The JIPEL Blog features articles on new developments and current challenges within the areas of IP and entertainment law, written by students, professors, and legal practitioners. If you would like to discuss writing a guest post, you can get in touch with us via email at firstname.lastname@example.org.
You’re Terminated!: Termination and Reversion of Copyright Grants and the Termination Gap Dilemma.
By Pierre B. Pine*
The 1976 Copyright Act (the “Act”) went into effect on January 1, 1978. The Act provided authors (and some heirs, beneficiaries, and representatives) with the right to terminate prior grants of their copyrights under certain conditions and within specific timeframes. Begining, on January 1, 2013, many artists and musicians who transferred their copyright rights after the Act was enacted 35 years ago have finally gained the opportunity to terminate those transfers.
The purpose and rationale underlying the termination provisions is clearly equitable in nature, to allow authors or their heirs a second opportunity to share in the economic success of their works. The House Report accompanying the Act explains that the provisions are “needed because of the unequal bargaining position of authors, resulting in part from the impossibility of determining a work’s value until it has been exploited.” Furthermore, the Congress that enacted the Act specifically recognized the necessity of “safeguarding authors against unremunerative transfers” as justification for its providing authors with the opportunity to subsequently terminate prior transfers.
The termination provisions involve very specific and formulaic time frames and notification requirements for two types of grants: (1) those made prior to January 1, 1978 (the effective date of the Act), and (2) those executed on or after such date. An overview of both is detailed below. However, despite what was clearly the best intentions of Congress to provide authors and/or their heirs with a second bite of the proverbial apple, an unfortunate oversight on Congress’s part in drafting the Act has created a dilemma that could prove costly for many authors and heirs looking to exercise their termination rights.
The dilemma involves how the Act’s termination provisions apply, if at all, to what have come to be known as “gap works.” Gap works are works that were transferred and/or assigned by an agreement dated before the effective date of the Act (January 1, 1978) but not actually created until on or after January 1, 1978. This “gap dilemma,” unless clarified by Congress, could adversely affect authors by, among other things, stemming a multitude of litigation, which may defeat the purpose of the Act and deter authors from seeking to enforce their reversion rights by making it cost-prohibitive to do so. more »
Concussion lawsuits have become an increasingly hot topic over the past decade as we’ve learned more about the long-term dangers concussions can pose to the human brain. While NFL concussion lawsuits for workers’ compensation have been highly publicized, less attention has been paid to NCAA players with similar injuries. Lawsuits for sports-related injuries at this level have been largely unsuccessful due to the “amateur” model that controls and defines college sports. This post will examine two current issues dealing with college athletes’ rights that could profoundly impact availability of workers’ compensation for student-athletes. However, I will ultimately argue that from a purely workers’ compensation perspective, there is a much easier and less disruptive way for athletes to get paid for their injuries.
Workers’ compensation statutes were enacted to provide compensation to employees or their estates for job-related injuries. Each state generally has its own very specific statute and most of them require that the recipient of the workers’ compensation be defined as an employee. At a basic level, workers’ compensation for collegiate athletes hinges on whether an employer-employee relationship exists between athletes and their schools.
Up until recently, attempts at finding an employer-employee relationship between athletes and universities were consistently rejected by courts. There were a few early cases where athletes prevailed, but the holdings lost their relevance as the NCAA introduced its amateur rules.
Currently, there are two major happenings that threaten to override the existing case law. First, in In Re: NCAA Student-Athlete Name and Likeness Licensing Litigation (“O’Bannon”) former UCLA basketball star, Ed O’Bannon, filed suit against the NCAA and others for failure to compensate him during and after his collegiate athletics career for commercial use of his name, image and likeness. If O’Bannon succeeds, college athletes could be compensated for their athletic services and an athlete could then be considered an employee and become entitled to workers’ compensation under many state laws.
Second, the National Labor Relations Board (“NLRB”) recently granted Northwestern football players the right to unionize, noting that they were “employees” of the university. This decision only affects Northwestern and it will likely be appealed to the NLRB proper, and if necessary, to federal court. If collegiate unionization survives on appeal and/or in court, which I don’t think it will, the logistics of the union will be very difficult to navigate. Given the disparities in profits across sports, difficult (and perhaps impracticable) decisions would have to be made regarding the criteria necessary for unionization, which athletes should be grouped into a given bargaining unit, and whether the NCAA, the conference or each individual university should serve as the “employer.” If student-athletes are allowed to unionize, they could potentially go on strike, which would impact the college program, waste student-athletes’ eligibility and negatively affect their athletic career and development. Further, there will be administrative costs due to player turnover that will inevitably occur every year.
There is no doubt that a decision for the players at Northwestern and in O’Bannon would be a positive outcome for the numerous athletes who are arguably risking millions of dollars in future earnings by participating in college sports. It would also provide equitable relief to players with injuries like concussions that last well beyond their time in college. On the other hand, the implications of viewing athletes as employees will have profound costs and administrative concerns for universities, including those related to Title IX and universities’ eligibility for taxation as “amateur athletic organizations.” The existence of an employer-employee relationship could ultimately destroy the amateur model and college sports as we know them.
In my view, there is an easier way to compensate collegiate athletes for their injuries. Given the potentially complicated and detrimental results of the Northwestern case and O’Bannon, perhaps the most realistic and equitable solution to the workers’ compensation problem is to provide some sort of injury reimbursement for athletes without creating an employer-employee relationship. For example, the current health insurance program for college athletes is complicated and inadequate. Although almost all NCAA schools provide insurance for their student-athletes, there are still some schools that don’t provide coverage. In these instances, student-athletes can be left with significant personal medical bills. Even where coverage is provided, it can be very specific and often doesn’t cover everything. For very severe injuries, athletes may be entitled to care under the NCAA’s “Catastrophic Insurance Program,” which provides coverage for athletes whose injuries result in $90,000 or more of medical bills. In 1990 the NCAA implemented the Exceptional Student-Athlete Disability Insurance Program (“ESDI”), which provides disability insurance to athletes that will likely be selected in the first three rounds of the NFL, MLB, NHL, NBA, or WNBA drafts. Unfortunately, the ESDI is not as effective as it could be due to its high cost, inadequate coverage of “non-total disability” injuries, and the fact that it only covers certain athletes based on sport and talent level.
The most effective solution to the workers’ compensation issue will not try to force the complex and potentially catastrophic employer-employee relationship on the college athletics model. Rather, it will address the gaps in the current medical insurance model by decreasing deductibles and providing some sort of remuneration for long-lasting injuries like concussions. In this way, we can find a way to win for both athletes and the NCAA.
Elizabeth Polido is a J.D. candidate, ’15, at the NYU School of Law.
Patents, prizes, government grants, and R&D tax incentives are ways to reward and incentivize innovation. One of the ways in which these schemes differ is the timing of the reward. Patent holders are rewarded after the product is developed and patented over the course of 20 years (length of the patent) but only if the product is commercialized (since rents are earned from the market). Prize-winners are awarded according to the competition rules although it is almost always after some sort of result. Government funding and tax incentives is granted throughout or before the development period and often before any final results are produced. R&D tax incentives have a slight delay from the process of getting through the tax system to realize those benefits.
Crowdfunding, most popularly embodied by Kickstarter, leverages small contributions from the masses to finance various projects and presents an interesting timing issue. Crowdfunding and patents are similar in that rents are collected from the private market but there is a slight shift in timing. Projects may vary in what stage they are in, but on Kickstarter, most if not all creators seem to have at least some prototype if not the actual product developed before their campaign launch. Kickstarter sets out additional requirements and guidelines for hardware and design products, and while there is no requirement what stage the project must be in, the language seems to assume that there is at least a working prototype. Since the ideation step is often completed by the time a crowdfunding campaign happens, crowdfunding incentivizes dissemination and commercialization, and there is questions on whether this is a good thing.
As far as incentives go, crowdfunding more directly encourages the dissemination of technology rather than the creation of it. This begs the question of whether crowdfunding and patents as incentive schemes overlap to a point of inefficiency and whether crowdfunding may undermine the justifications and existence of a patent system under certain circumstances.
This dichotomy of “ex ante” versus “ex post” rewarding calls into question many of the philosophical underpinnings of intellectual property regimes. The “ex-post justifications” for IP claims that without IP protection, innovators will not, upon ideation and initial development of the IP, continue to further invest in the improvement or commercialization of the product. It is the same sort of argument found in property law for the privatization of land in hopes of internalizing both the costs and benefits of the land thus resulting in efficient use. The traditional/ideation justification of IP is that innovators have expended significant costs to develop the innovation thus putting them at a disadvantage in a competitive market against others who have made no such contribution to innovation. But at the production and distribution stage, the intellectual property already exists and the additional dissemination costs are dictated by internal efficiency, which is how a competitive markets function. As long as people are willing to pay a price equal to marginal cost, some firm will distribute it, and we theoretically won’t see the kind of market failure that would occur with ideation.
Perhaps, crowdfunding and patents together provide excessive incentives to innovate and commercialize. Or perhaps this incentive to disseminate creates ex ante incentives to innovate. It is difficult to parse out the difference.
Christine Shim is a J.D. candidate, ’15, at the NYU School of Law.
Just as our hourly mood statuses (www.twitter.com), tedious errands (www.taskrabbit.com), and restaurant conundrums (www.yelp.com) have been progressively fulfilled and/or publicized by various social technology platforms, the want of capital has also turned to social networks sprawled across the internet as an alternative to the traditional financing entities. Crowdfunding, most popularly embodied by Kickstarter, leverages small contributions from the masses to finance various projects. While it generates the most traffic in the creative arts with film & video, music, and publishing categories having the highest volume of launched projects, Kickstarter has cultivated several noteworthy technology products. E-paper watches synced to smartphones, high-resolution desktop 3D printers, 3D pens, and temperature-regulating dress shirts are some of the success stories, with money pouring in through contributions from thousands or even tens of thousands of people accumulating funds that surpass the initial goal by up to a hundred-fold. Kickstarter is said to be the ultimate democratization of product development, but is product development an activity for the masses? Are good decisions being made?
Creators have information on the costs of their innovation, and this information is conveyed to some degree through the crowdfunding campaign webpage and any other communication between the creator and the funders. Creators, with projected costs and value in mind, will set a funding goal. If the creator fails to reach the funding goal, the creator receives nothing, so creators should set an attainable goal. A ludicrously high funding goal would also signal to potential funders that the creator is dishonest, delusional, or otherwise incompetent, and such reputation-based quality signals are very powerful determinants of campaign success.
Potential funders then use whatever information they have to decide what this project is worth to them. If the collective value that funders find in this project matches or exceeds the creator’s funding goal, the innovation will be further developed and commercialized. On one hand, we can view the crowd as pure consumers speaking on behalf of the market. In this scenario, the crowd compares the set funding goal against how it would price the product on the market. A presale rewards model of crowdfunding in particular may mimic the private consumer markets, whose consumptive behavior determines reward amounts and recipients in the patent system. That being said, crowdfunders represent a relatively small slice of active Internet users and thus are not necessarily good representations of the consumer population.
Alternatively, we can view the aggregate crowd as a central planner that decides which innovations are worth bringing to market. Crowdfunders often contribute without expectation of a direct reward or have a higher willingness to pay for the product than regular consumers, and this behavior suggests that crowdfunders find value in backing projects beyond mere consumption. Perhaps this crowdfunding mechanism is able to capture some of the social value that the standard market may miss. In this scenario, the crowd compares the set funding goal against a value that includes intrinsic value.
Realistically, the crowd probably acts as some combination of a market consumer and a central decision-maker. And if we are relying on crowds to direct the course of our innovation and consumer products markets through funding decisions, we need to determine if crowds are dependable. We are already concerned that crowdfunders represent a small segment of the public at large; active social network and Internet users are a subset of the general population and crowdfunders are an even limited subset of active Internet users. While free-riding and collective action problems exist, the sheer number of crowdfunders could make up for the fact that each crowdfunder is not individually performing adequate due diligence. With more eyes looking over projects, there is a higher chance that at least one pair will notice something wrong or something ingenious about the project.
This potential advantage to having a crowd decide whether or not to bring an innovation to market speaks to the “wisdom of crowds,” coined by James Surowiecki in The Wisdom of Crowds—the notion that aggregating the knowledge and information of a large number of people could make the aggregate answer more robust. The idea is that an individual’s opinion or guess, no matter how amateur, has two components: an informational piece and an error piece. Upon aggregation, the errors cancel out and something closer to pure information is left behind. It is important to note that this concept is a statistical phenomenon rather than a social or psychological one, and social influence is more likely to undermine the wisdom of crowds than enhance it.
There are four requirements that need to be met for a crowd to be wise. First, a crowd must be diverse. Diversity brings a large range of perspectives and considerations and also helps the group focus on facts in the decision-making process by diffusing herding effects that might arise from the imbalance of power and influence within the group. Homogenous groups of people are more likely to converge on an conclusion, less likely to entertain outside input, and more confident in their collective judgment. There is a higher pressure, even if unintentional, for individuals within the group to conform. Diversity also helps foster independence within the group which in turn feeds back and contributes in maintaining diversity.
Independence is the second condition for a wise crowd. It refers to the freedom and distance individuals within the group maintain from other members of the group. The more independent individuals are, the less likely it is that the same errors and biases are perpetuated throughout the group.
Decentralization is also very important in maintaining the independence and specialization in a crowd. Power and influence must not be concentrated in one location but rather spread out among “local” subgroups of the crowd. Decentralization is more relevant in some circumstances more than others, such as coordination activities.
Finally, the fourth condition of wise crowd decision-making is that there be some mechanism by which to aggregate information while maintaining the diversity and independence of it.
In addition to being wary of the quality of the collective conclusion, it is important to note confidence the group has in that answer. As opinions converge, individuals in the group, and hence the group as a whole, becomes more confident in the aggregate answer regardless of a whether or not there was an improvement in accuracy.
The crowdfunding mechanism, in its most common setup, is not conducive to gathering wise crowds. Most problematic is the lack of independence among funders. People considering whether to fund a project or not can see how much others have funded the project over what period of time and can calculate what the average contribution per funder was. Sequential group decision-making creates an information cascade in which latter funders mimic early funders assuming that the early funders have the correct information. As the cascade continues, it is building upon previous, uninformed decisions, and collectively the group decision is really the decision of a few of the earliest funders. Information cascades can be socially useful in spreading good ideas if imitation is done intelligently. If sequential decision-making occurs among a diverse group of people and at least some people are willing to made decisions against the cascade, information cascades can be halted. However, this depends on particularly confident or particularly risk-averse people to resist imitating the mass opinion, and sequential decision-making as a whole is not reliable. One additional wrinkle is that because funding is not anonymous, people’s consumption changes when others are watching.
In sum, while crowds may be able to provide accurate information about market demand from consumers, crowds are likely not well-suited to make decisions about innovation and whether a product should be brought to market.
Christine Shim is a J.D. candidate, ’15, at the NYU School of Law.
The Oculus Rift is one of the new technologies that has many techies buzzing. Videos are all over YouTube, fan pages have sprung up, and even the Game of Thrones exhibit in New York City is using the technology to immerse visitors.
And with good reason. The Oculus Rift promises to satisfy one of the holy grails of the technology world: virtual reality (VR). Though the modern concept of VR has been pursued since the 1980s, it is fair to say that no one had ever really done it right. That all changed when John Carmack and Palmer Lucky launched a Kickstarter campaign to fund their attempt at VR. Benefitting from generations of technological advances, the Oculus Rift boasted the ability to smoothly track head movements and provide the wearer with a high definition display across her field of vision. The campaign earned an astounding $2.4 million dollars from about 10,000 backers, making it the 17th highest funded Kickstarter at the time of writing. Considering their funding goal was only $250,000, the community’s enthusiasm for the project was unmistakable. For a donation of $300 or more, backers would receive a developer prototype of the device, an option many took.
The community reaction to the Oculus Rift since the Kickstarter campaign was overwhelmingly positive. Important players in the industry made plans to incorporate the technology, over 50,000 developer kits were sold (causing a supply shortage), and consumers anxiously waited for the chance to get their hands on a final product.
This all changed on March 25th, 2014 when Facebook announced its acquisition of Oculus. An outcry could be heard across the internet. Many who had originally “invested” in Oculus, some with money, others with their vocal support, felt betrayed. They viewed the acquisition as their hope for VR gaming selling out to the corporations who want to plaster their computer screens with targeted advertisements. They felt that they had provided Oculus with enough backing to make selling out to the social networking giant unnecessary.
What’s more, many felt that they had rights when it came to how the company was operated, as they helped fund the launch of the project. However, exactly what rights do these “investors” have as Kickstarter backers? For example, are they similar to the rights given to equity investors of startup companies (which often include a vote on a sale of the company)?
This is unfortunately where it would have done many of them a favor to read the fine print. Kickstarter explains the benefits of “backers” (note: not “investors”) under its FAQ section:
“Backers that support a project on Kickstarter get an inside look at the creative process, and help that project come to life. They also get to choose from a variety of unique rewards offered by the project creator. Rewards vary from project to project, but often include a copy of what is being produced (CD, DVD, book, etc.) or an experience unique to the project.
Project creators keep 100% ownership of their work, and Kickstarter cannot be used to offer equity, financial returns, or to solicit loans.”
Thus, despite the fact that they did give money to a company in order to “invest” in its future, they did not (and could not) invest in a traditional sense. Typically, equity investors are entitled to voting power as shareholders in a mixed buyout financed by cash and shares (like the Facebook buyout of Oculus). However, Kickstarter is purely a donation website where creators may or may not offer rewards to donors. This distinction should be an important consideration for all backers on Kickstarter going forward. It may also potentially be an advantage for certain startups with “projects” they can advertise to the public as this “no-strings-attached” form of crowd-funding avoids some problems of finding investors traditionally. Regardless, it will be interesting to see what the future holds, both for the Facebook-owned Oculus and for crowd-donation services in general.
Luke Smith is a J.D. candidate, ’15, at the NYU School of Law.
What is an abstract idea? That was the issue at the heart of Monday’s Supreme Court arguments in Alice v. CLS Bank. In order to understand the issue in Alice, its important to understand how the Supreme Court’s understanding of patentable subject matter has evolved over the past decade. Section 101 of the Patent Act specifies that inventors may receive a patent on any “process, machine, manufacture, or composition of matter” so long as it satisfies the other requirements of the Act. In 2010, the Supreme Court took up the question of whether “business methods” could be included in section 101’s requirements. In that case, Bilski v. Kappos, the court examined a patent for financial hedging. While the court ultimately found that patent to be an “abstract idea” and therefore not eligible for patent protection, the decision formally opened the door for other less abstract business method patents. Less than two years later, the Court heard arguments in Mayo v. Prometheus about whether adapting a “law of nature” to a diagnostic test fell within the realm of patentability. Holding that it did not, the Court criticized Prometheus, the patentee, for discovering a law of nature and then trying to acquire patentability by telling the reader to simply “apply” the law in a practical setting. Having addressed both financial innovation and diagnostic medicine, the court set the stage for litigation over the claims in Alice.
For those unfamiliar with the case, Alice, the petitioner, obtained patents on systems and methods for conducting two-way trades. As part of those systems and methods, the patent instructs the reader to use a computer to construct a “shadow ledger” for simulating a transaction before it’s made. By simulating the transaction, the program ensures that the parties are actually going to pay the agreed price before any money is transferred. If the simulated transaction fails then the computer orders a halt to the real-world transaction.
If this concept doesn’t sound particularly “inventive” then don’t worry, several of the justices weren’t impressed either. Carter Phillips, counsel for the petitioner and patentee, Alice Corp., went first and faced a flurry of opposition from the Justices. Within minutes of taking the podium, Justice Ginsberg asked how Alice’s patent claims differed from the claims in Bilski, suggesting that Alice’s “intermediate settlement” might not be any more inventive than Bilski’s “hedging.” Justice Kennedy followed up shortly thereafter, telling Mr. Phillips that a group of second year college students would find it “fairly easy to program” Alice’s underlying concept into a computer and that Alice’s patent seemed rather to cover an “idea” as opposed to a patentable invention. However, no justice was less amicable to Mr. Phillips than Justice Breyer. Following closely on the heels of Justice Kennedy’s remarks, Breyer suggested that Alice’s underlying concept was as old as the Egyptians and so simple that his mother employed it in his youth to prevent overspending. Pushing the issue even further, Justice Sotomayor asked what functional benefit derived from the use of a computer. Justice Sotomayor and several of the other justices failed to see how the patent innovated other than simply saying “use a computer” to perform the already understood concept. Throughout his time at the podium, Mr. Phillips did his best to highlight the complex nature of Alice’s patents but it wasn’t clear how convincing his arguments were to the justices.
For all their difficulties with Mr. Phillips’s arguments however, it wasn’t clear that the justices themselves knew what rule should apply here. At one point towards the middle of Mr. Phillips’s time, Justice Breyer candidly reflected that he struggled to formulate a rule that would curtail bad software patents without eviscerating the industry. Unfortunately, Mr. Phillips was unable to clearly answer the question and instead led the court down a debate, first arising in Bilski, over the legislative history surrounding business method patents.
During Mr. Phillips time at the podium the Court also struggled to apportion statutory importance between sections 101 (patentable subject matter), 102 (novelty), and 103 (non-obviousness). Justice Scalia, at one point, suggested that perhaps 102’s novelty analysis would prove to be the proper screening mechanisms for questionable software patents, but both Justice Breyer and Justice Ginsburg hesitated to join Scalia’s view. Ultimately, by the time Mr. Phillips sat down, his argument appeared bruised but not entirely beaten by the justices’ questioning.
In contrast, Mark Perry, counsel for the respondent, CLS Bank, had a much easier time at the podium. Unsurprisingly, Mr. Perry spent most of his time simplifying Alice’s patents. At one point Mr. Perry quoted the patent’s inventor as saying that the patent covered really only two steps, “debit and credit and then pay” and noted that Mr. Phillips’ many complexities were omitted from the patent claims.
However, Mr. Perry, for all his efforts, also struggled to articulate a workable standard by which “abstract ideas” could be distinguished from patentable inventions. Mr. Perry repeatedly harped on the notion of a “technological solution” requirement. Under Mr. Perry’s model, the only business method patents that would survive the abstract idea prohibition would be those employing a technological solution such as a method of encryption or the use of a data compression algorithm. But Justice Kennedy seemed particularly unhappy with this idea and pressed Mr. Perry several times for a business method patent that could stand independently from the technological form employed. Justice Sotomayor also voiced concerns about Mr. Perry’s proposal, asking whether email or word processors could withstand this test given their analogous nature to physical mail and typewriters. Mr. Perry addressed neither line of questioning particularly well and it was unclear how persuasive his proposal was to the justices.
Another interesting moment came when Mr. Perry was asked to explain why, if the case is so straightforward, did the Federal Circuit fail to arrive at a controlling opinion. To his credit, Mr. Perry, echoing many Federal Circuit scholars, argued that elements of the Federal Circuit have resisted Supreme Court review of its rulings and that this case in particular represented an attempt by the lower court to ignore precedent. On the whole, Mr. Perry’s argument appeared to carry the day even while the Court struggled to find articulate a manageable test for defining an abstract idea.
Following Mr. Perry’s argument, Solicitor General Donald Verilli took the podium to offer the government’s position. Prior to arguments, most observers agreed that the Solicitor General’s position favored Mr. Perry’s argument but the parties themselves disagreed as to what the Solicitor General’s argument would require the justices to do. In fact, within seconds of reaching the podium, Justice Sotomayor asked the Solicitor General why the Court needed to address software patents at all. Justice Ginsberg also grilled the Solicitor General about whether the government’s proposal would require the invalidity of all business method and software patents. The Solicitor General struggled to answer these questions and the others the justices posed. Over the course of the roughly 10 minutes the Solicitor General had to answer questions, relatively little was revealed and the justices did not seem aided by his advocacy.
At the end of the day, most observers seem to agree that Alice Corp. is going to lose, representing a relatively rare affirmance for the Federal Circuit. Talking with practitioners, students, and interested computer scientists in line for the arguments the prospect of a broad clarifying judgment seemed dim. For its fourth patentable subject matter case in as many years, the Supreme Court has waded into the fog of software patents and it doesn’t seem likely to clear the air anytime soon.
Miles Freeman is a J.D. candidate, ’14, at the NYU School of Law.
“ Is exclusivity versus mass replication really the 50 million dollar difference between a microphone and a paintbrush? Is contemporary art overvalued in an exclusive market, or are musicians undervalued in a profoundly saturated market? ”
-Cilvaringz & The RZA, EZCLZIV SCLUZAY
As far as cultural products go, music has seen relatively few changes in how it is consumed. The advent of recording technology and the development of commercial radio transformed music’s consumption, but while other technological advances have improved our ability to consume music—by making it more transportable, easier to store, and enabling remote access—the basic model of consumption has remained fairly static: buy a recording, or listen to it through a radio station. This model of consumption has been enshrined by copyright law, which provides a host of rights in sound recordings. For musicians, the path to success is a straightforward one of recording one’s music and finding a channel for distribution.
Wu-Tang Clan wants to break that model to pieces.
The hip-hop collective recently announced the release of a new secretly-recorded double album. The album differs from the typical release in one particularly noticeable way: Wu-Tang Clan will sell only a single copy.
“ The music will only ever have one incarnation.
It will not be made available digitally or in any other existing mass format. ”
Prior to the sale, Wu-Tang Clan plans on taking the album on tour, exhibiting it at museums, galleries, and potentially music festivals. Patrons will be able to hear the album, but only after being heavily screened for recording devices and paying an admissions fee. Wu-Tang Clan is treating their album as a work of contemporary art, with member Robert “The RZA” Diggs comparing the item to “the scepter of an Egyptian king.”
For the members of Wu-Tang Clan, the traditional model is failing to value music as high art. To The RZA, works produced by our era’s well-known musicians—Kanye West, Jay-Z, and the Clan itself—are deserving of the same sort of stature granted to the works of visual art that adorn the walls of the world’s museums. When these works are produced and distributed en masse, their cultural value is diminished. The solution, then, is to treat music the same way we treat visual art: to clothe it in a veil of exclusivity.
Wu-Tang’s announcement calls into question whether the current model of music consumption—and, by some extension, our copyright law—is in some ways failing to respond to the needs of artists. Historically, this concern has been ancillary to intellectual property’s primary objectives: the promotion of the “progress of science and the useful arts.” Of course, the artist is a relevant component of this objective. Without incentives to create, creation will not occur, and progress will not be promoted. The framework of rights established by existing copyright law creates strong economic incentives, but might do so at the cost of rights artists care about more.
Though this issue may be important, only a more holistic analysis of intellectual property systems can say whether the failure to address this interest is to the detriment of the system’s goals. A single artist plays only a small role in intellectual property’s overarching purposes. To promote progress might require the subordination of an artist’s right should the right contradict this goal. What that “right” actually is, in Wu-Tang’s case, is extremely unclear. The RZA’s argument is that mass distribution devalues music, but neither The RZA, nor other members of the Wu-Tang Clan, nor Tarik “Cilvaringz” Azzougarh, the album’s producer, can explain the “devaluation” in concrete terms. The argument set forth by the Clan depends on an assumption that there is value in exclusivity. Yet throughout copyright’s history, the opposite has often been suggested: that there is great value in the public domain.
Overhauling copyright to better respond to Wu-Tang’s needs is a solution that would create a host of problems. While The RZA and other Clan members clearly find the current model to have shortcomings, they are extremely unrepresentative of musicians as a whole in a few notable ways. Most obviously, the members of Wu-Tang Clan are already extremely successful musicians; they may be able to “afford” a model based on exclusivity more easily than other musicians. Even among the famous, their views are unconventional. And, if their stunt proves successful, it may demonstrate that gaps left by intellectual property law are fillable. This may be to the system’s advantage, particularly if these “gaps” do not apply uniformly across all artists.
The RZA has admitted that this stunt may be a total failure. If the album is a success, maybe there is a future in “private music.” If the album fails, maybe Wu-Tang Clan will acknowledge that art does not need to be private to have cultural significance.
Eric Holmes is a J.D. candidate, ’15, at the NYU School of Law.
With over one million mobile applications available to download on smartphones, generating over one billion dollars in revenues, it is clear that the field of mobile application development is currently a hotbed of technological innovation. The United States grounds its innovation policy in the intellectual property clause in the Constitution, where it grants Congress the power to “To promote the progress of Science and the Useful Arts, be securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” While the goal of the intellectual property law is to incentivize innovation, the traditional utilitarian tale of the goals of intellectual property law falls short of telling the full story of the explosive development of the mobile application industry.
Mobile applications are a relatively nascent phenomenon, dating back just a few years to 2008. One study showed that over one billion people were using apps by the end of 2012, and predicted that number to grow to over four billion users by 2017. As these numbers reveal, apps are not just being consumed by a small subset of technologically savvy society, but rather they are being consumed on a rapidly expanding global scale. Apps are proliferating at a rapid rate, and while it is a revenue-generating industry, the top 25 app publishers account for most of that revenue. This means that the typical small developer that comes to mind is unlikely to be making much money. In an environment in which it is predicted that less than 1% of consumer mobile apps will be considered financial successes by their developers by 2018, one wonders why so many developers are developing so many apps.
There are a host of intellectual property rights potentially available for an app, yet intellectual property law does not seem to be playing much of a role in this large- scale innovation. patent moves too slowly and is too costly for most small developers. Copyright does not protect much more than the app’s literal software code and its total concept and feel. Notably, developers cannot copyright an idea, which is often the heart of an app. Apps can use trademarks to protect themselves against copycats that may mislead users. Short of actual piracy, of which there have been few cases, intellectual property will not provide much protection for apps. While intellectual property may help appropriate revenue, it seems pretty clear that it is not what is primarily incentivizing app developers to create.
Melissa Goldstein is a J.D. candidate, ’15, at the NYU School of Law.
Approximately one month ago, the 9th Circuit released its decision in Garcia v. Google, Inc. In Garcia, a writer/producer by the name of Mark Basseley Youssef cast Cindy Garcia in a minor role in his film. As far as Garcia knew, she was acting in an adventure film set in ancient Arabia called “Desert Warrior.” However, it turned out that [a dubbed over version of] Garcia’s scene was actually used in an anti-Islamic film entitled “Innocence of Muslims.” The film caused uproar (so much so that after the film aired on Egyptian TV an Egyptian cleric issued a fatwa, calling for the killing of everyone involved in the film. In fact, Garcia began to receive death threats soon after). Garcia asked that Google remove video of the film from YouTube (which is where Garcia first discovered her role in “Innocence of Muslims”).
In a 2-1 decision (Judge Kozinski writing the majority opinion), the court held that YouTube was required to take down versions of the film that included Garcia’s performance. The court reasoned that Garcia held a copyright in her performance of the film (despite having a minor role, having not written any of her own lines, and her part in the film being dubbed over). As such, Garcia’s copyright in the film gave her the right to limit where her work could be publicly performed.
Kozinski justified his decision by noting that “[a]n actor’s performance, when fixed, is copyrightable if it evinces “some minimal degree of creativity . . . ‘no matter how crude, humble or obvious’ it might be.’…. That is true whether the actor speaks, is dubbed over or, like Buster Keaton, performs without any words at all.” Indeed, some commentators agreed with Kozinski, comparing this case to a singer having copyright in her recorded performance of a song despite the singer not having written the song.
Unsurprisingly, many have taken issue with Kozinski’s holding and agree with the dissenting opinion, which pointed to the lack of support in legal sources that performers are considered authors of an audiovisual work and entitled to copyright protection. Indeed, given that an actor performs his scene to the liking of the director/writer/producer, it seems difficult to categorize an actor as an “author” and more sensible to categorize an actor as an instrument of the director/producer/writer.
Although Kozinski held that Garcia had a copyright in her performance, he also discussed reasons why actors generally don’t have copyright in their performances: an actor’s performance might be a work for hire, or an actor’s participation in a film constitutes an “implied license” to the writer/producer/director. Kozinski explained that in Garcia’s case neither rationale applied – It was not a work for hire because Youssef was not in the “regular business of making films” and Garcia merely fulfilled a brief, specific task (and no written contract existed that deemed it a work for hire). There was no implied license due to the fact that Youssef lied to Garcia to induce her participation, thus negating (or exceeding) any possible grant of an implied license.
Regardless of whether you agree with Kozinski’s distinction above, commentators stress that Kozinski’s holding should still cause some concern to those in the film industry. Indeed, this ruling shifts these cases from a bright line rule (actor’s don’t have copyright in their individual performances) to a cases-by-case analysis that requires the director/producer/writer to defend based on implied (or express) licenses (this would probably be more difficult in low-budget indie films or candid camera style films).
Also, although Kozinski stressed that cases where an implied license is not assumed will be rare (for example, the fact that a director edited an actor’s scene in a way that is not satisfactory to the actor is not a basis for negating an implied license), there still might be worry that actors that are not happy with how their performances turn out in the final version of a film will try and use this case in future lawsuits, which may lead to excessive and frivolous lawsuits.
Lastly, some commentators are left unsure whether this ruling allows actors with signature techniques or famous scenes to sue other actors that “parrot” those performances.
Max Schwartz is a J.D. candidate, ’15, at the NYU School of Law.
Congress created the Federal Trade Commission (FTC) in 1914 to prevent unfair methods of competition in commerce. In 1938, Congress gave the FTC the grant to enforce the prohibition on “unfair and deceptive acts or practices”, which, in the area of privacy, has largely centered on false and misleading statements concerning companies’ privacy policies and data collection processes. The FTC develops policy in the field of privacy by issuing opinions in its enforcement actions against companies that violate the FTC Act prohibition on unfair or deceptive acts and practices. The FTC is driven largely by the desire to protect consumers from unfair and deceptive business practices in the marketplace. The FTC conducts investigations into alleged violations of the FTC Act and responds to consumer complaints of alleged wrongdoing on the part of businesses. The FTC has filed dozens of complaints against companies for violation of the FTC Act and other companies often use these opinions to ensure that they are complying with the provisions of the Act. The FTC also has the power to administer the Children’s Online Privacy Protection Act (COPPA), the Privacy Rule, the Safeguards Rule and the Fair Credit Reporting Act (FCRA).
Violation of the FTC Act was the most common source of complaints against companies. The most common violation of the FTC Act was the failure to comply with the terms of Section 5, which prohibits unfair or deceptive acts or practices in or affecting commerce. Misrepresentations may constitute deceptive acts or practices prohibited by Section 5 of the FTC Act. A common misrepresentation is a company stating that it has implemented adequate and appropriate security measures when in fact it has not. The act of failing to provide reasonable and appropriate security for consumers’ personal information may constitute an unfair act or practice under the Act, even if the company did not make claims to the contrary.
The FTC’s power to enforce the prohibition on unfair and deceptive acts or practices also extends to the U.S.-EU Safe Harbor program. The U.S.-EU Safe Harbor Framework allows American companies to transfer personal data outside of Europe in a manner that is compliant with the European Union Directive on Data Protection (“Directive”). The Directive sets standards for privacy and data security protection. The Directive requires EU member states to prohibit the transfer of personal data outside the EU unless the European Commission has approved of the recipient. The U.S.-EU Safe Harbor Framework creates a mechanism to allow for data transfer outside of the EU. In order to join the Safe Harbor, a company must self-certify to the U.S. Department of Commerce that it complies with the seven principles of the Safe Harbor. The seven principles are notice, choice, onward transfer, access, security, data integrity and enforcement. Companies that are under the jurisdiction of the FTC are eligible to join the Safe Harbor. Companies must re-certify their Safe Harbor status each year in order to be current members of the Safe Harbor. If a company fails to re-certify but does not notify the Department of Commerce this is a misrepresentation and a violation of Section 5 of the FTC Act. If a company self-certifies to the Safe Harbor but fails to adequately abide by the principles, the FTC has the authority to bring an enforcement action against them based on the FTC Act, which prohibits unfair or deceptive acts or practices.
The Fair Credit Reporting Act (FCRA), which is administered by the FTC, applies to companies that are in the business of furnishing consumer reports. Consumer reports are reports that bear on a consumer’s character, general reputation, personal characteristics, or mode of living or other attributes, and are used, or are expected to be used, as a factor in determining a consumer’s eligibility for employment or credit and insurance determinations. Section 607(b) of the FCRA requires all companies that create consumer reports to follow reasonable procedures to assure the maximum possible accuracy of the information contained in the reports. A consumer-reporting agency may only furnish reports to a person or business, which has a permissible purpose in obtaining the report. Under the FCRA, consumer-reporting agencies must make a reasonable effort to determine that the parties that it furnishes reports to are using the reports for permissible purposes. The most common reason for an enforcement action by the FTC was failure by the companies to adequately ensure that the reports were being used for permissible purposes as defined by the FCRA.
Two types of violations of the FTC Act were present in all of the FTC enforcement cases over the past five years. The FTC either charged companies with deceptive acts or practices in violation of Section 5 or unfair acts or practices in violation of Section 5. Misrepresentations were the most common source of an FTC complaint as they constitute deceptive acts or practices. Misrepresentations arose when companies claimed that they provided adequate protections for consumers’ personal information but failed to do so. The FTC most commonly uncovered these security and privacy failures when breaches occurred in which unauthorized users were able to access consumer information. The FTC most often cited companies for making these types of misrepresentations when they failed to ensure that adequate password protections were in place and when they stored and transmitted personal information in plain text. The FTC also accused companies of misrepresenting the adequacy of their security measures when it was evident that the company did not have a comprehensive privacy and security procedure in place. The FTC charged companies with unfair acts or practices when their security procedures were so inadequate that the lack of security for consumers’ personal information could be considered unfair to consumers.
Lisa Lansio is a J.D. candidate, ’15, at the NYU School of Law.