections 401(d) and 402(d) be amended to allow “innocent infringers” to enjoy the current reduction of the statutory minimum to $200, even in cases where a copyright notice appeared on the plaintiff's work. Under current law, the reduced minimum is only available if the plaintiff's work bore no copyright notice, which is very seldom the case. The task force explains that:

The existence of a copyright notice should remain a factor for the court to consider when determining whether to reduce the damages award, since it may bear on the defendant's state of mind. If a defendant asserts that he was not aware of and had no reason to believe that the work was protected by copyright, the existence of a copyright notice would tend to undermine that claim. But if a defendant mistakenly believed that he was engaging in a fair use, the notice would not undermine that defense. This proposal preserves the copyright owner's incentive to provide notice because, depending on the basis for the innocent infringement defense, the notice may still be relevant and even dispositive.

White paper at 97.

The final recommendation focuses narrowly on the issue of the “per-work multiplier” in the context of non-willful secondary liability by online services. Under existing law, the statute requires a separate award for each work infringed, and sets a floor of $750 on each such award, (barring reduction for innocent infringement, which is seldom available under existing law, as noted above). Even with minimum statutory damages, the result of calculating damages per-work is a potential for enormous damages against online services that facilitate their users' infringement of thousands or millions of works.

The task force proposes that courts be given discretion, in cases of non-willful secondary liability involving “large numbers of infringed works,” to “depart from the strict 'per work' calculus and adjust the overall award to an amount that appropriately reflects the purposes set forth in the statutory factors [the task force] proposed above'. Congress should consider whether to set a minimum number of infringed works beyond which an additional per-work award would not be mandatory, or whether that number should be determined in each case by the court.”

Courts would not be required to abandon the strict per-work method of calculation, but instead would “have the discretion to do so if that calculus would lead to a disproportionate overall award. Nor should the enactment of such a provision be read to mean that this is the favored result in cases involving more than the threshold amount.” White paper at 98.

Conclusion

In light of the importance of both copyright-based industries and Internet-based technologies to our culture and economy, the task force sought to balance exclusive rights and exceptions so that “[t]he goals of our national copyright policy and our global Internet policy ' work in tandem.” White paper at i. In practice, however, harmony is elusive, and stakeholders with greater stakes in one camp or the other will no doubt continue to seek a better balance for themselves. The resulting lobbying, as always, will make the implementation of any amendments to the Act a long and winding road.

Robert J. Bernstein practices law in New York City in The Law Office of Robert J. Bernstein. Robert W. Clarida is a partner at Reitler, Kailas & Rosenblatt.