Establishing an Indirect Liability System for Digital Copyright Infringement in China: Experience from the United States’ Approach

Establishing an Indirect Liability System for Digital Copyright Infringement in China: Experience from the United States’ Approach
By Xiao Ma* Download a PDF version of this interview here.  


Indirect copyright liability is a term used to describe the liability imposed upon a defendant who is not the direct infringer,[1] but whom the law nonetheless holds liable for damages which the copyright owner suffers from the infringement.[2] Indirect liability requires that the defendant (also referred to as the “indirect infringer” below) assist, promote, facilitate or benefit from the direct infringement.[3] The indirect copyright liability rule has different names such as secondary liability or derived liability,[4] and has various forms across jurisdictions.[5] For instance, the United Kingdom adopts the notion of “authorisation” in its copyright legislation to deal with intermediaries who authorise the infringing acts done by the third party.[6] The United States, on the other hand, has developed doctrines of contributory liability, vicarious liability and inducement liability through case law.[7] In China, however, there has been no notion of “indirect liability” in the copyright law regime. The issue of indirect copyright liability has been dealt with under the joint tort liability regime.[8] In order to address digital challenges, especially the increasing use of peer-to-peer (P2P) technologies, China has developed a series of instruments—including laws, regulations, judiciary interpretations and administrative measures—to regulate Internet intermediaries’ copyright liability for infringement committed by users. These legal documents establish a joint tort liability system under which network service providers (“NSPs”)[9] share joint liability with direct infringing users under certain conditions. The most notable of these legal instruments includes: the Copyright Law of the People’s Republic of China 1990[10] which was revised in 2001[11]and 2010;[12] the 2000 Networks Copyright Interpretation issued by the Chinese Supreme People’s Court, which was amended twice in 2004 and 2006;[13] the Regulations for the Protection of the Right of Communication through Information Network, which embodies a set of so called “safe harbor” provisions;[14] the Tort Liability Law of the People’s Republic of China[15] with one specific provision regulating ISP liability;[16] and the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in Hearing Civil Dispute Cases Involving Infringement of the Right of Dissemination on Information Networks.[17] However, in China, debates surrounding intermediary liability issues have never stopped. First, the judiciary and scholars have been confronted with an obscure legal underpinning of indirect copyright liability due to the lack of an independent category of indirect infringement in the tort law. The success of an indirect copyright liability claim under the joint tort liability principle without the existence of joint intent or knowledge is questionable. It is equally problematic to impose indirect liability on a separate tort basis. To overcome this lacuna, a survey of current tort law is required to test the viability of engaging indirect copyright liability under the guidance of the general tort law regime. Second, courts have been struggling with the incompleteness of liability attribution rules, especially the constitutive element that has been used to establish the culpability of the defendant. The issue in the spotlight is the inconsistent knowledge standard. Current rules that are used to define and interpret whether someone “knows,” “has reason to know” and “should know” have been the subject of contention. Third, the Chinese safe harbor provisions, inspired by the United States DMCA safe harbors, fail to accommodate the specific conditions in China. The 2006 Regulation adopted the legislative model of ruling on both liability attribution and liability exemption, which caused confusion as to the nature of the safe harbors. Unlike the United States’ approach that has provided specific guidance on the interpretation of the safe harbors through case law, Chinese legislation has failed to correctly address the knowledge standard or control and benefit standard. In addition to addressing the above-mentioned debates, this article thoroughly reviews current laws and cases in China and compares them with United States laws on indirect copyright liability. In the United States, liability attribution rules have evolved and formed three categories: contributory liability, which stresses elements of constructive knowledge and material contribution; vicarious liability, which emphasizes factors of ability to control and direct financial interest; and inducement liability, which focuses on purposeful, culpable conduct and expression. China has adopted the aiding and abetting liabilities which correspond to the United States’ contributory and inducement liabilities. However, the one-sided emphasis on applicable knowledge has impaired the importance of other constitutive elements such as the intent, the relationship with direct infringers, the ability to control direct activities, the means that are used for infringement, and due care. The United States has developed concrete explanations for the application of exemption rules in indirect copyright liability in case laws.[18] In China, however, safe harbors have set a higher standard to exempt liability for NSPs, compared with the standards of the United States.[19] This article begins by exploring three major debates concerning Chinese NSP liability rules. The issues in these debates are factors that have hampered the establishment of an indirect copyright liability system in China. Through an analysis of recent efforts that China has taken to construct a set of NSP liability rules, this study highlights the incompatibility of safe harbor rules, provides an overview of comprehensive liability factors, and calls for remolding and updating China’s relevant regulatory instruments by reexamining the United States’ experience. Part II revisits the key doctrines of indirect copyright liability in the United States, finding that judicial practice has stepped out of the traditional analysis of knowledge and material contribution elements in contributory liability and of the control and financial benefit factors in vicarious liability. Instead, a series of subjective and objective factors—including the relationship, control, knowledge, means and due care—have all invited consideration. Part III proposes guidelines and specific suggestions in establishing an indirect liability system for digital copyright infringement in China. This article concludes with a strong recommendation that, to construct an efficient, well-balanced and predictable indirect copyright liability system for dealing with digital copyright infringement in China, an independent tort theory-oriented, culpable conduct-based indirect copyright liability system, with modified safe harbor provisions, is needed.

I. Debates on NSP Liability Rules in China

In China, there have been no systematic rules on the issue of indirect liability for copyright infringement in legislation. This was compatible with the original focus of copyright protection in China, because the legislative and applicative focus had been the act of direct infringement since establishing the copyright system. This focus can partly be explained by the previous technological conditions where the general public could not afford to copy technologies and only a select few, with certain financial and material resources, were capable of conducting severe direct infringement. In this light, the copyright owners could gain sufficient remedies through chasing legal liabilities from those direct infringers. With fast developments in copying and disseminating technology, however, individuals are now capable of conducting severe copyright infringement. Nevertheless, it is not easy for copyright owners to locate the infringers, nor to gain sufficient compensation from chasing individual liability. Moreover, if they are not immediately restrained, some expanding infringements will produce very serious outcomes for copyright owners. In practice, the uniformity of court judgments at different levels is not guaranteed.[20] Therefore, the copyright laws in China should not only introduce fundamental principles guiding indirect infringement of copyright, but also make concrete and detailed provisions to construct a comprehensive and systematic indirect liability system for copyright infringement online. Civil liability for copyright infringement is stipulated in relevant articles of the General Principles of the Civil Law (“GPCC”), which prescribes that “citizens and legal persons shall enjoy rights of authorship (copyrights) and shall be entitled to sign their names as authors, issue and publish their works and obtain remuneration in accordance with the law.”[21] When dealing with infringement, it provides joint liability for joint infringements.[22] The Supreme Court’s Opinion of the Civil Law further states that “any person who incites or assists another to commit a tort is the joint tortfeasor.”[23] Relevant articles in the 2010 Tort Liability Law can be applied when dealing with copyright liabilities,[24] including strict liability, fault-based liability, and joint and several liabilities.[25] It is noteworthy that the 2010 Tort Liability Law prescribes defines abetting and assisting activities as two forms of infringing acts which lead to joint and several liabilities.[26] Article 36, which specifically deals with NSP liability in the network environment,[27] affirms the notice and takedown provisions[28] provided in the 2006 Regulation[29] and makes clear that a fault-based liability is applied to the NSP who has knowledge of a third party’s infringement.[30] This article is a principled stipulation for indirect liability that needs to be further interpreted. The main problems involve the interpretation of certain terms in this article such as “necessary measures,” “in a timely manner” and “know.” For example, whether “know” is perceived as actual knowledge, or as knowledge including “should know,” was under hot debate.[31] The recently issued 2013 Provision has absorbed recent judiciary practice as well as recent academic research.[32] By distinguishing direct and indirect infringement of network service providers,[33] especially stipulating the abetting and aiding infringement[34] with a specific knowledge standard,[35] the 2013 Provision has provided a consistent framework for evaluating and assessing NSP infringement with regard to the relevant issues over online copyright disputes. The imputing and limiting of online copyright liabilities are embodied and the balancing of interests is reflected. Based on the investigation of cases and consultation from academes and different sectors, the promulgation of the 2013 Provision will help courts at all levels in China to keep pace with the times and be more scientific and normalized in adjudicating copyright cases in the future. However, for several reasons, the 2013 Provision does not provide total clarity on attribution rules. First, it has been established that fault is a determinative factor in deciding whether the NSP is liable for infringement as an abettor or aider.[36] However, the 2013 Provision defines fault as knowledge, which overlooks other types of intentional fault including inducing or encouraging.[37] Second, the 2013 Provision takes an approach that stresses only the subjective element rather than the objective element. Knowledge (know or should have known)[38] becomes the key deciding factor; the objective factors, such as nature of the services provided and the NSP’s capability of information management, are treated as factors to be taken into account in deciding the knowledge.[39] Third, the factors in deciding fault of an NSP are enumerated with examples, which limit judges’ discretion.[40] This legislative technique becomes disadvantageous when facing new technologies. Last but not least, the provisions relating to copyright liabilities in various legal instruments have not yet been unified, especially considering that the Copyright Law is currently under the third revision. Therefore, the effect of application of the 2013 Provision remains to be seen.

A. Debate on the Tort Basis for NSP Copyright Liability

Generally speaking, tort infringement acts lead to tort liability. However, under current tort theory, debates among scholars on the tort infringement basis of NSP copyright liability have been getting heated. Some argue for joint infringement,[41] while others argue that NSPs are severally liable.[42] Prior to the promulgation of the 2010 Tort Liability Law, the act of joint infringement was used to define the relationship between the NSP and the network users; for instance, the 2006 Network Interpretation provides that the NSP shall bear joint liability with the users.[43] The same approach was adopted in Article 23 of the 2006 Regulation.[44] However, the 2010 Tort Liability Law recognizes joint and several liabilities for aiding and abetting torts, without referring to its liability basis.[45] In judicial practice, Chinese courts have been employing the joint infringement theory. For instance, in the case Zhongkai Culture v. Guangzhou Shulian[46], the court applied the 2006 Network Interpretation, stating that the defendant, who did not upload a film for direct downloading, had abetted and assisted the users in committing the infringement and should bear joint infringement liability with direct infringers.[47] Among academics, Professor Ming Yang argues for joint infringement as a basis for NSP liability in China.[48] He points out that unlike the criminal law, joint infringement in civil law tort theory stresses an objective infringement act, rather than the existence of conspiracy or joint intent or knowledge.[49] If the indirect infringement system is used to define NSP liability in the form of assisting infringement, major confusion will occur surrounding the nature of the relationship between a direct and indirect infringer.[50] Based on this observation, he claims that it is unnecessary to import an indirect infringement system in China.[51] However, the above point of view has been challenged by Wei Xu, whose argument stems from the concept of joint infringement itself.[52] The major disagreement concerns the question of whether the infringements committed by multiple persons without connected intent constitute joint infringement. For a start, he suggests a systematic reading of articles 8 through 12 of the 2010 Tort Liability Law, and finds that the answer to the above question is no.[53] He advises assisting infringement liability rather than joint infringement liability in a situation without connected intent between NSP and its users.[54] Next, he analyzes a dilemma in practice if the NSP is considered as a joint tortfeasor. Under the joint infringement theory, the joint tortfeasor is required to participate in the necessary joint action as a necessary party to the litigation.[55] However, in practice, users who commit direct infringement are highly impossible to locate, or the cost is too high to be added as a party to the litigation.[56] In addition, the NSP that bears liability has a right to pursue recovery from direct infringers, but it is difficult and impractical for an NSP to do so.[57] Accordingly, Xu proposes that the NSP shall be severally rather than jointly liable.[58] Tort law Professor Lixin Yang provides a third opinion.[59] Professor Yang describes a logic gap between the infringement committed by multiple parties and respective liability forms in traditional tort law theory in China.[60] The unresolved question is whether the combination of direct infringement and indirect infringement constitutes joint infringement. He advises that it is not joint infringement but joint and several liabilities based on consideration of public policy.[61] From his point of view, infringement activity leads to corresponding infringement liability. Given that, joint infringement leads to joint and several liability, the independent infringement act leads to proportionate liability, and the third party infringement leads to third party liability. A gap, consequently, is generated concerning the correspondent form of infringement, which leads to unreal joint liability.[62] He proposes a concept of “overlapping infringement,”[63] constituted by multiple infringement activity, which has direct or indirect causation of the damage. The infringer bears the unreal joint liability. When the concept of overlapping infringement comes into play, the logic gap that has long existed in tort law theory is filled. In this light, the theoretical basis for NSP liability can be initially established.[64]

B. Debate on the NSP’s Knowledge Standard

The requisite level of knowledge possessed by the NSP in determining its liability of online copyright infringement committed by its users has also been one of the major controversies in China. The 2000 Network Interpretation raises the “explicit knowledge” requirement in Article 5.[65] The 2006 Regulation sets forth the requisite knowledge requirement for limiting the liability of NSPs that provide services related to information storage and searching or linking. Article 22(3) employs the terms “knows” or “has reasonable ground to know” for limiting liability of an NSP that provides storage space,[66] while Article 23 uses the phrase “explicitly knows” and “should have known” for an NSP that provides searching or linking services.[67] Prior to the promulgation of the 2013 Provision, it was unclear what “should have known” means. For instance, compare IFPI v. Baidu[68] and IFPI v. Yahoo.[69] Both cases are very similar in that they concern recording labels suing search engines and linking service providers. Nevertheless, they produced different results. In IFPI v Baidu, the IFPI sued Baidu on behalf of seven music companies for providing links to a website that offered free downloading of infringing songs.[70] The Beijing First Intermediate People’s Court ruled in favour of Baidu, holding that the plaintiff failed to notify Baidu of the infringing files, and Baidu had no fault for searching and linking to the other websites because it ‘should not have known’ of the infringing material.[71] The Beijing Higher People’s Court upheld the decision. However, in a similar case IFPI v Yahoo, the defendant Yahoo who provided links to the third websites for free music downloading, was held liable for aiding infringement.[72] It is notable that though the defendants in both cases provided the same service, there were different facts that were essential for the decision. The music labels sent notices to the defendant including the name of the song, the name of the album and the singer of each infringing file. The court held that the above three pieces of information were enough to locate the copyrighted music However, Yahoo refused to disconnect the access to the infringing material.[73] Yahoo should have known of the infringement, therefore it constituted aiding infringement.[74] In another case Fanya v Baidu,[75] the right holder also sent notices to the defendant, demanding the defendant to disconnect access to the infringing material. However, these notices were different from the notices sent in IFPI v Yahoo that were sufficient for locating the illegal music files. Instead, the notices from Fanya only provided the name of the song, with which alone would be very difficult to locate the copyrighted material enjoyed by the copyright holders.[76] In order to understand what constitutes “know” or “should have known” for a searching or linking service provider, first, a notice that is sufficient to locate the infringing material is required. An noncompliance notice will not constitute explicit knowledge; but, if it is sufficient to locate the infringing material, the “red flag” test is met.[77] Second, there are different types of service provided by the searching or linking NSPs. One is the search box, which has no bias towards the content it linked when the key words are being typed in. The other is the list provided by some search engines. By clicking song or singer’s names in the list such as ‘top 100’ songs, users can reach the same result as typing the name in the search box. However, the culpability of the search engine provider under the two situations is different. By providing the list, the search engine providers are supposed to have higher duty of care. When infringing material is apparent like a ‘red flag’ from a glance of the list, the service provider is required to disconnect it, rather than turning a blind eye to the infringement.[78] The NSP knowledge standard has also been uncertain since the drafting of Article 36[79] of the 2010 Tort Liability Law.[80] There is no doubt that “know” includes “explicitly know.” However, whether it also includes “should have known” or “have reason to know” generates fierce debate. Some legal professionals maintain that “know” includes “should have known” because “many culpable internet service providers might escape liability if their liabilities are only based on actual knowledge,”[81] while some disagree because “it would incur a considerable duty of care for website operators.”[82] The third opinion suggests that the knowledge requirement includes “have reason to know” instead of “should have known,” because the latter may increase the level of care for internet service providers, whereas the former is equal to “awareness of facts or circumstances” under the DMCA.[83] Though the two terms both relate to the term “constructive knowledge,” and vaguely to the duty of care under the tort of negligence at common law, they have a slight difference:
The term “had reason to know” has a slight difference with “should have known”. The first centers on the “reason”, while, the second emphasizes the “duty” which could be a legal duty of care under a statute or based on an agreement. The “has reason to know” is more like a factual determination based upon the circumstances and information available to the parties, while, the “should have known” is more like a judicial determination of what is a reasonable level of knowledge given the parties and the circumstances. Hence, the first is a party-specific objectivity, and the second is a community-focused objectivity.[84]
Tao disagrees with all above opinions in interpreting “know” in the 2010 Tort Liability Law and instead proposes the United States’ approach in the DMCA.[85] Since China has enacted no rule preventing the imposition of a monitoring obligation,[86] the first and third approaches would result in disproportionate burdens on intermediaries. In addition, Tao argues that the adaptation of the term “reason to know” and “should have known” in Article 22 of the 2006 Regulation is a misunderstanding by legislators[87] and that an interpretation consistent with the DMCA would avoid more confusion and legal uncertainty.[88] Prior to the promulgation of the 2013 Provision, Tao’s interpretation of “know” in Article 36 of the 2010 Tort Liability Law was of great significance, because a broad interpretation of the knowledge standard would lead to an excessive burden for the NSP. However, since 2013, the status of NSP liability has changed. Indirect copyright liability attribution rules, which employ “know” or “should have known” have been introduced based on the knowledge of an NSP.[89] Under the rudimentary framework of indirect liability for digital copyright infringement, the knowledge requirement in different legislation needs to be re-examined. Article 36 of the 2010 Tort Liability Law adopts a horizontal approach which is applicable to both intellectual property infringement and other civil claims governing content including copyright, and defamatory and obscene content.[90] It is advisable to interpret this article in a broad way, because it “is not only fatal to the imposition of copyright liability on [NSPs] but also important for other kinds of content-related liability for [NSPs] such as liability for defamatory content.”[91] Further, as a liability attribution rule rather than liability exemption rule, the knowledge requirement in Article 36 is obviously broader than that of the safe harbor provisions under the 2006 Regulation. It is therefore concluded that the term “know” in article 36 of the 2010 Tort Liability Law embraces the meaning of “explicitly know” and “should have known” to determine the NSP’s knowledge of copyright infringements committed by the third party.

C. Debate on the Nature of Safe Harbors

There have been passionate and polarized debates on the nature of the Chinese “safe harbor” provisions[92] provided in the 2006 Regulation.[93] A contextual analysis suggests the language used in the 2006 Regulation reflects divergent approaches towards the liability model. For instance, the safe harbors all use the language of liability limitation, such as “shall not be liable for damages”;[94] however, the Regulation provides for liability attribution in the second section: “where [the NSP] knows or has reasonable grounds to know that the linked works, performances, sound recordings or video recordings infringe another person’s right, it shall be jointly liable for the infringement.”[95] Given the ambiguity of what is prescribed in the legislation, both courts and academics suggest clarifying the nature of the provisions.[96] Although the safe harbors have generally been considered by academic circles as liability exemptions, some disagree.[97] There is general international consensus that the purpose of safe harbors is to be a “limitation of liability” or an “exemption from liability.” For instance, the European Union Directive on Electronic Commerce[98] defines the safe harbors as a “limitation of liability” or as constituting an “exemption from liability.”[99] The same approach is adopted in the United States.[100] In China, the 2010 Guiding Opinion issued by the Beijing Higher People’s Court referred to Articles 20 to 23 of the 2006 Provision as constituting a “liability exemption.”[101] Similarly, the mainstream academic view is that the major purpose of the notice and take down procedure is to exempt NSPs from indirect liability for direct infringement committed by network users; that the nature of the NSP safe harbors is not liability attribution but exemption; and that the safe harbors are not the final establishment of liability but the defenses.[102] However, Wei Xu disagrees with the academic consensus.[103] He argues that adopting the theory of liability exemption contradicts the NSP’s fault-based liability for third party copyright infringement.[104] He proposes the following inferences, based on the theory of liability exemption. First, infringement liability is established before the notice is received by the NSP, and the NSP is exempted from liability as soon as it deletes the infringing content.[105] Alternatively, infringement liability is not established before the notice is received by the NSP but after, and as soon as the NSP deletes the infringing content, it is exempted from liability.[106] He indicates that the first inference contradicts fault-based liability because before the notice is received, the NSP bears no fault.[107] The second inference, according to Xu, is also incorrect because if receiving the notice means fault, this would contradict Article 36(3) of the 2010 Tort Liability Law,[108] which suggests that fault means knowledge and failing to delete.[109] However, this inference has severe defects. First, the author falsely states that the fault-based liability requires that before the notice is received there has been no fault with the NSP. This statement equates fault with notice, leaving out the possibility of other forms of knowledge of an NSP including an email from a third party, actual knowledge obtained before receiving the notice, or red flag knowledge.[110] Second, the author misunderstands the meaning of fault as knowledge plus failing-to-delete. It has been made clear under Article 8 of the 2013 Provision that fault of the NSP means knowledge of a network user’s infringement.[111] Qian Wang, a leading professor in the area of NSP copyright liability, argues that the safe harbor provisions are actually two sides of the same coin—serving as both the attribution and limitation of NSP liability.[112] By analyzing each condition in the safe harbor provisions, he suggests that some liability exemption provisions correspond to direct liability and some correspond to aiding liability.[113] For instance, Article 22(3) provides that the NSP shall not be liable for damages if “it does not know or has no reasonable grounds to know that the works, performances, sound recordings or video recordings provided by its subscribers infringe any other persons’ rights.”[114] This is obviously an expression of liability attribution. Expressing this article another way—as “knows or has reasonable ground to know”—forms the attribution of aiding liability. Prior to the promulgation of the 2013 Provision, this “two sides of the same coin” approach facilitated the understanding of the NSP’s copyright liability for infringement committed by users under circumstances for which there were no relevant laws regarding indirect liability. Since the 2013 Provision has been issued, Wang’s approach, which has been adopted by China’s courts for years, is no longer compatible. First, not all safe harbor provisions correspond to a form of liability attribution. Distinguishing these provisions becomes a difficult task when applying the safe harbors. Second, problems occur with applying the conditions of each safe harbor: Are the conditions necessary, sufficient or both? An in-depth analysis of United States’ safe harbor provisions below will facilitate an understanding of the changes in China’s safe harbor provisions. An analysis of laws, cases, and academic debates over recent years in China shows that the absence of systematic indirect copyright liabilities is the root of confusion and chaos in the Chinese copyright regime. The lack of a comprehensive indirect copyright liability scheme not only leaves a degree of uncertainty to the issue of digital copyright infringement, but also creates a loophole in Chinese tort law. Unlike the United States, which has established indirect liability for intellectual property infringement through legislation and the common law, China has been left behind—although a significant body of research has contributed to this area. It is reasonable to speculate that the inconsistency in the copyright regime, even in the tort law regime, has posed a significant threat to the interpretation and application of digital copyright infringement in judicial practice.

II. Experience from the United States

China, as a developing country, has gained some nutrition from the existing body of law in the United States. For instance, China’s 2006 Regulation was a result of learning from the United States’ DMCA safe harbor provisions. However, due to the different legal system, the attribution rules of indirect copyright liability in the United States have been ignored by China. The United States’ indirect copyright liability doctrines were developed through precedent; . accordingly, there have been no codified rules on the attribution of indirect liability for China to borrow. Thus China has stepped into a dilemma: on the one hand, the safe harbor rules play important roles in both attribution and exemption of liabilities; on the other hand, the 2010 Tort Liability Law and 2013 Provision also seek to serve as liability attribution rules. Since these rules have not been systematically organized and interpreted, a thorough reading of United States’ doctrines is helpful.

A. Fault-Based Liability Attribution Rules Developed from Common Law Cases

As a pioneer in the development of copyright laws based on the “early, rapid and widespread development of computer-based commerce”,[115] the United States occupies a dominant position in the development of indirect copyright liability laws which has impacted many other jurisdictions. Indirect (or secondary) liability[116] of service providers for online copyright infringement continues to be a highly controversial issue in the United States. Since Congress enacted its first copyright law in 1790[117], copyright law has been in constant conflict with evolving technological trends because technology reduces the ability of copyright holders to control their property.[118] This significant judicial dilemma led to the development of three indirect liabilities in the United States copyright regime: contributory liability and vicarious liability, which have been applied in a long line of cases, and inducement liability, which developed only in the last ten years.[119]
1. Is the Sony Rule Still Applicable in a Digital World? The Implied Factors in Contributory Liability
Contributory infringement in the United States is a common law liability regime. A defendant who engages in “personal conduct that encourages or assists the infringement” may be held liable for contributory infringement.[120] Courts began recognizing claims of contributory liability for infringment in the late nineteeth century, but only on the basis of intentional acts.[121] In one of the earliest cases involving contributory copyright infringement, Harper v. Shoppell,[122] the defendant was held liable as a joint tortfeasor for selling a printing plate, knowing that the purchaser would use it to make infringing copies. Later, in Kalem Co. v. Harper Bros,[123] the owner of a motion picture was held liable for authorizing the infringing activity by selling copies to exhibitors and supplying advertisements for the infringing exhibitions based on his knowledge that the illegal use would constitute an infringement. These early cases reflect the knowledge requirement to impose copyright liability. Gershwin Publishing Corp. v. Columbia Artists Management[124] developed a two-prong test for contributory infringement: “one who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another, may be held liable as a ‘contributory’ infringer.”[125] In the 1980s, the Supreme Court again confronted the issue of contributory infringement in Sony Corp. v. Universal City Studios, Inc. (Betamax), which has been considered a conundrum in balancing conflicting interests between copyright holders and technology innovators.[126] In Sony, the District Court borrowed the “staple article of commerce” doctrine from patent law,[127] expressing the concern that commerce might be hampered if a mere constructive knowledge of possible infringement rendered the product distributor liable.[128] After a lengthy review of Constitutional provisions and case law.[129] the Supreme Court also recognized the role that the staple article of commerce doctrine played in balancing the interests of copyright holders and others’ freedom of commerce, holding that “the sale of copying equipment, like the sale of other articles of commerce, does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes. Indeed, it need merely be capable of substantial noninfringing uses.”[130] The Sony doctrine was tested in the landmark case of A&M Records, Inc. v. Napster, Inc. (“Napster”),[131] in which the Ninth Circuit refused to apply the Sony “staple article of commerce” doctrine to Napster for two reasons: (i) Napster had both the continuous ability to limit copyright infringement in ways that VCR manufacturers did not;[132] and (ii) actual knowledge of direct infringement rendered the Sony rule inapplicable.[133] The application of the Sony doctrine in Napster revealed that, in future cases with respect to mass-market means of copying, courts should “inquire into non-infringing uses when the distributor of the device lacks actual knowledge of and control over specific infringements.”[134] In addition, when adjudicating a case involving a dual-purpose product (one capable of substantial non-infringing uses), factors such as actual knowledge of the direct infringement and the ability to control direct infringement should also be taken into account. Sony was further tested in Aimster,[135] in which the Seventh Circuit disagreed with the interpretation of the Sony Rule by the district court and with Napster’s approach in application of the Sony Rule on the element of control.[136] Judge Posner reasoned from an economic perspective, recognizing that although control is a factor to be considered in determining contributory infringement,[137] the preliminary injunction the district court granted to the recording industry based on Aimster’s ability to control its users could result in the shutting down of the Aimster service, contrary to the clear meaning of the Sony decision.[138] The biggest challenge that the Sony rule and the doctrine of contributory liability encountered was the Grokster case, in which Grokster was sued by MGM for distributing free software products that allowed computer users to share copyrighted works through de-centralized peer-to-peer networks.[139] According to Grokster, under the Sony rule, the software it distributed was capable of substantial non-infringing uses.[140] Additionally, the remaining areas of uncertainty regarding the Sony “staple article of commerce” doctrine became the core of the case. Unlike Napster, which had actual knowledge of specific infringement and the ability to control direct infringement by operating a centralized system,[141] Grokster’s decentralized structure disclaimed its ability to obtain actual knowledge and prevent infringements once the product was distributed.[142] Without the two key elements established in the Napster decision, it seemed that Grokster was able to shield itself with the Sony defense. However, the Supreme Court disagreed on multiple grounds. Major disputes arose as to the interpretation and application of the Sony doctrine. Justice Souter refused to visit Sony further, but employed an inducement rule, holding that Sony did not apply when clear intent to infringe was demonstrated.[143] Justice Ginsburg argued that the Sony rule still applied, but not in this case, which “differ[ed] markedly from Sony,”[144] and the Ninth Circuit needed to reconsider the meaning of Sony.[145] Justice Breyer insisted on maintaining Sony, arguing that neither should it be strictly interpreted, nor should it be modified.[146] There have been a number of criticisms regarding the Sony “staple article of commerce” doctrine. The first is that the transplant of the Sony doctrine from patent law is a diversion from general tort law principles.[147] Some argue that the Supreme Court abused its discretion by extending its analysis of contributory and vicarious liability when the finding of fair use did not stop their analysis, which is possibly “out of context with the tradition of the Court not to engage in rule making beyond the case before it.”[148] Furthermore, articulating a standard from the Patent Act was “unfortunate and inapposite” for the readiness of technology assessment.[149] It was observed that two major problems arose with the application of the “staple article of commerce” equation in the digital world. First, there were no objective standards for the construction of the doctrine that would “prevent an inference of intent to result in infringement by the end user”.[150] Second, safe harbors provided the same function.[151] Accordingly, the objective of the “staple article of commerce” doctrine was misread. The purpose of the doctrine was for the protection of technology, and for ensuring that lawful use of a patent is not excluded, rather than “to create an inference of intent to infringe”.[152] The second criticism concerns the vague meanings of “capable of” and “substantial”. There has been debate as to whether “capable of” simply means current use of technology or also includes potential uses.[153] After all, “only the most unimaginative manufacturer would be unable to demonstrate that an image-duplicating product is ‘capable’ of substantial non-infringing uses.”[154] It is also evident, as some suggested, that eBay, Amazon, or Google and the multiple of other Internet and Information technologies be categorized as staples of commerce.[155] As for the meaning of “substantial”, it is arguable whether a minority non-infringing use would nonetheless be “substantial”.[156] Like Grokster suggested, if 10% of non-infringing uses in Sony were regarded as “substantial”, how about the 9% non-infringing uses in Grokster?[157] The questions such as how to identify the doctrine, what constitutes non-infringing use, and the time frame of measurement, are left open, which create fears of uncertain futures for innovators of new technologies.[158] Therefore, one may argue that a mature technology analysis is needed in order to conduct inquiries regarding the assessment of new technologies. Put another way, the problems raised by technology are better solved by technology itself. The third and the most important criticism is whether the Sony rule remains applicable in the digital world at all. Copyright law, the Court wrote, must “strike a balance between a copyright holder’s legitimate demand for effective . . . protection, and the rights of others to freely engage in substantially unrelated areas of commerce.”[159] That is why it was observed that “copyright law is important, but at some point copyright incentives must take a backseat to other societal interests, including an interest in promoting the development of new technologies and an interest in experimenting with new business opportunities and market structures.”[160] The driving concern in Sony was “a fear that indirect liability would have given copyright holders control over what was then a new and still-developing technology”.[161] That concern is why the Sony rule has played an important role in balancing the interest between copyright holders and technology innovators.[162] However, Grokster was substantially different from Sony in that the latter was used for individual non-commercial copying and the former was an unlimited copying tool without any restriction, which made mass-production possible. This difference demonstrates that the Sony rule, which was produced in the traditional dissemination world, is not suitable in the digital world anymore. More importantly, the vague and undefined wording in the Sony rule has triggered divergence in its interpretation. This was apparent in Grokster, where the Court had to apply inducing infringement in order to escape the difficulty of applying the Sony rule.[163] Creating a Sony rule might only be a temporary solution concerning the protection of a new technology. When challenged by new cases such as Grokster, it is time to consider whether the Sony rule is still applicable, and if not, what the alternatives are. Since the Grokster case, “ ‘inducement’ and ‘substantial non-infringing use’ will become legal conclusions, separating the Sony (good technology) sheep from the Grokster (evil entrepreneur) goats.”[164] While Robert I. Reis argued that “Sony left us with doctrine and dicta that obscured the need for rigorous methods of evaluation and assessment of new technologies that ensure reasonable standards and transparency”,[165] the interpretation of the Sony role has been evolving though cases, especially those with respect to new technologies. Since copyright holders started to target intermediaries such as ISPs as a shifting strategy under the digital environment, the scope of contributory copyright liability has been expanding with the development of technology with fear that technology would “unjustly enrich secondary actors at the expense of originators and destroy the latter’s creative incentives”.[166] The key factors to determine contributory liability are the defendant’s knowledge of direct infringement conducted by the third person and the material contribution to the infringement.[167] These two criteria have changed over time and continue to evolve, yet still remain “confusingly opaque” and not “suitably apportioned”,[168] especially under the challenge of P2P file sharing cases.[169] In order to determine the culpability of intermediaries, Dixon proposes a common set of elements to be considered by courts, including the relationship of the third party with the user, the extent of the third party’s involvement, knowledge of infringing activities, intention of the third party, extent of infringement and lawful activities, financial or other benefit of third party, ability to prevent or deter infringement, due care of third party and cost-benefit analysis.[170] Through presenting these elements and analyzing factors in different cases,[171] Dixon points out that “no one factor itself will impute liability, but the strong presence of two or more accumulated elements ties a third party more closely to the infringement in ways that courts may find sufficient to impose liability on the third party.”[172] The above elements were not expressly stressed by United States courts but have been taken into account in many occasions. For example, though the relationship between the direct infringer and the third party was not considered as an essential element of contributory liability in any United States court, it was brought about several times. In Sony, the district court noted that “Sony had no direct involvement with any Betamax purchasers who recorded copyrighted works off the air.”[173] In the dissenting opinion of the Supreme Court, Justice Blackmun argued that “the District Court reasoned that Sony had no direct involvement with individual Betamax users, did not participate in any off-the-air copying, and did not know that such copying was an infringement of the Studios’ copyright”, however, the Court stated that the contributory liability “may be imposed even when the defendant has no formal control over the infringer.”[174] In Napster, the court emphasized Napster’s ongoing relationship with its customers.[175] At any time, Napster could have refused service to users who were violating copyright law. VCR manufacturers, by contrast, had no such power; their relationship with any customer ended at the moment of sale. The element of control has not been officially recognized as a constituting element in deciding indirect copyright liability cases. However, it has functioned as an important nexus between primary and secondary infringers. The element of control is justified not only theoretically, based on fault, as a duty of care exists on the indirect infringer who has the ability to control, but also practically, based on the consideration for cost-efficient litigation.[176] In practice, courts have considered the factor of control not only in contributory infringement cases, through “the knowledgeable giving or withholding of a material contribution necessary to carrying out the infringing activity,” but also in vicarious liability cases, exercised “directly through the supervisory powers of the secondary over the subordinate primary”.[177] From the above analysis, it can be seen that the key factors analyzed in different liability forms should be interpreted under the specific circumstances. Other factors, such as relationship between direct and indirect infringers or due care of third party, are all invited into consideration.
2. The Expansion of Vicarious Liability in Copyright Law: Why It Does Not Apply in China?
Vicarious liability was developed out of the doctrine of respondeat superior, which provides that employers can be held strictly liable in general tort law for torts committed by their employees in the course of their employment.[178] The traditional formula states that:
When the right and ability to supervise coalesce with an obvious and direct financial interest in the exploitation of copyrighted materials –even in the absence of actual knowledge that the copyright monopoly is being impaired-the purposes of copyright law may be best effectuated by the imposition of liability upon the beneficiary of that exploitation.[179]
As a form of risk allocation,[180]the rationale for this form of liability is the incentive theory, which suggests that the employer is in a position to supervise and control the employee.[181]This liability was first extended[182]beyond an employer/employee relationship to cover the “dance hall” cases,[183]in which an independent contractor was found liable because the general contractor was in a better position to supervise and knew the identity of the subcontractor.[184]Gershwin extended the formula of vicarious liability in copyright case, in which a defendant “has the right and ability to supervise the infringing activity and also has a direct financial interest in such activities”.[185] In Napster, the district court determined that Napster had the right and ability to supervise its users’ conduct, because the evidence showed that Napster had the ability to block infringers’ access, retained the right to control access to its system, and had the ability to locate infringing material listed on its search indices as well as the right to terminate users’ access to the system.[186] This approach was challenged by Aimster, in which a cost-benefit analysis was conducted to prove that the meaning of control should not include the means to exclude the technology from the market.[187] Similarly, Grokster stated that one “infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it.”[188] Grokster further explained the “control” element of the vicarious liability test as the defendant’s “right and ability to supervise the direct infringer.”[189] Thus, under Grokster, a defendant exercises control over a direct infringer when he has both a legal right to stop or limit the directly infringing conduct, as well as the practical ability to do so.[190] In analyzing Perfect 10, the Circuit Court held the evidence did not support Google’s right and ability to limit the direct infringement of third-party websites.[191] Google’s ability to control was even weaker than Napster, which could terminate its users’ accounts and block their access to the Napster system.[192] On the element of direct financial interest, both the district court and the appellate court agreed that Napster had a direct financial interest in the infringing activity based on the finding that by attracting more users through the availability of protected works on its system, “Napster’s future revenue is directly dependent upon ‘increases in user base.’”[193] The tort law doctrine of vicarious liability, once applied in indirect copyright infringement cases, has expanded, with a broad interpretation of “control” and “financial benefit.” This liability approach would easily disturb many service providers that have certain ability to control their users activities and gain revenue based on advertisement or other business models. For China, vicarious liability does not apply for two reasons. First, there has been no basis or precedent in copyright law for vicarious liability, which is strictly restrained in the tort law regime of employer/employee relationship. Second, current development of vicarious liability in the United States shows that the interpretation of the constituting elements have not reached a stable status, which, if being transplanted to China’s copyright law, could easily become a problem.
3. Inducement Liability: What Could be Learned for China?
After the shutting down of Napster, Grokster made an architectural modification from Napster’s centralized file sharing function to a decentralized model, in order to not only avert actual knowledge, but also eliminate its ability to control. By dissatisfying both the knowledge and control elements, Grokster attempted to defeat both contributory and vicarious liability claims.[194] However, the Supreme Court borrowed an “inducement” theory of liability from patent law and held that:
One who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, going beyond mere distribution with knowledge of third-party action, is liable for the resulting acts of infringement by third parties using the device, regardless of the device’s lawful uses.[195]
What conduct may be sufficient to render a defendant liable for inducement? The Supreme Court pointed out that the Sony rule limits imputing culpable intent rather than ignoring evidence of intent.[196] Thus, if evidence shows statements or actions directed to promoting infringement, the Sony rule will not preclude liability.[197] Grokster and Sony had different bases of liability for distributing a product open to alternative uses. Grokster emphasized the illegal objective from concrete evidence, while Sony stressed prohibiting the imputation of fault.[198] The classic case of direct evidence of unlawful purpose occurs when one induces commission of infringement by another, as by advertising. Under common law, one who “not only expected but invoked infringing use by advertisement” is liable for infringement “on principles recognized in every part of the law.”[199] According to the court, mental element or conduct alone is insufficient for a finding of indirect liability; an analysis must be based on all relevant factors.[200] Here, the summary judgment record was replete with other evidence that Grokster and StreamCast, unlike the manufacturer and distributor in Sony, acted with a purpose to cause copyright violations by illegal use of the software.[201] The Court looked to factors to determine inducement including “advertisement or solicitation that broadcasts a message designed to stimulate others to commit violations.”[202] To this end, the court declared that the respondents’“unlawful objective is unmistakable.”[203] Through importing the inducement rule from patent law, however, the Court failed to make further clarification on how far this rule should be stretched for future P2P illegal file sharing cases, especially on the question of “whether an inducer must have an intent to induce the acts that constitute infringement or an intent to induce infringement.”[204] Given the statutory structure in the patent law, a narrower standard was proposed, which required that the “inducer have an intent to induce infringement, not merely intent to induce acts that constitute infringement.”[205] This was a pro-competitive standard that encouraged newcomers to enter the market if they obtain a good faith belief in fair competition.[206] This approach solved the spiny Grokster case, and more importantly, cleared the path for the future application of indirect copyright liability rules on other P2P file sharing cases. China’s current legislation on online copyright infringement has been focusing on fault of a service provider, which was interpreted as actual or constructive knowledge.[207] However, this interpretation overlooked the culpable conduct of an abetting infringer. In its United States counterpart, the culpable conduct of an inducer is the purposeful, culpable expression and conduct, demonstrated by subjective and objective evidence. The ignorance of abetting infringement evidence in China’s legislation will cause trouble in deciding P2P file sharing cases when the P2P service providers have no knowledge and no control over the direct infringement. If elements of inducement infringement are to be imported to China, the service providers will not only avoid presenting unlawful objectives, but also take precautions and pay attention to the due care obligation such as implementing filter technologies.

B. Strict Interpretation of DMCA Safe Harbors

Designed as a balance between protecting the rights of copyright holders and promoting technology development, DMCA safe harbors have played a significant role in U.S. copyright law.[208] For technology developers, efficiency of internet services is assured and the variety and quality of the services continues to improve.[209] For copyright owners, an efficient remedy is provided without incurring substantial litigation fees.[210] There has been a significant amount of scholarly literature and judiciary opinions on the interpretation of the DMCA safe harbor rules, especially on the meaning of the knowledge and control requirements.[211] However, recent developments in American copyright litigation make it highly doubtful that the current interpretation is sufficiently clear. For one thing, Circuit Courts demonstrate split judiciary opinions on the content of knowledge, the specificity of the knowledge requirement, the qualifications of actual and red flag knowledge, the willful blindness doctrine, and the relationship between the knowledge requirement and the common law contributory infringement doctrine.[212] Similar questions arise when courts deal with the interpretation of the control requirement, e.g., whether item specific knowledge is required, whether the control requirement codifies vicarious liability, and what “something more” means in the application. These uncertainties have caused major confusion in litigations, which threatened to undermine the purpose of the DMCA safe harbors. In practice, after years of their application in litigations, the safe harbors have been under severe criticism as “a confusing and illogical patchwork” which “makes no sense;”[213] as very old;[214] and as baring deficiencies in vague and ambiguous language, which reflect the political compromise.[215] It is crucial to clear up the uncertainties in order to encourage both the protection of copyright and the development of new technologies.
1. Clarifying the Knowledge Requirement under § 512(c) and (d) of DMCA: Actual or Apparent Knowledge of Specific Infringement
Section 512(c)(1)(A) and section 512(d)(1) of the DMCA are similar, both providing that a service provider who stores “information residing on systems or networks at direction of users” or provides “information location tools” shall not be liable for monetary relief, if the service provider “does not have actual knowledge that the material or an activity using the material on the system or network is infringing”; and “in the absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent”; or “upon obtaining such knowledge or awareness, acts expeditiously to remove, or disable access to, the material that is claimed to be infringing or to be the subject of infringing activity”.[216] “Knowledge” may refer either to knowledge of the activity itself or knowledge that the activity constitutes infringement. The latter argument is supported by an analysis of the statutory language, legislative history and case interpretation.[217] First, from the plain reading of the legislative language, it is evident that relevant provisions clearly require that the provider knows not only of the existence of the infringing material or activity, but also that it is infringing.[218] Second, with regard to the red flag test,[219] the committee reports reflecting legislative history made clear that “the red flag must signal to the provider not just that the activity is occurring, but that the activity is infringing”.[220] In other words, knowledge depends on whether the facts and circumstances make apparent the infringing nature of the user’s activity.[221] Case law has strengthened the above arguments. For instance, the Ninth Circuit in Perfect 10, Inc. v. CCBill LLC rejected the copyright owner’s allegation that the defendants must have been aware of apparent infringing activity because of the obvious nature of the domain names such as “” and “”.[222] According to the court, the infringing nature could not be certain because the burden of determining whether photographs were illegal could not be placed on the service provider.[223] Thus, the relevant question was not “whether the defendants knew about the photographs, but whether they knew of the photos’ infringing nature”.[224] Another example is Corbis Corp. v.,[225] in which the court concluded that although Corbis sent Amazon notices, they did not constitute red flags, because Corbis was silent regarding the content of the complained listings, which meant Amazon had no clue of the infringing nature of those sales.[226] In this light, the court thus articulated the statutory “awareness” standard as more demanding than the common law “should have known” standard.[227] The second concern of the knowledge requirement of safe harbors is whether general or specific knowledge is required. This issue was dealt with in the lengthy Viacom v. YouTube case.[228] The court reached its finding from contextual analysis, structural analysis, legislative intent analysis, and case law analysis. First, the court read from the context of the statute.[229] In practice, service providers must expeditiously remove or disable access to the infringing material only if they can locate the material, which requires specific knowledge of the infringement.[230] Second, the structure and operation of the statute require the “specific knowledge” construction of the safe harbors. As pointed out by Judge Fisher in UMG Recordings, Inc. v. Shelter Capital Partners, LLC,[231] considerations of requiring specific knowledge of particular infringing activity were reflected in Congress’s decision to enact a notice and takedown protocol, and in the “exclusionary rule” that prohibited consideration of substantially deficient §512(c)(3)(A) notices which encourage the copyright holders to clearly identify specific infringing material,[232] rather than putting the monitoring obligation on service providers. This leads to the second consideration: the requirement of general knowledge would impose an obligation of policing infringement on service providers, which contradicts §512(m) of DMCA.[233] The view that requiring expeditious removal in the absence of specific knowledge or awareness would be “to mandate an amorphous obligation” and cannot be reconciled with the language of the statute.[234] Third, the legislative intent reflected in the Committee Reports also requires specificity of the knowledge. Both the Senate and House Reports noted that the Online Copyright Infringement Liability Limitation Act (OCILLA) was intended to provide “strong incentives for service providers and copyright owners to cooperate to detect and deal with copyright infringements.”[235] Copyright holders are better able to efficiently identify infringing copies than service providers “who cannot readily ascertain what material is copyrighted and what is not.”[236] The Reports also cleared the cloud in the construction of the actual and red flag knowledge by indicating that their difference is not between specific and general knowledge, but between a subjective and objective standard.[237] Case law also comports with the specific knowledge requirement. For instance, in UMG Recordings, Inc. v. Veoh Networks, Inc.[238], the district court concluded that “CCBill teaches that if investigation of ‘facts and circumstances’ is required to identify material as infringing, then those facts and circumstances are not ‘red flags’.”[239] The Court of Appeals reached the same conclusion by noting that “we do not place the burden of determining whether materials are actually illegal on a service provider.”[240] While the Ninth Circuit opinion in UMG III superseded UMG II, the argument regarding the specificity of knowledge remains the same: general knowledge is insufficient to meet both the actual and red flag knowledge requirement under §512 (c)(1)(A).[241] There have been two different approaches in interpreting the DMCA knowledge standard. One is the parallel or co-extensive approach that codifies the contributory infringement knowledge standard; the other is the independent approach that is different from, and more stringent than, the contributory infringement knowledge requirement. The copyright holder in litigation usually argues for the first approach, which sets up a lower standard of DMCA knowledge, under which the service provider will probably lose the benefits of the DMCA safe harbors. The service provider, on the contrary, argues for the latter approach, because a higher standard helps it become immune from contributory liability. In order to decide which approach should be applied, extensive consideration, including structural analysis of the legislation, the purpose of the legislators, and economic analysis is recommended, if possible. It was argued that the safe harbors and the common law contributory liability principle differ in their treatment of knowledge that comes by way of notice from a copyright owner. Contributory infringement recognizes notice as necessary knowledge for imposing secondary liability. However, safe harbor provisions provide a notice-and-takedown system that imposes more stringent requirements and differ from contributory infringement in operational detail. The form of notice decides whether the obligation of removing is triggered; thus, a noncompliant notice cannot create actual knowledge, according to the requirements of section 512. However, the common law contributory liability principle recognizes a noncompliant notice as sufficient to meet the knowledge requirement.[242] Regarding the “red flags” theory of liability, beyond the actual knowledge such as notice received from the copyright holder, under what circumstances must an ISP remove potentially infringing material in order to invoke the DMCA safe harbor? Under contributory liability, a defendant could be liable if he “knew or had reason to know of another’s direct infringement and materially contributed to it.”[243] However, under the DMCA safe harbor, possession of the knowledge will attract liability only if the ISP did not act “expeditiously to remove, or disable access to, the material.”[244] Is the level of knowledge between “should know” in contributory liability and “awareness” under the safe harbor equivalent? In order to determine the answer, Edward Lee conducted an analysis of DMCA text, structure, legislative history and case law.[245] First, from the plain language of the legislation, infringing activity must be “apparent”, which means it is “plain, clear, or obvious.”[246] This is a high standard of knowledge. Second, the structure of the DMCA safe harbors also supports adopting a high standard of awareness of “obvious” or “blatant” infringement, because a low standard would invite constant litigation against Internet companies and turn ISPs into censors, which Congress has expressly avoided.[247] Third, legislative history shows in the explanation by the Committee Report that the red flags are apparent from even a brief and casual viewing, with an important policy reason that the Congress “did not want to saddle Internet sites with the impossible burden of trying to differentiate what constitutes copyright infringement in the myriad of situations on the Internet.”[248] Fourth, all cases concerning the ISP safe harbors have applied a high standard of particularized knowledge, consistent with the above interpretation.[249] From the analysis above, section 512(c) and (d) of DMCA do not codify the common law principle of contributory liability for copyright infringement, because first, the knowledge requirement is different between statutory and common law principle in that the former requires not only knowledge itself but also knowledge of the infringing nature of the activity. Second, the common law and the statute treat notice differently in that the latter requires compliance in form. Third, the level of knowledge requirement is different between the common law contributory liability and the statute’s safe harbor provisions. Therefore, in interpreting the knowledge requirement in the DMCA safe harbors, an independent and narrow approach, rather than a paralleled and broad approach, is adopted.
2. “Control” and “Benefit” under § 512(c) and (d) of DMCA
The §512 safe harbor provides that an eligible service provider must “not receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity.”[250] What does “right and ability to control” exactly mean? Three questions arise as to the concept of control under the safe harbor provisions. First, is “item-specific” knowledge of infringement required in its interpretation of the “right and ability to control” infringing activity under 17 U.S.C. §512(c)(1)(B)? Second, does the control element in safe harbors codify the common law vicarious liability? Third, if not, what more does control exactly mean? As to the first question, in Viacom, the district court concluded that “the ‘right and ability to control’ the activity requires knowledge of it, which must be item-specific.”[251] In any event, the provider must know of the particular case before he can control it. If infringing material with sufficient particularity is identified as “red flags”, it must be taken down.”[252] However, on appeal, the court held that two competing constructions of the “right and ability to control” infringing activity were both fatally flawed.[253] The first construction that “the provider must know of the particular case before he can control it” was adopted by the district court in favor of the defendants.[254] The Ninth Circuit in UMG took a similar position that “until the service provider becomes aware of specific unauthorized material, it cannot exercise its “power or authority” over the specific infringing item.”[255] But the Second Circuit in Viacom held that the district court “erred by importing a specific knowledge requirement into the control and benefit provision,” and the case was remanded for further fact finding.[256] They disagreed on the aspect of literal interpretation of the statute and concluded that “importing a specific knowledge requirement into §512(c)(1)(B) renders the control provision duplicative of § 512(c)(1)(A).”[257] According to §512(c)(1)(A), a service provider that has specific knowledge of infringing material and fails to effect expeditious removal would be excluded from the safe harbor protection, and therefore the existence of §512(c)(1)(B) would be superfluous. The second construction of the “right and ability to control” was that it codifies the common law doctrine of vicarious copyright liability, evidenced by the House Report relating to a preliminary version of the DMCA:
The “right and ability to control” language . . . codifies the second element of vicarious liability . . . Subparagraph (B) is intended to preserve existing case law that examines all relevant aspects of the relationship between the primary and secondary infringer.[258]
However, this codification reference was omitted from the committee reports describing the final legislation. Before the district court on remand gave its decision in Viacom v. YouTube, the Ninth Circuit issued a decision on the same issue in UMG III, following the Viacom opinion by the Second Circuit, holding that there were several reasons for a stricter interpretation of the “right and ability to control” than vicarious liability, in light of the DMCA’s language, structure, purpose and legislative history. First, the term “vicarious liability” is mentioned nowhere in §512(c), and the language used in common law standard “is loose and has varied”.[259] Second, considering the structure of §512(c), if the ability to control is being read as the ability to remove or block access, “the prerequisite to §512(c) protection under§512(c)(1)(A)(iii) and (C), would at the same time be a disqualifier under§512(c)(1)(B) where the ‘financial benefit’ condition is met”, which means that a catch-22 is created by Congress.[260] Applying this interpretation would “defeat the purpose of the DMCA and render the statute internally inconsistent.”[261] Third, according to the legislative history, though it was not suggested to codify the element of control as vicarious infringement, this suggestion was omitted from later reports.[262] Fourth, Congress explicitly stated that “the DMCA was intended to protect qualifying service providers from liability for all monetary relief for direct, vicarious and contributory infringement.”[263] In addition, it was clear that “the Committee decided to leave current law in its evolving state and, instead, to create a series of ‘safe harbors,’ for certain common activities of service providers.”[264] Furthermore, if Congress had intended the control element be coextensive with vicarious liability law, “the statute could have accomplished that result in a more direct manner.”[265] According to above analysis, the “right and ability to control” infringing activity under §512(c)(1)(B) “requires something more than the ability to remove or block access to materials posted on a service providers [website].”[266] Courts tended to interpret the phrase “right and ability to control” as “exerting substantial influence on the activities of users, without necessarily—or even frequently—acquiring knowledge of specific infringing activity.”[267] Therefore, the case was remanded to the district court to consider whether YouTube had the right and ability to control the infringing activity and received a financial benefit directly attributable to that activity.[268] Since the Ninth Circuit held that the “right and ability of control” does not codify the common law vicarious liability and requires “something more” than “just ordinary power over what appears on the provider’s website,”[269] what constitutes “something more?” In UMG III, the Court addressed “high levels of control” and “purposeful conduct” as two standards of “substantial influence” that the service provider must exert on the activity of users.[270] In this case, the evidence presented was not enough to create the issue equivalent to the activities found to constitute substantial influence. Accordingly, the element of “right and ability to control” was not applied to Veoh Networks, which met all of the §512(c) requirements. In Viacom IV, the plaintiffs claimed that “something more” was established by both YouTube’s willingness and ultimate editorial judgment and control over infringing content. This was shown by YouTube’s decisions “to remove some but not all infringing material, by its efforts to organize and facilitate search of the videos appearing on the site, and by its enforcement of rules prohibiting, e.g., pornographic content.”[271] The court took a very strict approach in interpreting the evidence that alleged YouTube’s influence or participation in the infringing activity occuring on its site. The court found that “something more” required by the “right and ability to control” must only be fulfilled when the defendant exercises substantial participation or ultimate editorial judgment over the infringing activity.[272] Evidence provided by the plaintiffs demonstrated neither participation in, nor coercion of, user infringement activity. Therefore, YouTube did not have the right and ability to control infringing activity within the context of §512(c)(1)(B). As discussed, the question arises in Viacom v. YouTube as to whether the safe harbor provision in DMCA codifies the common law principle of vicarious liability for copyright infringement. The court’s answer was no, and some commentators agree.[273] The resemblance of factors such as “right and ability to control” and “direct financial interest/benefit” between vicarious liability and safe harbors leads to a loophole theory that the DMCA safe harbors provide no immunity from vicarious liability at all, because safe harbors and vicarious liability share the exact same standard.[274] Mark Lemley indicates that the language of DMCA safe harbors suggests that it provides a safe harbor under section 512(c) only against claims of direct and contributory infringement, rather than vicarious liability. However, the legislative history suggests the opposite. Thus, a digital hole is created.[275] However, Edward Lee provided the interpretation that the DMCA safe harbors provide partial immunity from some, but not all vicarious infringement claims. He explained that “the term “receive a financial benefit directly attributable to the infringing activity” requires a closer causal connection between the infringing activity and the ISP’s actual receipt of a financial benefit. It must be “directly attributable” to the infringing activity, which is a higher level of proof and causation than required under the common law”.[276]

III. Establishing Indirect Liability System for Digital Copyright Infringement in China

Current Chinese tort law has a logic gap that had existed long before the promulgation of the 2010 Tort Liability Law. Unfortunately, the new legislation has not yet recognized the concept of indirect liability, nor has it developed an independent basis for indirect infringement. Therefore, the tort law needs to be amended, adding an “overlapping tort” as one of the liability forms and theoretical bases for indirect liability. Constructing indirect liability forms and standards for online copyright infringement involves three steps. The first step is to establish a general rule for indirect copyright liability. This rule requires three key components: direct infringement as a prerequisite, because indirect infringement does not exist without direct infringement; a subjective fault including intent or knowledge; and enablement, that the indirect infringer provides means for direct infringement. The second step constructs two types of indirect liability. Contributory liability is mainly designed for ISPs that provide services such as hosting and information locating, while inducement liability can solve many problems with the issue of P2P infringement, especially for ISPs that provide decentralized software. The third step requires strict interpretation and application of safe harbor provisions. These liability limitation rules should not unduly impede legitimate digital communications, nor should they unreasonably influence the Internet, which has been an effective communications platform, commercial channel and educational tool. Specifically speaking, it is proposed that China’s legal framework for indirect copyright infringement consists of relevant articles in the 2010 Copyright Law, the 2010 Tort Liability Law and the 2013 Provision as liability attribution, and related rules in the 2006 Regulation work as copyright liability limitation. However, considering the ambiguities in current laws, I make the following recommendations. To begin with, the 2010 Copyright Law shall explicitly recognize indirect copyright liability. Unlike the United States, which has developed indirect copyright liability in case laws, judicial decisions in China have no binding effects.[277] In this light, it is essential for legislators to codify this theory and put it into the statute, as long as the theory matures in tort law as well. Next, China has transplanted the United States safe harbor provisions, which have served as both attribution and exemption of liabilities, owning to the misunderstanding of safe harbor provisions. This article suggests a strict interpretation of safe harbors, rather than considering safe harbors as a codification of common law principles, based on analysis of legislative history, legislators intent and context reading. Investigating into the nature, role and true meaning of the DMCA safe harbors resolves the confusion that exists in China’s legislation, such as the nature of safe harbor provisions, contradictable knowledge standards, and contested control and benefit requirements. I therefore propose a revision of current Chinese safe harbor provisions. The second paragraph of article 23[278] should be removed for two reasons: first, it is an expression of liability attribution rather than liability limitation. Since the 2006 Regulation shall serve as a safe harbor for NSPs, there is no need for the paragraph to exist. Second, it has been proved that NSPs assume independent liability based on the overlapping tort theory rather than joint liability. The existence of this article will create confusion in the future application of law. The other proposition for the modification of the 2006 Regulation is that the article 22(4)[279] should be removed. As demonstrated previously, vicarious liability lacks root in Chinese copyright law system, and the stipulation on financial benefit as one limitation to the liability renders a higher copyright liability for NSPs than that in the United States. This is disproportionate for NSPs in China. Lastly, concern has been raised towards the culpability of NSPs, especially the inconsistency of the knowledge standard. It is vital for both courts and scholars to reach the consensus as to the interpretation and application of the knowledge requirement such as “know,” “should have known” and “have reasonable ground to know.” Great achievement has been made in United States on the theory of knowledge, such as the content of knowledge, the generality of knowledge and the meaning of “red flag” knowledge. China can benefit from the United States experience. In addition, China’s laws have been partially emphasizing the mental element of the defendant, but have overlooked the objective aspects such as culpable conduct.


Ever-improving technological advances, especially the development of the Internet and digital technology, have provided impetuses as well as challenges for the application of traditional copyright law principles, which have been tested within the digital environment to see whether the balance between copyright and commerce has been interrupted and whether changes are needed. The indirect copyright liability regime becomes the crux of the contradiction between copyright law and technology by imposing liability on intermediaries who do not commit copyright infringement directly but are held liable for infringement committed by others, based on efficiency and moral grounds. Within the digital environment, ISPs are facing potential liability for the acts of subscribers who are using their services to access, upload or download information. However, a lack of certainty of ISP liability in current digital legislation will inevitably decrease ISPs’ incentives for utilizing new technology and participating in e-commerce. Consequently, this may have a negative impact on the progress of science and on economic development in China. China has been importing the United States’ safe harbor models into its own legislation, which, however, has caused confusion from two aspects. First, China and the United States have different legal systems, which makes the transplant inapplicable in certain ways. Second, unlike the United States’ safe harbor rules that supplement the attribution of indirect liability principles, such as contributory and vicarious infringements developed in case law, China has not fully developed its own attribution of liability principles, just like water without a source and a tree without roots. This study finds that in the United States, judicial practice of applying the doctrine of contributory infringement liability has abrogated the Sony rule by applying relevant factors, which have displaced the “substantial non-infringing uses” standard. Additionally, courts have been considering all relevant factors—including the relationship, control, means, knowledge, due care and inevitability of infringement, allowing for a wide spectrum of evaluation that work in a correlative pattern. Further, this study argues for a strict interpretation which considers integrity, clarity and uniformity as guiding principles for the efficient application of safe harbors. With a deep understanding of the United States’ approach in constructing the indirect copyright liability doctrines and safe harbors, a suitable approach for China could be found. In conclusion, this article proposes to establish a tort law-oriented, culpable conduct-based indirect copyright liability system, with modified safe harbor provisions, in China. In this way, a justified and compatible indirect liability system can be optimized with equilibrium among relevant parties.
* Dr. Ma received her PhD in Law from Bangor University in 2015 with financial support from the China Scholarship Council and the Bangor Law School. She also received an LLM in Commercial Law from Bangor University and an LLM in Constitutional and Administrative Law from Shandong University. Her gratitude goes to Dr. Wei Shi for his suggestions on an earlier draft of this article and to JIPEL members for their editing work and support in publishing this article.
[1] Copyright law prescribes “acts restricted by copyright” that are enjoyed by copyright owners. (See, e.g., Section 16(1) of The Copyright, Designs and Patents Act of 1988 (“CDPA”)) Direct (or primary) copyright infringement takes place when an infringer conducts a restricted act that he is not entitled to, such as communicating the work to the public. Indirect copyright liability is premised on direct copyright liability. See Paul Goldstein & Bernt Hugenholtz, international copyright 338 (3rd ed. 2012) (“For a defendant to be held contributorily or vicariously liable, a direct infringement must have occurred.”).
[2] See Goldstein & Hugenholtz, supra note 1, at 337. (“The law in most countries will, under prescribed conditions, impose secondary liability on those who, though not directly infringing copyright, have materially contributed to the infringement.”).
[3] These are requirements under the different forms of indirect liabilities such as contributory liability, inducement liability and vicarious liability.
[4] Peer-to-Peer File Sharing And Secondary Liability in Copyright Law 1 (Alain Strowel ed., 2009); see also Jane C. Ginsburg, Separating the Sony Sheep From the Grokster Goats: Reckoning the Future Business Plans of Copyright-Dependent Technology Entrepreneurs, 50 Ariz. L. Rev. 577, 580 (2008) (referring to indirect liability as “derivative liability”).
[5] See david bainbridge, intellectual property, at 182-185 (9th ed. 2012).
[6] Section 16(2) of CDPA provides that “[c]opyright in a work is infringed by a person who without the license of the copyright owner does, or authorises another to do, any of the acts restricted by copyright” (emphasis added).
[7] See Allen N Dixon, Liability of Users and Third Parties for Copyright Infringement on the Internet: Overview of International Development, in Peer-to-Peer File Sharing And Secondary Liability in Copyright Law 12, 15 (Alain Strowel ed., 2009).
[8] See Yiman Zhang, Establishing Secondary Liability With a Higher Degree of Culpability: Redefining Chinese Internet Copyright Law to Encourage Technology Development, 16(1) Pac. Rim L. & Pol’y J. 257 (2007) (“The current legal framework, which premises copyright liability upon a direct infringement and joint liability theory, unfortunately has produced considerable ambiguity both within the judiciary and the affected industries.”).
[9] The term Network Service Provider has not been defined in Chinese copyright law, but this term has been used in all relevant laws regulating network service providers in information networks. The services include automatic access services, autonmatic transmission services, automatic storage services, storage space services, and searching and linking services. See Regulations for the Protection of the Right of Communication through Information Network, (promulgated by the State Council, May 10, 2006, effective July 1, 2006, revised on January 16th, 2013), art. 6 (China) [hereinafter 2006 Regulation], translation available at
[10] Zhonghua Renmin Gongheguo Zhuzuo Quanfa [Copyright Law of the People’s Republic of China] (promulgated by the Standing Comm. Nat’l People’s Cong., Sept. 7, 1990, effective June 1, 1991) (China) [hereinafter 1990 Copyright Law], translated in Zheng Chengsi and Michael Pendleton, Copyright Law in China 215 (1991).
[11] Zhonghua Renmin Gongheguo Zhuzuoquan Fa [Copyright Law of the People’s Republic of China] (promulgated by the Standing Comm. Nat’l People’s Cong., Oct. 27, 2001, effective Oct. 27, 2001), art. 10 (China) [hereinafter 2001 Copyright Law], translated in World Intell. Prop. Org. (2014), available at A new right of “communication of information on networks” was added to the list of exclusive rights. See 2001 Copyright Law, art. 10(12).
[12] Zhonghua Renmin Gongheguo Zhuzuoquan Fa [Copyright Law of the People’s Republic of China] (promulgated by the Standing Comm. Nat’l People’s Cong., Feb. 26, 2010, effective Apr. 1, 2010), art. 48 (China) [hereinafter 2010 Copyright Law], translated in World Intell. Prop. Org. (2014), available at
[13] Hereinafter the Network Interpretations are respectively referred to as the 2000, 2004, and 2006 Network Interpretation. The 2006 Interpretation was repealed by the 2013 Provision.
[14] 2006 Regulation, supra note 9.
[15] Zhonghua Renmin Gongheguo Qinquan Zeren Fa [Tort Law of the People’s Republic of China] (promulgated by the Standing Comm. Nat’l People’s Cong., Dec. 26, 2009, effective July 1, 2010) (China) [hereinafter 2010 Tort Liability Law], translated in World Intell. Prop. Org. (2014), available at The notes provide that “[t]his Law is the basic tort legislation of China and provides general provisions for determining liability, assumption of liability, and mitigation of liability as well as special provisions concerning joint tortfeasors and seven special torts.” Id.
[16] Id., art. 36.
[17] Zuigao Renmin Fayuan Guanyu Shenli Qinhai Xinxi Wangluo Chuanboquan Minshi Jiufen Anjian Shiyong Falv Ruogan Wenti de Guiding [Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in Hearing Civil Dispute Cases Involving Infringement of the Right of Dissemination on Information Networks] (issued by the Supreme People’s Court, Dec. 17, 2012, effective Jan. 1, 2013) (China) [hereinafter 2013 Provision], translation available at
[18] See, e.g., UMG Recordings, Inc. v. Shelter Capital Partner LLC, 718 F.3d 1006 (9th Cir. 2013); Perfect 10, Inc. v. CCBill LLC, 488 F.3d 1102 (9th Cir. 2007); Viacom Int’l, Inc. v. YouTube, Inc., 676 F.3d 19 (2d Cir. 2012); Viacom Int’l, Inc. v. YouTube, Inc., 07 Civ. 2103 (S.D.N.Y. 2013); Viacom Int’l, Inc. v. YouTube, Inc., 718 F. Supp. 2d 514 (S.D.N.Y. 2010).
[19] The liability provided in Article 22 of the 2006 Regulation is actually stricter than that imposed by the DMCA because it requires only financial benefit as immunity rather than the two indispensable requirements of both financial benefit and right and ability to control the infringing activity in section 512(c) and (d) of the DMCA. A higher threshold for liability exemption is therefore established in the 2006 Regulation.
[T]here are two indispensable constitutive requirements for the ‘vicarious liability’ in DMCA: The financial benefit directly attributable to the infringing activity, and the network service provider’s right and ability to control the infringing activity. But there is only one requirement in the Regulations. If the Regulations are implemented by word, a stricter liability will be imposed on the network service provider than in the US, which is not tenable.
Qian Wang, Study on Copyright Infringement of Video-Sharing Websites, 5(2) Front. L. China 275, 299 (2009).
[20] Jessica Haixia Jia, Copyright Infringement in the Network Environment–China’s Perspective, 19(2) Computer L. & Sec. Rep. 101 (2003).
[21] Zhonghua Renmin Gongheguo Minfa Tongze [General Principles of the Civil Law of the People’s Republic of China], (adopted at the Nat’l People’s Cong., April 12, 1986), art. 94 (China) [hereinafter GPCC], translation available at
[22] Id., art. 130 (“[I]f two or more persons jointly infringe upon another person’s rights and cause him damage, they shall bear joint liability.”)
[23] Opinion of the Supreme People’s Court on Questions Concrning the Implementation of the General Principles of the Civil Law of the People’s Republic of China (issued by the Supreme People’s Court, Jan. 26, 1988) art. 148 (China), translated in Whitmore Gray & Henry Ruiheng Zhen, 52 Law & Contemp. Problems 59 (1989).
[24] 2010 Tort Liability Law, supra note 15, art. 2 (“Those who infringe upon civil rights and interests shall be subject to the tort liability according to this Law. ‘Civil rights and interests’ used in this Law shall include . . . copyright . . . .”).
[25] Id., art. 6. (“One who is at fault for infringement upon a civil right or interest of another person shall be subject to the tort liability. One who is at fault as construed according to legal provisions and cannot prove otherwise shall be subject to the tort liability.”); Id., art. 7. (“One shall assume the tort liability for infringing upon a civil right or interest of another person, whether at fault or not, as provided for by law, shall be subject to such legal provisions.”); Id., art. 8 (“Where two or more persons jointly commit a tort, causing harm to another person, they shall be liable jointly and severally.”).
[26] “One who abets or assists another person in committing a tort shall be liable jointly and severally with the tortfeasor.” Id., art. 9.
[27] Id., art. 36(1) (“A network user or network service provider who infringes upon the civil right or interest of another person through network shall assume the tort liability.”).
[28] Id., art. 36(2) (“Where a network user commits a tort through the network services, the victim of the tort shall be entitled to notify the network service provider to take such necessary measures as deletion, block or disconnection. If, after being notified, the network service provider fails to take necessary measures in a timely manner, it shall be jointly and severally liable for any additional harm with the network user.”).
[29] 2006 Regulation, supra note 9, art. 14–17.
[30] 2010 Tort Liability Law, supra note 15, art. 36(3) (“Where a network service provider knows that a network user is infringing upon a civil right or interest of another person through its network services, and fails to take necessary measures, it shall be jointly and severally liable for any additional harm with the network user.”).
[31] See, e.g., Weixiao Wei, ISP Copyright Liability in China: Collision of the Knowledge Standard and the New Tort Liability Act, 33(8) Eur. Intell. Prop. Rev. 507 (2011); see also Qian Tao, The Knowledge Standard for the Internet Intermediary Liability in China, 20(1) Int’l. J.L. & Info. Tech. 1 (2011).
[32] For instance, Article 11 of the 2013 Provision, which agrees with Qian Wang’s suggestion, avoids creating the vicarious liability that corresponds to the United States’ copyright law out of nowhere. It prescribes that
[w]here a network service provider directly gains economic benefits from the work, performance, or audio or video recording provided by a network user, the people’s court shall determine that the network service provider has a higher duty of care for the network user’s infringement of the right of dissemination on information networks. If a network service provider gains benefits from inserting advertisements into a specific work, performance, or audio or video recording or gains economic benefits otherwise related to the disseminated work, performance, or audio or video recording, it shall be determined that the network service provider directly gains economic benefits as mentioned in the preceding paragraph, however, excluding the general advertising and service charges, among others, collected by a network service provider for providing network services.
2013 Provision, art. 13. Cf. Wang, supra note 19.
[33] Article 3 of the 2013 Provision differentiates two acts of provision: (i) the providing of works and (ii) the providing of network services. This differentiation actually broadens the meaning of “the right of dissemination on information networks.” In this light, the distinction between direct and indirect infringement occurs – the former corresponds the providing of works and the latter corresponds the providing of network services. This is a breakthrough in the understanding of the infringement of dissemination right, which clears the fog in questions as to whether to use “server standard” or any other standards to determine the right of dissemination on information networks, and the legal nature of the act of providing network technology and facility service.
[34] See id., art. 7 (“Where a [NSP] abets or aids any network user in infringing upon the right of dissemination on information networks when providing network services, the people’s court shall hold the network service provider liable for the infringement. Where a [NSP] induces or encourages any network user to infringe upon the right of dissemination on information networks . . . the people’s court shall determine that the [NSP] has abetted the infringement. Where a [NSP] which knows or should have known that a network user is using its network services to infringe upon the right of network dissemination of information fails to take necessary measures . . . the people’s court shall determine that [NSP] has aided in the infringement.”).
[35] See id., art. 9 (“The people’s court shall determine whether a [NSP] should have known an infringement based on a clear fact that a network user has infringed upon the right of dissemination on information networks and by taking into account the following factors . . . .”); see also id., arts. 10–14.
[36] Id., art. 8; see also id., art. 6 (“Where . . . the network service provider is able to prove that it only provides network services and is not at fault, the people’s court shall not determine that the network service provider has committed an infringement.”).
[37] Id., art. 8 (“The fault of a [NSP] means whether the network service provide knows or should have known a network user’s infringement of the right of dissemination on information networks”). But see A Samuel Oddi, Contributory Copyright Infringement: The Tort and Technological Tensions, 64 Notre Dame L. Rev. 47, 64 (1989) (indicating that fault encompasses different categories such as intent and negligence).
[38] Id., art. 8.
[39] Id., art. 9 (“The people’s court shall determine whether a [NSP] should have known an infringement based on a clear fact that a network user has infringed upon the right of dissemination on information networks and by taking into account the following factors: (1) The [NSP]’s capability of information management, as required according to the nature of services provided, manners of provision of services, and possibility of infringement attributable thereto.”).
[40] See, e.g., id., art. 9 (prescribing that clear facts, combined with certain factors, are required to be taken into account in determining whether the network service providers “should have known” the direct infringement).
[41] See, e.g., Yang Ming (杨明), “Jianjie Qinquan” Bian: Cong “Baidu, Yahu An” Shuo Kai Qu (“间接侵权”辨:从“百度、雅虎案”说开去) [Discussion on “Indirect Infringement”: Taking “Baidu & Yahoo” Cases as the Beginning], 10 Wangluo Falv Pinglun (网络法律评论) [Int. L. Rev.], no.1, 2009, at 11; see also Wu Handong (吴汉东), Qinquan Zeren Fa Shiye Xia De Wangluo Qinquan Zeren Jiexi (侵权责任法视野下的网络侵权责任解析) [Analysis of the Online Infringement Liability from the Perspective of Tort Law], 140 Fashang Yanjiu (法商研究) [Stud. L. & Bus.], no. 6, 2010, at 28.; Wu Handong (吴汉东), Lun Wangluo Fuwu Tigongzhe de Zhuzuoquan Qinquan Zeren (论网络服务提供者的著作权侵权责任) [Tort Liability for Indirect Infringement of Copyright in the Internet According to Article 36 of the Tort Law PRC], Zhongguo Faxue (中国法学)[China Legal Sci.], no.2, 2011, at 38.
[42] See, e.g., Lixin Yang(杨立新), Lun Jinhe Qinquan Xingwei (论竞合侵权行为) [On Overlapping Torts], Qinghua Faxue (清华法学) [Tsinghua L. Rev.], no. 1, 2013, at 119; Lixin Yang (杨立新), Qinquan Zeren Fa Guiding de Wangluo Qinquan Zeren de Lijie yu Jieshi (<<侵权责任法>>规定的网络侵权责任的理解与解释) [Comprehension and Interpretation of Internet Infringement Liability Regulated in the Tort Law], 18 Guojia Jianchaguan Xueyuan Xuebao (国家检察官学院学报) [J. Nat’l Prosecutors C.], no. 2, 2010, at 3; see also Xu Wei (徐伟), Tongzhi Yichu Zhidu de Chongxin Dingxing Jiqi Tixi Xiaoying (通知移除制度的重新定性及其体系效应) [The Redefinition and Systematic Influence of Notice and Takedown Regime], 35 Xiandai Faxue (现代法学) [Mod. L. Sci.], no. 1, 2013, at 58.
[43] 2006 Network Interpretation, supra note 13, art. 4 (“[W]here an internet service provider participates in any act of another person to infringe copyright through network, or aids and abets, on the internet, others to carry out any act of copyright infringement, the people’s court shall, pursuant to the provision of Article 130 of the General Principles of the Civil law, investigate it and other actors or any other person having directly carried out the infringement, and impose joint liability thereon.”).
[44] 2006 Regulation, supra note 9, art. 23 (“[W]here a network service provider that provides searching or linking service to its subscribers, disconnects the link to the infringing works, performances, sound recordings or video recordings upon receipt of the right owner’s notification according to these Regulations, it shall not be liable for damages; where it knows or has reasonable grounds to know that the linked works, performances, sound recordings or video recordings infringe another person’s right, it shall be jointly liable for the infringement.”).
[45] See 2010 Tort Liability Law, supra note 15, art. 8 (“where two or more persons jointly commit a tort, causing harm to another person, they shall be liable jointly and severally.”); Id., art. 9 (“[O]ne who abets or assists another person in committing a tort shall be liable jointly and severally with the tortfeasor.”).
[46] Guangdong Zhong Kai Wenhua Fazhan Youxiangongsi Su Guangzhou Shu Lian Ruanjianjishu Youxiangongsi, Shanghai Ka Fu Guanggao Youxiangongsi Guangdong (广东中凯文化发展有限公司诉广州数联软件技术有限公司、上海卡芙广告有限公司) [Zhongkai Culture Development Ltd. v. Guangzhou Shulian Software Technology Ltd., Shanghai CAV] (Shanghai No.1 Interm. People’s Ct., Nov. 22, 2007).
[47] Id.
[48] See Yang Ming, supra note NOTEREF _Ref411680257 \h 41.
[49] Id. at 23.
[50] Id.
[51] Id. at 28.
[52] Xu Wei (徐伟), Wangluo Fuwu Tigongzhe Liandai Zeren Zhi Zhiyi ( 网络服务提供者连带责任之质疑) [Questioning the Joint Liability of Internet Service Providers], Faxue (法学) [Legal Sci. Monthly], no. 5, 2012, at 82.
[53] Id. at 83.
[54] Id. at 84.
[55] Id. at 85.
[56] Id. at 86.
[57] Id.
[58] Id.
[59] See Lixin Yang, On Overlapping Torts, supra note 42, at 9.
[60] Id. at 120.
[61] Lixin Yang, Ruhe Lijie Qinquan Zeren Fa Zhong Wangluo Qinquan Zeren (如何理解侵权责任法中网络侵权责任) [How to Understand Online Infringement Liability Under the Tort Liability Law], jiancharibao (检察日报) [The procuratorate daily], March 31, 2010. Available at
[62] Professor Lixin Yang explains that “unreal joint liability refers to the act conducted by multiple tort-feasors, in violation of the statutory obligations, which results in damage of one victim, or different acts conducted by different tort-feasors, which rusult in the same tort liability. In each case, any tort-feasor bears full liability for the performance of the others, whose liability are thus eliminated. It also refers to the liability in accordance with the provisions of the special form of torts.” See Lixin Yang, Tort Liability Law 125 (2d ed, China Law Press 2012).
[63] See Lixin Yang, On Overlapping Torts, 1 Tsinghua Law Review 119, 123 (2013).
[64] Id.
[65] See 2000 Network Interpretation, supra note 13, art. 5 (“a network service provider that provides content service explicitly knows that network users use its network to infringe copyright of others, or after receiving a substantiated warning from copyright owners but fails to take measures such as removing the infringing content to eliminate consequence of the infringement, the People’s Courts shall pursue joint liability of the network service provider for infringement with network users, pursuant to Article 130 of the General Principles of the Civil Code.” (emphasis added)).
[66] 2006 Regulation, supra note 9, art. 22 (“[A] [NSP] that provides its subscribers with network storage space for them to make works, performances, sound recordings or video recordings available to the public, and meets the following conditions shall not be liable for damages: . . . it does not know or has no reasonable grounds to know that the works, performances, sound recordings or video recordings provided by its subscribers infringe any other persons’ rights . . . .”).
[67] Id., art. 23 (“[W]here a [NSP] that provides searching or linking service to its subscribers, disconnects the link to the infringing works, performances, sound recordings or video recordings upon receipt of the right owner’s notification according to these Regulations, it shall not be liable for damages; where it knows or should have known that the linked works, performances, sound recordings or video recordings infringe another person’s right, it shall be jointly liable for the infringement.”).
[68] Jinpai Yule Shiye Youxiangongsi Yu Beijing Baidu Wang Xun Keji Youxiangongsi Qinfan Xinxi Wangluo Chuanbo Quan Jiufen Shangsu An (金牌娱乐事业有限公司(Gold Label Entertainment Limited)与北京百度网讯科技有限公司侵犯信息网络传播权纠纷上诉案) [IFPI v. Baidu] (Beijing Higher People’s Ct. Apr. 28, 2007); Jinpai Yule Shiye Youxiangongsi Su Beijing Baidu Wang Xun Keji Youxiangongsi Qinfan Xinxi Wangluo Chuanbo Quan Jiufen An (金牌娱乐事业有限公司诉北京百度网讯科技有限公司侵犯信息网络传播权纠纷案) [IFPI v. Baidu] (Beijing No. 1 Interm. People’s Ct. Nov. 17, 2006).
[69] IFPI v. Alibaba, the Beijing No. 2 Intermediate People’s Court, No. Erzhongminchuzi 2626/2007; the Beijing Higher People’s Court, No. Gaominzhongzi 1990/2007.
[70] IFPI v. Baidu (Beijing No. 1 Interm. People’s Ct. 2006).
[71] Id.
[72] IFPI v. Alibaba, the Beijing No.2 Intermediate People’s Court, No. Erzhongminchuzi 2626/2007; the Beijing Higher People’s Court, No. Gaominzhongzi 1990/2007.
[73] Id.
[74] Id.
[75] Zhejiang Fan Ya Dianzishangwu Youxiangongsi Su Beijing baidu Wang Xun Keji Youxiangongsi Deng Qinfan Zhu Zuo Quan Jiufen An (浙江泛亚电子商务有限公司诉北京百度网讯科技有限公司等侵犯著作权纠纷案) [Fanya v. Baidu] (Beijing Higher People’s Ct. Dec. 19, 2008).
[76] Fanya v. Baidu (Beijing Higher People’s Ct. 2008).
[77] The term “red flag,” referring to apparent knowledge, was borrowed from the United States safe harbour knowledge standard. See S. Rep. No. 105-190, at 44 (1998) (“ Subsection (c)(1)(A)(ii) can best be described as a “red flag” test. As stated in subsection (1), a service provider need not monitor its service or affirmatively seek facts indicating infringing activity (except to the extent consistent with a standard technical measure complying with subsection (h)), in order to claim this limitation on liability (or, indeed any other limitation provided by the legislation). However, if the service provider becomes aware of a ‘red flag’ from which infringing activity is apparent, it will lose the limitation of liability if it takes no action.”); see Cao Yang (曹阳), Zhishichanquan Jianjie Qinquan Zeren de Zhuguan Yao Jian Fenxi (知识产权间接侵权责任的主观要件分析) [The State of Mind of Infringers in Rendering Intellectual Property Indirect Infringement Liability: Take ISP As the Main Object], Wangluo Falv Pinglun (网络法律评论) [Int. L. Rev.], no. 11, 2012, 24, for relevant discussion in China.
[78] Qian Wang, On the Determination of Indirect Liability of Information Location Service Providers, 2 Intell. Prop. 3 (2009).
[79] 2010 Tort Liability Law, supra note 15, art. 36(3) (“[W]here a [NSP] knows that a network user is infringing upon a civil right or interest of another person through its network services, and fails to take necessary measures, it shall be jointly and severally liable for any additional harm with the network user.”).
[80] Qian Tao, The Knowledge Standard for the Internet Intermediary Liability in China, 20 Int. J. L. & Info. Tech. 1, 1, 2–3 (2011) (“In the preliminary draft and the second draft of the Tort Liability Law, the term used was “actually knew”, then the legislators changed it to “knew” in the third draft, and it was “knew or should have known” in the fourth draft, ultimately “knew” is used in the final version.”) (emphasis added).
[81] Id. at 3.
[82] Id. at 4.
[83] Id.
[84] Id. at 13.
[85] Id. at 14.
[86] The 2013 Provision implies that the NSP has no monitoring obligation to seek out facts and circumstances indicating illegal activities. See 2013 Provision, supra note 17, art. 8 (“Where a network service provider fails to conduct proactive examination regarding a network user’s infringement on the right of dissemination on information networks, the people’s court shall not determine on this basis that the network service provider is at fault. Where a network service provider is able to prove that is has taken reasonable and effective technical measures but it is still difficult for it to discover a network user’s infringement . . . the court shall determine that the network service provider is not at fault.”).
[87] Qian Tao, The Knowledge Standard for the Internet Intermediary Liability in China, 20(1) Int’l J.L. & Info. Tech. 1, 14 (2011).
[88] Id. at 17.
[89] 2013 Provision, supra note 17, art. 8 (“The fault of a network service provider means whether the network service provide [sic] knows or should have known a network user’s infringement of the right of dissemination on information networks.”).
[90] 2010 Tort Liability Law, supra note 15, art. 36 (“[a] network user or network service provider who infringes upon the civil right or interest of another person through network shall assume the tort liability.”); id. art. 2 (“civil rights and interests” include “the right to life, the right to health, the right to name, the right to reputation, the right to . . . copyright . . . and other personal and property rights and interests.”).
[91] Weixiao Wei, supra note 31, at 516.
[92] 2006 Regulation, supra note 9, art. 20–23.
[93] See, e.g., Wei Xu, The Redefinition and Systematic Influence of Notice and Takedown Regime, 1 Mod. L. Sci. 58 (2013); Jiarui Liu, The Safe Harbor Rules of the Chinese Network Service Providers: a Comment on the Yahoo Case, 19 Intell. Prop. 13 (2009); Qian Wang, Effect of the Safe Harbor Provisions Under the Communication Regulations, 6 Legal Sci. Monthly 128 (2010) [hereinafter Effect of the Safe Harbor Provisions].
[94] 2006 Regulation, supra note 9, art. 20–23.
[95] 2006 Regulation, supra note 9, art. 23.
[96] See, e.g., Qian Wang, Study on Copyright Infringement of Video-Sharing Websites, 5 Frontiers L. in China 275 (2009); Xue Snow Dong & Krishna Jayakar, The Baidu Music Settlement: A Turning Point for Copyright Reform in China?, 3 J. Info. Pol’y. 77 (2013); Huaiwen He, Safe Harbor Provisions of Chinese Law: How Clear are Search Engines from Liability?, 24 Computer L. & Security Rep. 454 (2008); Ke Steven Wan, Internet Service Providers’ Vicarious Liability Versus Regulation of Copyright Infringement in China, 2 J.L., Tech. & Pol’y 376 (2011); Qian Tao, Legal Framework of Online Intermediaries’ Liability in China, 14 Info. 59 (2012).
[97] See Wei Xu, supra note 93.
[98] Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on Certain Legal Aspects of Information Society Services, in Particular Electronic Commerce, in the Internal Market, 2000 O.J. (L 178) 1 [hereinafter E-Commerce Directive].
[99] See id. (“In order to benefit from a limitation of liability, the provider of an information society service, consisting of the storage of information, upon obtaining actual knowledge or awareness of illegal activities has to act expeditiously to remove or to disable access to the information concerned . . . .”).
[100] See also 17 U.S.C. § 512 (2006) (entitled “Limitations on liability relating to material online”).
[101] The Beijing Higher People’s Court’s Guiding Opinions on Several Issues Relating to Trial of Cases of Network Copyright Dispute, effective May 17, 2010, translation available at (last visited Sept. 14, 2014).
[102] See academic opinions summed up in part 1(1) of Wei Xu, The Redefinition and Systematic Influence of Notice and Takedown Regime, 1 Mod. L Sci. 58 (2013); see also Jiarui Liu, The Safe Harbor Rules of the Chinese Network Service Providers: a Comment on the Yahoo Case, 19 Intell. Prop. 13, 14 (2009).
[103] Wei Xu, supra note 93, at 59.
[104] Id. at 61–62.
[105] Id. at 62.
[106] Id.
[107] Id.
[108] 2010 Tort Liability Law, supra note 15, art. 36 (“[w]here a network service provider knows that a network user is infringing upon a civil right or interest of another person through its network services, and fails to take necessary measures, it shall be jointly and severally liable for any additional harm with the network user.”).
[109] See Wei Xu, supra note 93, at 62.
[110] For a defintion of “red flag” knowledge, see note 77 supra.
[111] 2013 Provision, supra note 17, art. 8(1) (“The people’s court shall determine whether a network service provider is liable for infringement as an abettor or aider according to the fault of the network service provider. The fault of a network service provider means whether the network service provide [sic] knows or should have known a network user’s infringement of the right of dissemination on information networks.”).
[112] Effect of the Safe Harbor Provisions Under the Communication Regulations, supra note 93.
[113] Id. at 136.
[114] Id.
[115] Thomas Hays, The Evolution and Decentralization of Secondary Liability for Infringements of Copyright-Protected Works: Part 1, 28(12) Eur. Intell. Prop. Rev. 617, 617 (2006).
[116] Unlike in the United Kingdom, where the secondary infringement refers to the unauthorized dealing of infringing copyrighted materials, the term “secondary liability” in the US usually means contributory, vicarious or inducing liabilities. This article adopted “indirect liability” instead of “secondary liability” to avoid the confusion. See Bainbridge, supra note 5, at 182-185.
[117] Act of May 31, 1790, ch. 15, 1 Stat. 124 (1790) (repealed 1831).
[118] See Jessica Litman, Real Copyright Reform, 96 Iowa L. Rev. 1, 3 (2010) (discussing the conflict between copyright regimes and technological evolution).
[119] Allen N. Dixon, Liability of Users and Third Parties for Copyright Infringements on the Internet: Overview of International Developments, in Peer-to-Peer File Sharing And Secondary Liability in Copyright Law 12, 15 (Alain Strowel ed., 2009).
[120] Matthew Bender & Co. v. West Publ’g Co., 158 F.3d 693, 706 (2d Cir. 1998).
[121] Mark Bartholomew & Patrick F. McArdle, Causing Infringement, 64 Vand. L. Rev. 675, 683–84 (2011) (describing the development of contributory liability for intellectual property infringement in the United States).
[122] Harper v. Shoppell, 28 F. 613, 615 (S.D.N.Y. 1886) ([T]he defendant is in no better position than he would be if he had himself printed and published the copyrighted matter . . . he is to be regarded as having sanctioned the appropriation of the plaintiffs’ copyrighted matter . . . .”).
[123] Kalem Co. v. Harper Bros., 222 U.S. 55, 62 (1911).
[124] Gershwin Publ’g Corp. v. Columbia Artists Mgmt., 443 F.2d 1159 (2d Cir. 1971).
[125] Id. at 1162.
[126] Sony Corp. v. Universal City Studios, Inc. (Betamax), 464 U.S. 417 (1984); see Robert I. Reis, The Sony Legacy: Secondary Liability Perspectives, 183 Akron Intell. Prop. J. 205 (2009) (discussing the background of Sony).
[127] See 35 U.S.C. § 271 (2006); see also Sony, 464 U.S. at 417 n.41 (“The ‘staple article of commerce’ doctrine protects those who manufacture products incorporated into or used with patented inventions . . . . Because a patent holder has the right to control the use of the patented item as well as its manufacture, such protection for the manufacturer of the incorporated product is necessary to prevent patent holders from extending their monopolies by suppressing competition in unpatented components and supplies suitable for use with the patented item. The doctrine of contributory patent infringement has been the subject of attention by the courts and by Congress, and has been codified since 1952, but was never mentioned during the copyright law revision process as having any relevance to contributory copyright infringement.” (citation omitted)).
[128] Sony, 464 U.S. at 426–27.
[129] Id. at 428–34.
[130] Id. at 442.
[131] A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001). Plaintiffs alleged both contributory and vicarious copyright infringement because Napster promoted the unauthorized distribution and duplication of copyrighted music. At the trial court level, Napster relied on the Sony defense, alleging that its service, like a VCR, was capable of both legal and illegal uses. See A&M Records, Inc. v. Napster, Inc., 114 F. Supp. 2d 896, 912 (N.D. Cal. 2000). .
[132] A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1022 (9th Cir. 2001) (noting that Napster “could block access to the system by suppliers of infringing material, and that it failed to remove the material”); see also, Rebecca Giblin-Chen, Rewinding Sony: An Inducement Theory of Secondary Liability, 27 Eur. Intell. Prop. Rev. 428, 429 (“Unlike Sony, Napster had a continuing ability to control its users.”).
[133] Napster, 239 F.3d at 1020 (“We observe that Napster’s actual, specific knowledge of direct infringement render’s Sony’s holding of limited assistance to Napster.”) Although contributory infringement is based on actual or constructive knowledge of specific infringement cases, the defendant will be contributorily liable even if the product is capable of substantial non-infringing uses. See Giblin-Chen supra note 132, at 429.
[134] Ginsburg, supra note 4, at 582.
[135] In this case, the recording industry sued the Internet service Aimster for facilitating the swapping of digital copies of popular music over the Internet. The district court entered a broad preliminary injunction that “had the effect of shutting down the Aimster service.” In re Aimster Copyright Litigation, 334 F.3d 643, 645 (7th Cir. 2003).
[136] Id. at 649.
[137] Id. at 648–49.
[138] Id.
[139] Metro-Goldwyn-Mayer Studios Inc. v. Grokster Ltd., 545 U.S. 913 (2005).
[140] Id. at 933.
[141] Rebecca Gilbin-Chen, Rewinding Sony: an Inducement Theory of Secondary Liability, 27 Eur. Intell. Prop. Rev. 428, 431 (2005).
[142] Ginsburg, supra note 4, at 583.
[143] Grokster, 545 U.S. at 915.
[144] Id. at 945.
[145] Id. at 944.
[146] Id. at 957.
[147] See Reis, supra note 126, at 206 (pointing out that the adoption of patent law doctrine “obscured the need for transparent means of technology readiness, utility and risk assessment in the determination of present and potential uses of technology”).
[148] Id. at 214–15.
[149] Id. at 215 (“[T]he analogy to the Staple Article of Commerce provision in the Patent Act was unfortunate and inapposite to copyright and may be a factor that retarded the development of technology readiness assessments and other analytical processes that hold the promise of objectivity and transparency in the evaluation of use and intent inferences in new technologies.”).
[150] Id.
[151] Id. Any article which satisfies the doctrine would enjoy “the safe harbor for any infringement that later occurred, whether intentional or not.”
[152] Id. at 219.
[153] See e.g., Ginsburg, supra note 4, at 581; Craig A. Grossman, From Sony to Grokster, the Failure of the Copyright Doctrines of Contributory Infringement and Vicarious Liability to Resolve the War Between Content and Destructive Technologies, 53 Buff. L. Rev. 141, 173 (2005).
[154] Sony, 464 U.S. at 498.
[155] Reis, supra note 126, at 244.
[156] Gisburg, supra note 4, at 581.
[157] See Grokster, 545 U.S. at 933.
[158] Reis, supra note 126, at 220–21.
[159] Sony, 464 U.S. at 432.
[160] William Landes & Douglas Lichtman, Indirect Liability for Copyright Infringement: Napster and Beyond, 17 J. Econ. Perspectives 113, 118 (2003).
[161] Id.
[162] Reis, supra note 126, at 205 (“Sony seeded the ongoing conundrum of balancing protected intellectual property rights with the potential of technologies that enhance the use of intellectual content.”).
[163] Metro-Goldwyn-Mayer Studios Inc. v. Grokster Ltd., 545 U.S. 913 (2005).
[164] Jane C. Ginsburg & Sam Ricketson, Inducers and Authorizers: a Comparison of the US Supreme Court’s Grokster Decision and the Australian Federal Court’s KaZaa Ruling, 11 Media & Arts L. Rev. 1, 7 (2006).
[165] Reis, supra note 126, at 208.
[166] Bartholomew, supra note 121, at 684.
[167] Id. at 683.
[168] Id.
[169] Hays, supra note 115, at 618.
[170] See Dixon, supra note 119, at 37–39.
[171] Id. at 39.
[172] Id. at 39–40.
[173] Sony, 464 U.S. at 426.
[174] Id. at 487.
[175] Napster, 239 F.3d at 1023.
[176] Hays, supra note 115, at 619.
[177] Id.
[178] Matt Jackson, One Step Forward, Two Steps Back: a Historical Analysis of Copyright Liability, 20 Cardozo Arts & Ent. L.J. 367, 392 (2002).
[179] Shapiro, Bernstein & Co. v. HL Green Co., 316 F. 2d 304, 307 (2d Cir. 1963).
[180] See Polygram Int”l Publ”g, Inc. v. Nevada/TIG, Inc., 855 F. Supp. 1314, 1325–26 (D. Mass. 1994) (citing Napster, 239 F. 3d. 1004, 1022 (9th Cir. 2001)).
[181] Jackson, supra note 178, at 392 (“One rationale for vicarious liability (and deep pockets in general) is that a judgment-proof defendant does not feel the incentive created by the imposition of liability, whereas the employer can induce the employee to be careful. Furthermore, the employer is in a position to supervise and control the actions of the employee. It is seen as the employer’s responsibility to make sure that the employee acts properly in pursuing the company’s interests.”).
[182] See Napster, 239 F. 3d. 1004, 1022 (9th Cir. 2001) (citing Fonovisa, Inc., v. Cherry Auction, Inc., 76 F. 3d 262 (D.C. Cir. 2001)).
[183] Dreamland Ball Room v. Shapiro, Bernstein & Co., 36 F. 2d 354 (7th Cir. 1929).
[184] Jackson, supra note 178, at 393.
[185] Gershwin Publ’g Corp. v. Columbia Artists Mgmt., 443 F.2d 1159 (2d Cir. 1971) (citing Napster, 239 F. 3d. 1004, 1022 (9th Cir. 2001)).
[186] Id. at 1023–24.
[187] In re Aimster Copyright Litigation, 334 F.3d 643, 645 (7th Cir. 2003).
[188] Metro-Goldwyn-Mayer Studios Inc. v. Grokster Ltd., 545 U.S. 913 (2005).
[189] Id. at 930 n.9.
[190] See Perfect 10, Inc. v. Google, Inc., 508 F.3d 1146, 1173 (9th Cir. 2007).
[191] Id. (“Perfect 10 has not shown that Google has contracts with third-party websites that empower Google to stop or limit them from reproducing, displaying, and distributing infringing copies of Perfect 10’s images on the Internet.”).
[192] Id. at 1174. Practically speaking, Google could not stop any of the third party websites from infringing Perfect 10’s copyrights because the infringing conduct took place on the third-party websites. The district court found that Google lacked the practical ability to police the third-party websites’ infringing conduct. While Napster had the ability to identify and police infringing conduct by searching its index for song titles, Google could not implement measures, as Perfect 10 suggested, to prevent its web crawler from indexing infringing websites and to block access to infringing images, because they were “imprecision and over breadth,” and not “workable”.
[193] Napster, 239 F.3d 1004, 1023 (9th Cir. 2001).
[194] See Bryan H. Choi, The Grokster Dead-End, 19 Harv. J.L. & Tech. 393, 396 (2006).
[195] Grokster, 545 U.S. at 936–37.
[196] Id. at 934.
[197] Id. at 935.
[198] Id. at 941 (“If liability for inducing infringement is ultimately found, it will not be on the basis of presuming or imputing fault, but from inferring a patently illegal objective from statements and actions showing what that objective was.”).
[199] Id. at 935–36 (“The rule on inducement of infringement as developed in the early cases is no different today. Evidence of active steps taken to encourage direct infringement, such as advertising an infringing use or instructing how to engage in an infringing use, shows an affirmative intent that the product be used to infringe, and overcomes the law’s reluctance to find liability when a defendant merely sells a commercial product suitable for some lawful use.).
[200] Id. at 937 (holding that “mere knowledge of infringing potential or of actual infringing uses would not be enough here to subject a distributor to liability. Nor would ordinary acts incident to product distribution, such as offering customers technical support or product updates, support liability in themselves. The inducement rule, instead, premises liability on purposeful, culpable expression and conduct, and thus does nothing to compromise legitimate commerce or discourage innovation having a lawful promise.”).
[201] Id. at 938.
[202] See id. at 937–38.
[203] Id.
[204] Timothy R Holbrook, The Intent Element of Induced Infringement, 22 Santa Clara Computer & High Technology Law Journal 399, 404 (2006).
[205] Id. at 400; see also Sverker K Hogberg, The Search for Intent-Based Doctrines of Secondary Liability in Copyright Law, 106 Colum. L. Rev. 909, 958 (2006) (supporting narrowly circumscribing the reach of inducement liability by the court and advocating to abandon the expansion of the intent inquiry in other two forms of indirect copyright liability).
[206] Holbrook, supra note 204, at 408, 411.
[207] 2013 Provision, supra note 17, art. 8 (“[T]he people’s court shall determine whether a network service provider is liable for infringement as an abettor or aider according to the fault of the network service provider. The fault of a network service provider means whether the network service provider knows or should have known a network user’s infringement of the right of dissemination on information networks.”).
[208] With the object of adapting to the new technologies at the turn of the century and satisfying America’s commitment to WIPO, the Digital Millennium Copyright Act was enacted by the United States Congress in 1998 to “implement the World Intellectual Property Organization Copyright Treaty”, and to “update domestic copyright law for the digital age”. The DMCA is divided into five titles, among which Title II provides the Online Copyright Infringement Liability Limitation Act (“OCILLA”) in adding a new § 512 to the Copyright Act, which creates a series of safe harbors by placing limitations on liabilities for copyright infringement by Online Service Providers (“OSPs”). Digital Millennium Copyright Act, 17 U.S.C. § 512 (2013).
[209] S. Rep. No. 105-190, at 8 (“without clarification of their liability, service providers may hesitate to make the necessary investment in the expansion of the speed and capacity of the Internet . . . By protecting service providers, the DMCA ensures that the efficiency of the Internet will continue to improve and that the variety and quality of services on the Internet will continue to expand.”).
[210] Amir Hassanabadi, Viacom v. YouTube – All Eyes Blind: the Limits of the DMCA in a Web 2.0 World, 26 Berkeley Tech. L.J. 405, 412 (2011).
[211] See, e.g., Mark A Lemley, Rationalizing Internet Safe Harbors, 6 J. Telecomm. & High Tech. L. 101 (2007); Edward Lee, Decoding the DMCA Safe Harbors, 32 Colum. J.L. & Arts 233, 238 (2009); Peter Leonard, Safe Harbors in Choppy Waters – Building a Sensible Approach to Liability of Internet Intermediaries in Australia, 3 J. Int’l Media & Ent. L. 221 (2010-2011); R. Anthony Reese, The Relationship Between the ISP Safe Harbors and the Ordinary Rules of Copyright Liability, 32(4) Colum. J.L. & Arts 426 (2009); Hassanabadi, supra note 210.
[212] The Ninth Circuit in UMG and the Second Circuit in Viacom took different positions in interpreting whether to import a specific knowledge requirement into the control and benefit provision. Compare UMG Recordings, Inc. v. Shelter Capital Partners LLC, 667 F.3d 1022, 1041 (9th Cir. 2011), with Viacom International, Inc. v YouTube, Inc., 676 F.3d 19, 25 (2d Cir. 2012).
[213] Lemley, supra note 211, at 102.
[214] Lee, supra note 211, at 233.
[215] “A safe harbor generally was the outcome of a political compromise effected after heavy lobbying between rights holders or others and the internet industry. Sometimes the drafting deficiency reflects a political compromise that is reflected in vague or open language.” Leonard, supra note 211, at 235.
[216] 17 U.S.C. §§ 512(c)(1)(A), 512(d)(1).
[217] Reese, supra note 211, at 433–36.
[218] 17 U.S.C. § 512(c)(1)(A)(i) (prescribing that a service provider “does not have actual knowledge that the material or an activity using the material on the system or network is infringing”); see also 17 U.S.C. § 512(d)(1)(A) (prescribing the same standard).
[219] S. Rep. No. 105-190, at 44 (“Subsection (c)(1)(A)(ii) can best be described as a “red flag” test.”).
[220] Mere knowledge of the activity’s existence is not enough, the infringing nature of the activity must be known to the service provider. H.R. Rep. No. 105-551, pt. 2, at 57–58 (1998) (“Absent such “red flags” . . ., a directory provider would not be . . . aware merely because it saw one or more well known photographs of a celebrity at a site devoted to that person. The provider could not be expected, during the course of its brief cataloguing visit, to determine whether the photograph was still protected by copyright or was in the public domain; if the photograph was still protected by copyright, whether the use was licensed; and if the use was not licensed, whether it was permitted under the fair use doctrine.”).
[221] Reese, supra note 211, at 434.
[222] Perfect 10, Inc. v. CCBill LLC, 488 F.3d 1102 (9th Cir. 2007).
[223] Id. at 1114.
[224] Reese, supra note 211, at 435.
[225] Corbis Corp. v., 351 F. Supp. 2d 1090 (W.D. Wash. 2004).
[226] Id. at 1108 (“In determining whether a service provider is ‘aware of facts or circumstances from which infringing activity was apparent,’ . . . the question is not ‘what a reasonable person would have deduced given all of the circumstances.’ . . . Instead, the question is ‘whether the service provider deliberately proceeded in the face of blatant factors of which it was aware.’ . . . As articulated by Congress, apparent knowledge requires evidence that a service provider ‘turned a blind eye to red flags of obvious infringement.’”).
[227] Reese, supra note 211, at 436.
[228] Viacom Int’l., Inc. v. YouTube, Inc., 540 F. Supp. 2d 461 (S.D.N.Y. 2008) [hereinafter Viacom I]; Viacom Int’l, Inc. v. YouTube, Inc., 718 F. Supp. 2d 514 (S.D.N.Y. 2010) [hereinafter Viacom II]; Viacom Int’l, Inc. v. YouTube, Inc., 676 F.3d 19 (2d Cir. 2012) [hereinafter Viacom III]; Viacom Int’l, Inc. v. YouTube, Inc., 940 F. Supp. 2d 110 (S.D.N.Y. 2013) [hereinafter Viacom IV]. YouTube, owned by Google, is a video-sharing website that allows users to upload videos free of charge. In 2008, Viacom, a copyright holder of many video files that had been uploaded to YouTube, sued YouTube for both direct and indirect copyright infringement, alleging that YouTube had actual knowledge of ongoing infringement and had received a financial benefit from the infringement in the form of advertising revenue from the resulting web traffic. Viacom also alleged that YouTube’s infringing activity was outside the scope of safe harbor provision of DMCA. See Viacom II, 718 F.Supp.2d at 526.
[229] Viacom III, 676 F.3d at 30.
[230] Id. at 30 (stating that “under§512 (c)(1)(A), knowledge or awareness alone does not disqualify the service provider; rather, the provider that gains knowledge or awareness of infringing activity retains safe-harbor protection if it ‘acts expeditiously to remove, or disable access to, the material.’” (citing 17 U.S.C. §512 (c)(1)(A)(iii))).
[231] UMG Recordings, Inc. v. Shelter Capital Partners LLC, 718 F.3d 1006 (9th Cir. 2013) [hereinafter UMG III].
[232] Id. at 1022.
[233] 17 U.S.C. § 512(m) (“[N]othing in this section shall be construed to condition the applicability of subsections (a) through (d) on . . . a service provider monitoring its service or affirmatively seeking facts indicating infringing activity.”).
[234] Viacom III, 676 F.3d at 31.
[235] See S. Rep. No. 105-190, at 20; H.R. Rep. No. 105-551, pt. 2, at 49.
[236] UMG III, 718 F.3d at 1022.
[237] Id. at 1025 (“[T]he actual knowledge provision turns on whether the provider actually or “subjectively” knew of specific infringement, while the red flag provision turns on whether the provider was subjectively aware of facts that would have made the specific infringement “obviously” obvious to a reasonable person.”).
[238] UMG Recordings, Inc. v. Veoh Networks, Inc., 665 F. Supp. 2d 1099 (C.D. Cal. 2009) [hereinafter UMG II].
[239] Id. at 1108.
[240] UMG Recordings, Inc. v. Shelter Capital Partners LLC, 667 F.3d 1022, 1038 (9th Cir. 2011).
[241] Id. at 1022–23.
[242] Reese, supra note 211, at 437–38.
[243] Lee, supra note 211, at 252.
[244] 17 U.S.C. §§ 512(c)(1)(C), 512 (d)(3).
[245] Lee, supra note 211, at 252–58.
[246] Id. at 253.
[247] Id.
[248] Id. at 256.
[249] Id.
[250] 17 U.S.C. § 512 (c)(1)(B).
[251] Viacom II, 718 F. Supp. 2d at 527.
[252] Id.
[253] Viacom III, 676 F.3d at 36.
[254] Id. at 30.
[255] UMG Recordings, Inc. v. Shelter Capital Partners LLC, 667 F.3d 1022, 1041 (9th Cir. 2011) (citing Viacom International, Inc. v. YouTube, Inc., 676 F.3d 19, 25 (2d Cir. 2012)).
[256] Viacom III, 676 F.3d at 36.
[257] Id.
[258] H.R. Rep. No. 105-551, pt. 1, at 26 (citing Viacom International, Inc. v. YouTube, Inc., 676 F.3d 19, 26 (2d Cir. 2012)).
[259] UMG III, 718 F.3d at 1027.
[260] Id. at 1029.
[261] Id. at 1027 n.17.
[262] Id. at 1028.
[263] H.R. Rep. No. 105-551, pt. 2, at 54; S. Rep. No. 105-190, at 44–45.
[264] S. Rep. No. 105-190, at 19.
[265] UMG III, 718 F.3d at 1029.
[266] Viacom III, 676 F.3d at 38.
[267] Id. at 38.
[268] Id.
[269] Viacom IV, 940 F. Supp. 2d at 111.
[270] UMG III, 718 F.3d at 1030.
[271] Viacom IV, 940 F. Supp. 2d at 119.
[272] See id. at 121.
[273] See Lee, supra note 211; Reese, supra note 211.
[274] Lee, supra note 211, at 238. “[B]asically, the DMCA provides no safe harbor for vicarious infringement because it codifies both elements of vicarious liability.” Costar Group Inc., v. Loop Net, Inc., 164 F. Supp. 2d 688, 704 (D. Md. 2001), aff”d at 373 F.3d 544 (4th Cir. 2004).
[275] Lemley, supra note 211, at 104 n.23.
[276] Lee, supra note 211.
[277] Influenced by Continental European legal systems since the Qing dynasty, China has adopted the civil law tradition and sources of law are written. Unlike common law jurisdictions such as the United States or England, there is no strict precedential concept of case law in China. In theory, each case ruling stands as its own decision and will not bind the decisions of another court. However, in practice, the judges of lower people’s courts often attempt to follow the interpretations of laws issued by the Supreme People’s Court, which—as a common practice—issues judicial interpretations, opinions, or replies which are ultimately followed by the lower courts. See Donald C. Clarke, The Chinese Legal System (July 4, 2005),; see also Ronald C. Brown, Understanding Chinese Courts and Legal Process: Law with Chinese Characteristics 82 (Kluwer Law International 1997).
[278] 2006 Regulation, supra note 9. Paragraph 2 of Article 23 of the 2006 Regulation stipulates that “where it knows or should have known that the linked works, performances, sound recordings or video recordings infringe another person’s right, it shall be jointly liable for the infringement.”
[279] Id., art. 22(4) (providing that a network service provider will not be liable for damages if ‘it does not seek financial benefits directly from the works, performances, sound recordings or video recordings provided by its subscribers’.).

Remixing Transformative Use: A Three-Part Proposal for Reform

Remixing Transformative Use: A Three-Part Proposal for Reform
By Liz Brown* Download a PDF version of this article here.  


Art is big business. Worldwide, the global art market was valued at approximately $64 billion in 2012.[1] Institutional investors are also turning to art as an investment vehicle.[2] The assets in art investment funds worldwide rose 69% to $1.62 billion in 2012.[3] In May 2014, the auction house Christie’s brought in record sales of $744 million in a single evening, including sales of two Andy Warhol works for $100 million, $30 million more than their pre-sale estimate.[4] At the center of this high-stakes art world are appropriation artists, such as Richard Prince, whose work is built on the works of other artists.[5] These works command the highest prices for modern art sales. In Cariou v. Prince, for example, the Prince artworks at issue were marketed to A-list celebrities like Beyoncé, Tom Brady and Anna Wintour.[6] One series of these works sold at the Gagosian gallery for more than $10 million.[7] In Cariou, the Second Circuit held that Prince’s unlicensed appropriation of Patrick Cariou’s photographs, with what many consider to be only minor modifications, was fair use rather than copyright infringement, broadening the scope of copyright law’s fair use defense.[8] The Cariou decision resolved issues that are critical to appropriation art, but the Second Circuit’s ruling in that case—final now that the Supreme Court has denied certiorari—has troubling implications for the entire art market. By broadening the definition of “transformative,” the Second Circuit’s decision in Cariou may encourage other appropriation artists to use original images in ways that have never before been considered fair use. Without the revival or reaffirmation of limitations on how one artist can use another’s work, many creative artists—and the businesses that rely on their work—are likely to suffer severe economic loss. The Supreme Court has noted that the fair use doctrine “permits and requires courts to avoid rigid application of the copyright statute when, on occasion, it would stifle the very creativity which that law is designed to foster.”[9] After Cariou, one might question who is best suited to evaluate the creativity that the law is designed to foster. In its wake, lawyers, artists, and dealers face growing uncertainty as to what kind of copying is legal. The ruling has led to a new sense of unease, has uncovered a generational shift in the perception of artistic ownership rights, and reflects a dramatic reversal of the roles of artists and judges in evaluating art. The importance of appropriation art as a cultural element will grow exponentially in the future. The ubiquity of photo sharing sites like Pinterest, Flickr, Tumblr, 4Chan, and Instagram, together with new photography databases like Photogrammar, which catalogues FSA photographs, makes it easier to access other people’s images than ever before. This is the moment for a robust discussion of how law can protect photographers and other source artists without curtailing the continued development of appropriation art. It is only the privileged few major artists who can afford the kind of complex litigation defense mounted by Prince’s elite legal team. If we do not want to limit the making of appropriation art to those privileged few, we must adopt a more sensible and predictable approach to assessing the legality of this kind of art. This article proposes such an approach. In order to preserve the balance between protecting existing works and incentivizing the creation of new ones, in light of recent jurisprudence, this proposal calls for three critical, interdependent changes to copyright law as it applies to visual art. First, courts should clarify that meritorious appropriation art is per se transformative use. Adopting a transformative use presumption for appropriation art will reduce the current confusion as to how much variation between the original work and the new work is permissible and what role market value plays in visual art copyright infringement cases, providing much-needed clarity to the rights of all visual artists. Second, courts should encourage expert testimony from art scholars in order to guide judges as to whether the works in question are meritorious appropriation art or not, an intentionally unexacting standard. Judges should resume their historic reluctance to evaluate visual art, especially in light of the non-obvious meanings of appropriation art. Instead, courts should invite experts on the merits of art to guide judicial determinations of infringement. Finally, Congress should revise the Copyright Act to narrow the scope of fair use for visual artists to reproductions, eliminating the current confusion between the protected transformative use defense and the infringing transformation of original works within the scope of the artists’ derivative rights. These three recommendations work best when taken together. Clarifying the transformative use determination for visual art would be significantly more difficult without the adoption of expert testimony on merit and the concurrent statutory narrowing of visual artists’ derivative rights. Similarly, expert testimony would not be worth the trouble and expense without the focused point of contention that both the adoption of the transformative use per se standard and the limited derivative rights would provide. Unless these three critical changes are made, visual artists’ derivative rights under current copyright law will continue to collide regularly with appropriation art in untenable ways. This article explores the consequences of the current doctrinal chaos of fair use in the visual arts, particularly in the lucrative world of appropriation art, while also providing a tripartite remedy. It contends that reforms to the judicial standards for evaluating appropriation art in infringement cases, the use of expert testimony to support those determinations, and the derivative rights of source artists are needed to clarify the scope of the transformative use defense. Part I describes the origins of transformative use as an extension of the fair use defense to copyright infringement and explains how the Second Circuit’s ruling in Cariou and other recent decisions have expanded the scope of transformative fair use. Part II explores the impact of this expansion on the production and valuation of art, placing this legal development in the context of the modern art market. Part III reviews solutions proposed by other scholars to limit the over-expansion of the transformative use doctrine, and explores the benefits and drawbacks of each, concluding that none will be sufficient standing alone or in combination with each other. Part IV describes the benefits of adopting a transformative use per se standard for meritorious appropriation art, expanding the use of art experts, and reducing the scope of derivative rights for visual artists. Part V concludes. It is time to recognize that current copyright law cannot fairly and effectively resolve the tensions between the rights of source artists like Cariou and appropriation artists like Prince. There is a fundamental mismatch between appropriation art, a form of visual art central to the modern art market, and copyright law in the visual arts. While many scholars have offered piecemeal solutions to this problem,[10] a more comprehensive set of reforms like the ones proposed here is necessary. Appropriation art requires a unique approach to copyright infringement allegations, one that balances a limitation on the scope of derivative rights with a properly informed transformative use standard that limits judicial subjectivity on matters of artistic judgment. The current trend toward expansion of the fair use defense creates an uncertain legal environment because it lacks clarity and predictability, potentially chilling an increasingly valuable art market in future years. This growing market requires an effective legal solution to remain sustainable. The three reforms presented here, while perhaps controversial, provide a sound basis for the realignment of copyright law in the visual arts to accommodate art creation in the 21st century.

I. Cariou’s Impact on Transformative Use and the Art Market

The doctrinal confusion arising out of Cariou’s interpretation of transformative use is important because it concerns the application of copyright law to appropriation art, a critically and financially important form of modern art that depends on copying for its meaning and impact. While the doctrine of transformative use first entered the judicial lexicon in a case about songs, its subsequent expansion and application in art cases underscores the need for a more selective application. In short, transformative use in the visual arts requires a different set of standards than such use in other forms of copyrightable expression. The reasons for this selective application stem both from the nature of appropriation art, an established type of art that may not be well understood by judges and the general public, and from the consequences flowing from decisions like Cariou that threaten the future of the art market.

A. The Rise and Rise of Appropriation Art

Appropriation art is art made from other artists’ work, and can involve modifying that source work in a number of different ways. As defined by the Museum of Contemporary Art in Los Angeles, California:
Appropriation is the practice of creating a new work by taking a pre-existing image from another context—art history, advertising, the media—and combining that appropriated image with new ones. Or, a well-known artwork by someone else may be represented as the appropriator’s own. Such borrowings can be regarded as the two-dimensional equivalent of the found object. But instead of, say, incorporating that “found” image into a new collage, the postmodern appropriator redraws, repaints, or re-photographs it. This provocative act of taking possession flouts the modernist reverence for originality.[11]
Another definition of appropriation art posits that it “takes a (usually) recognizable object, text or image and recontextualizes it. In the new context, the associations that the reader/viewer has with the appropriated object are subverted, and he or she is forced to reexamine his/her relationship to it. Therefore appropriated art is often political, satirical and/or ironic.”[12] Most people have seen appropriation art without recognizing it as a genre. Shepard Fairey’s Hope poster depicting President Obama is perhaps the best known example of appropriation art that has been subject to a copyright challenge.[13] As a genre, however, appropriation art is at least a century old. It evolved in part from the Cubist practice of incorporating newspapers, musical scores, and drawing scraps in their work, creating new meaning from the displacement and combination of these materials.[14] Then, in a 1912 work titled “L.H.O.O.Q.,” Marcel Duchamp painted a moustache onto a postcard reproduction of Leonardo da Vinci’s Mona Lisa. He also wrote its title, which, in French, sounds like the phrase “elle a chaud au cul,” meaning “she’s got a hot ass,” underneath.[15] Appropriation art became more prominent in the 1970s, with the emergence of the “re-photographers” including Sherrie Levine, Cindy Sherman, and Barbara Kruger.[16] These artists created works largely incorporating the work of earlier photographers, and which are critical of the works that they reproduce.[17] As Monika Jasiewicz has noted, “[Levine’s] appropriation is a form of ‘criticism’ or ‘comment’–types of use that are supposed to be privileged in fair use analysis.”[18] What was once a fringe movement is now part of the art canon. Appropriation art is not only here to stay, it is primed to multiply. Aided by technological improvements to sourcing, sharing and manipulating images, it has become a springboard for a new generation of artists and art forms. It has never been so easy for appropriation artists to source and use existing material in all forms, including film, video and multi-media. As the website for an annual appropriation-based audio-visual media fest explains, “the past decade has witnessed the emergence of a wealth of new audiovisual elements available for appropriation into new works. In addition to official state and commercial archives, resources like vernacular collections, home movie repositories and digital archives now also provide fascinating material to repurpose in ways that lend it new meaning and resonance.”[19] Appropriation art has also evolved into new forms, many of which fall under the heading of remix, or the incorporation of source material into new works generally. The rise of remix culture and scholarship provides a new dimension to appropriation art, further signifying its permanent status. The variety of forms and purposes artists employ in remixing can be inferred from the introduction to Professor Mark Amerika’s Remix Culture seminar, which:
investigates the emergence of interdisciplinary media art practices that experiment with the art of remixing, including but not limited to literary cut-ups and procedural composition, image appropriation, Internet or, sound art, glitch, collage film, installation art, live A/V performance (DJ, VJ, live coding), culture jamming / hactivism,[20] and other art forms that engage with renewable source material.[21]
While many of these terms may be unfamiliar to lawyers and judges, it is easier for them and the general public to appreciate the fact that billions of images are now available on the Internet and that the number is growing daily. Several technological developments including the ubiquity of the mobile phone camera, the rise of photo sharing sites including Flickr, Instagram, Pinterest and Tumblr, and the ability to attach pictures to most if not all general social media sites, have vastly increased the number of images available to the public. The numbers are staggering. By one estimate, 500 million photographs are shared every day, and the number is likely to rise.[22] Studies showing that Facebook posts containing photos are far more likely to generate “likes” also encourage the posting of pictures online.[23] Those developments make it much easier to use and adapt existing images than it was in 1990, when Hon. Pierre Leval wrote his influential article on transformative use, or, in 1994, when the Supreme Court first adopted the doctrine in Campbell. [24] The clash between appropriation art as a recognized artistic movement and current copyright law came to a head in Cariou. It began, however, with the development of transformative use as a kind of fair use defense to copyright infringement.

B. The Origins of Transformative Use

In most cases, the Copyright Act prevents one person from taking and using another’s protectable work without permission.[25] An accused copyright infringer can escape liability by showing that his use falls within the fair use exception, which allows for the use of copyrighted materials for certain limited purposes. The Copyright Act codifies the fair use defense in Section 107, setting out four factors for the court to consider in ruling on the defense:
(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (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.[26]
Although the Copyright Act defines the four factors clearly, it does not specify how each factor should be weighted. Limited by precedent, each court has some latitude in its interpretation and weighing of each factor. In an influential Harvard Law Review article, the Hon. Pierre Leval (then of the Southern District of New York) developed a theory of “transformative use,” which elaborates on the first fair use factor.[27] According to Leval, in order to be transformative, the second work must add something new, with a further purpose or different character, altering the first work with a new expression, meaning, or message.[28] A work’s commercial qualities are less significant when the work is extremely transformative and parodic.[29] The Supreme Court analyzed the fair use defense and adopted the doctrine of transformative use, citing Judge Leval’s article, in its 1994 decision in Campbell v. Acuff-Rose Music, Inc.[30] In that case, the Court was asked to decide whether 2 Live Crew’s song “Pretty Woman” infringed the copyright in Roy Orbison’s song “Oh Pretty Woman.”[31] In determining that the rap version was a parody, and therefore fair use, the Court noted that in evaluating a fair use defense, “[a]ll [of the four factors] are to be explored, and the results weighed together, in light of the purposes of copyright.”[32] In discussing the expansion of transformative use, it may be helpful to distinguish “appropriation artists,” as defined above, from “source artists.” The term “source artist” denotes the artist whose work is used by the “appropriation artist” in creating the newer work at issue. These terms are fluid, in the sense that they must be defined with reference to a particular work or series of works. The source for a work created by an appropriation artist may itself have relied on the work of another artist.[33] In that way, she would become an appropriation artist with respect to that new work. That said, some artists tend to be, and have developed reputations as, one or the other. Richard Prince, for example, is well known as an appropriation artist in the global art market, and his work played a central role in the recent expansion of the legal limits of appropriation.

C. The Expansion of Transformative Use in Cariou

On November 12, 2013, the Supreme Court denied certiorari in Cariou, letting stand a decision that has dangerous repercussions for the art business.[34] Cariou concerned the appropriation artist Richard Prince, who created a series of artworks using the photographs of another artist, Patrick Cariou, as his base materials.[35] In 2000, Cariou published a book of his photographs of Jamaican Rastafarians called Yes Rasta.[36] Cariou testified about the creative choices involved in composing his photographs, including the equipment, staging, and development techniques and processes involved.[37] Prince’s works are highly collectable and expensive. They have been the subject of major survey exhibitions at the Whitney Museum of American Art in New York, the San Francisco Museum of Modern Art, and the Serpentine Gallery in London, among other places.[38] In July 2008, a New York dealer paid $8.4 million at auction for Prince’s 2002 work Overseas Nurse.[39] Prince bought copies of Yes Rasta, and incorporated some of the photographs in works he displayed in St. Barth’s in 2007-2008.[40] Prince ultimately completed a series of twenty-nine paintings in what he called the “Canal Zone” series, twenty-eight of which incorporated Cariou’s Yes Rasta photographs.[41] The Gagosian Gallery, one of the most prominent art galleries in the United States, exhibited twenty-two of Prince’s Canal Zone paintings in November and December 2008 at one of its Manhattan galleries.[42] The gallery sold eight of the paintings for a total of $10,480,000, 60% of which went to Prince.[43] Although another New York gallery had approached Cariou about exhibiting his work, that gallery withdrew its offer when it became aware of the Canal Zone exhibit.[44] Cariou sued Prince and Gagosian for copyright infringement.[45]
1. The District Court’s Ruling
The facts of the Cariou case were largely undisputed, and the District Court ruled on cross-motions for summary judgment.[46] In evaluating the first fair use factor, the purpose and character of Prince’s use of Cariou’s photographs, the court considered three sub-factors: commerciality, bad faith, and the extent to which Prince’s art was “transformative.”[47] The three factors were not given equal weight: “the more transformative the new work, the less will be the significance of other factors, like commercialism, that may weigh against a finding of fair use.”[48] In order to be transformative, the court noted, the new work should “comment on, relate to the historical context of, or critically refer back to the original works.”[49] In light of that requirement, the court determined that Prince’s work is transformative “only to the extent that they comment on the [Cariou] Photos.”[50] Relying largely on Prince’s own testimony that he didn’t “really have a message” when making art, the court concluded that he “did not intend to comment on any aspects of the original works.”[51] Accordingly, it found that “the transformative content of Prince’s paintings [was] minimal at best.”[52] In doing so, the court suggested a negative view of Prince’s artistry. For example, it quoted Prince’s testimony that his message in collaging guitars onto Cariou’s portraits of Rastafarian men had to do with the fact that men played guitars: “He’s playing the guitar now, it looks like he’s playing the guitar, it looks as if he’s always played the guitar, that’s what my message was.”[53] The other two components of the first fair use factor, commerciality and bad faith, also weighed against Prince. In light of the Gagosian Gallery’s extensive marketing of the Canal Zone show and the sale prices of Prince’s works, the court determined that the “Defendants’ use and exploitation of the Photos was also substantially commercial.”[54] Prince’s failure to even attempt to license from Cariou sealed the court’s conclusion of bad faith.[55] The court interpreted the second fair use factor, the nature of the copyrighted work, to be more restrictive where the work at issue is “expressive or creative,” as opposed to “factual or informational.”[56] Without further explanation, the court found that Cariou’s photographs were “highly original,” weighing against a finding of fair use.[57] The court quickly disposed of the third factor, the amount used, noting that Prince had appropriated the “central figures depicted in portraits taken by Cariou” in most of the works at issue, weighing heavily against a finding of fair use.[58] The analysis of the final factor, the effect on potential market, is perhaps the most interesting. The court rejected Prince’s efforts to minimize the potential market for Cariou’s works even though Cariou had not aggressively marketed them.[59] The potential market, the court noted, could be larger than the actual market for the original works.[60] An author is “entitled to protect his opportunity to sell his [works]”[61] and may be entitled to judgment even when he “has evidenced little if any interest in exploiting this market for derivative works.”[62] A New York gallery owner, Cristiane Celle, had offered to show Cariou’s works, but later withdrew the offer in light of the Prince exhibit.[63] Celle testified that she cancelled the Cariou show because she “did not want to seem to be capitalizing on Prince’s success and notoriety,” fed by the Gagosian show.[64] She did not want to exhibit work which had been “done already” at another gallery.[65] Celle’s cancellation supported the court’s conclusion that the defendants usurped the market for Cariou’s works.[66] The District Court may have gone a step too far by permitting the destruction of the infringing artworks. The Court ordered the defendants to hand over all copies of the infringing works for “impounding, destruction, or other disposition, as Plaintiff determines,” among other remedies.[67] In its reversal, the Second Circuit described the lower court’s order as granting “sweeping injunctive relief.”[68] It is possible that what was perceived as too severe a remedy led in part to the reaction and the reversal that followed.
2. The Second Circuit’s Reversal
On appeal, Prince retained the firm of Boies, Schiller & Flexner.[69] Although the oral argument took place on May 21, 2012, the appellate decision did not issue until April 25, 2013, nearly a year later.[70] When it did issue, the Second Circuit’s reversal sent shock waves through the art world. Throughout the decision, the court assumed that Prince’s work differed in an important way from Cariou’s without explaining its rationale. For example, in describing Prince’s use of the Yes Rasta photographs, the court noted, “Prince altered those photographs significantly by among other things painting ‘lozenges’ over their subjects’ facial features and using only portions of some of the images.”[71] In general, placing an oval cut out over part of a photo does not necessarily alter the photo significantly and the basis for the court’s characterization of it as such is unclear. The court did interpret size differences as significant, however, noting that the Yes Rasta book measures “approximately 9.5” x 12”” while Prince’s artworks are “several times that size.”[72] What troubled the Second Circuit most about the lower court’s ruling, apparently, was the implication that a secondary work must “comment on the original or its author in order to be considered transformative.”[73] In order to qualify as fair use, a secondary work could “serve[ ] some purpose other than those (criticism, comment, news reporting, teaching, scholarship and research) identified in the preamble to the [fair use] statute.”[74] The secondary work only needs to “alter the original with new expression, meaning, or message.”[75] The court went on to declare that Prince’s works passed the “new expression, meaning or message” test, noting that “Prince’s composition, presentation, scale, color palette, and media are fundamentally different and new compared to the photographs, as is the expressive nature of Prince’s work.”[76] Rejecting Cariou’s arguments that Prince’s own failure to identify any substantial message or purpose in his work were fatal to his fair use defense, the court stated that “[w]hat is critical is how the work in question appears to the reasonable observer.”[77] The court found Prince’s works so transformative that the fact that they were also commercial – another first-factor element – was, effectively, irrelevant.[78] With regard to the effect of Prince’s copying on the market for Cariou’s work, the court found that Prince’s copying did not usurp that market.[79] The bases for that conclusion were that (1) Celle did not cancel her plans to show Cariou’s work “because it had already been done at Gagosian,” (2) Cariou had “not aggressively marketed his work,” and (3) wealthier people were more interested in Prince’s work than Cariou’s.[80] The court’s emphasis on the socioeconomic status of Prince collectors was striking. Observing that “Prince’s artwork appeals to an entirely different type of collector than Cariou’s,” the court went on to note that Prince’s works sold for millions of dollars.[81] It observed further that the invitation list for the opening dinner included:
Jay-Z and Beyonce Knowles, artists Damien Hirst and Jeff Koons, professional football player Tom Brady, model Gisele Bundchen, Vanity Fair editor Graydon Carter, Vogue editor Anna Wintour, authors Jonathan Franzen and Candace Bushnell, and actors Robert DeNiro, Angelina Jolie, and Brad Pitt.[82]
After comparing the Prince and Cariou works, the court determined that twenty-five of the thirty Prince works at issue were protected by the fair use doctrine.[83] It remanded for consideration another five works to the district court, deeming them too close to call.[84] In doing so, however, the court did not articulate any basis on which the district court could make such a determination. It is not clear why the appellate court believed the district court would be better able to determine whether the five remaining works were sufficiently transformative than the appellate court.[85]

D. The Dubious Trend Toward Expanding Transformative Use

Cariou was not the only case to expand the fair use defense in 2013. Across the country, an appellate decision in the Ninth Circuit also expanded the scope of the transformative use defense in unpredictable and troubling ways. It concluded that a high-profile rock band’s unlicensed use of an artist’s original work as a concert backdrop qualified as transformative fair use. In Seltzer v. Green Day, Inc., the Ninth Circuit found that the rock band Green Day’s use of Derek Seltzer’s work in its concert backdrops was fair use.[86] Seltzer created an image called “Scream Icon,” which he sold on stickers and posters.[87] Green Day used a version of “Scream Icon” in a video that ran during its concerts during a multi-city tour in 2009.[88] Seltzer sued Green Day for copyright infringement.[89] Citing Cariou, among other precedents, and noting that “whether a work is transformative is a[n] often highly contentious topic,” the Ninth Circuit ruled in Green Day’s favor.[90] The court found that Green Day’s use of “Scream Icon” amounted to new creative expression because it juxtaposed the original image with religious imagery: “With the spray-painted cross, in the context of a song about the hypocrisy of religion, surrounded by religious iconography, Staub’s video backdrop using Scream Icon conveys ‘new information, new aesthetics, new insights and understandings’ that are plainly distinct from those of the original piece.”[91] This, the court ruled, was transformative, and therefore the first fair use factor weighed in Green Day’s favor. Green Day and Cariou are not the only indicia of transformative use’s expansion, although they are among the most newsworthy recent cases. Scholarly surveys underscore the conclusion that courts are expanding the scope of transformative use, and consequently fair use, across the country. Professor Sag examined more than 280 fair use cases from 1978 to 2011.[92] His research “reinforce[d] the dominance of transformative use over other factors” in determining case outcomes.[93] In another study, Professor Netanel looked at 79 opinions in fair use cases from 1996 through 2010.[94] He concluded that “the transformative use paradigm, as adopted in Campbell, overwhelmingly drives fair use analysis in courts today.”[95] The trend toward consideration of transformative use was significant. Netanel observed that courts’ use of the transformativeness analysis “increased measurably during the period 2006-2010, even if it was already quite high previous to that period.” [96] “[Eighty-five percent] of district court opinions and 93.75%, or all but one, of appellate opinions” analyzed whether the challenged use was transformative.[97] More importantly, Netanel’s research underscored the determinative nature of transformative use in the courts’ determinations. He noted that since 2005, “decisions that unequivocally characterize the defendant’s use as transformative almost universally find fair use.”[98] When a court found that the challenged use was transformative, there was a “sharp decline in the weight that courts say they are giving to whether a use is commercial.”[99] One interpretation of this data is that a finding of transformativeness effectively reinterprets fair use factors three and four toward inevitably favoring fair use.[100] Arguably, it also reinterprets the market analysis underlying the fourth factor. The driving concern changes from “whether the use falls within a conceivable licensing market for the copyright owner” to disregarding that potential market entirely.[101] Instead, it “effectively delimits the legally relevant market for the fourth factor. If a use is unequivocally transformative, then, by definition, it causes no market harm since the copyright holder does not have a right to exclude others from the market for transformative uses.”[102] The rise of transformative use as a guiding if not determinative factor in fair use analysis is exemplified in a pair of cases concerning another prominent artist, Jeff Koons. In the earlier case, Koons’ use of another artist’s work was held to be copyright infringement. In the later case, on similar facts, Koons’ use of another artist’s work was held to be transformative and fair use. The first case, Rogers v. Koons, concerned a Koons sculpture called String of Puppies exhibited at New York’s Sonnabend Gallery in 1988.[103] Koons based this work on a black and white photograph by Art Rogers called Puppies, which had been licensed by Museum Graphics for a notecard. Rogers sued Koons for copyright infringement in 1989. Although Koons argued that String of Puppies was fair use because it was a parody or satire, the court granted summary judgment in Rogers’ favor.[104] When Koons appealed, the court of appeals affirmed the district court’s decision.[105] The second case, Blanch v. Koons, concerned Koons’ appropriation of photographer Andrea Blanch’s work in Koons’ 2000 collage, Niagara.[106] Niagara consists of images of women’s lower legs and feet dangling above a tray of pastries.[107] One pair of feet was modeled on Blanch’s photograph, “Silk Sandals by Gucci.”[108] Blanch’s photograph showed the woman’s feet resting on a man’s lap in an airplane cabin.[109] For Niagara, Koons reproduced only the legs, feet, and shoes from Blanch’s photograph, adding a heel to one shoe, altering their orientation, and varying the coloring.[110] Blanch sued Koons for copyright infringement. The Supreme Court’s Campbell decision had issued in the years between Rogers and Blanch, and Koons now argued the defense of transformative and fair use instead of parody.[111] The district court agreed that Koons’ use of Blanch’s photograph was fair, and the court of appeals affirmed.[112] This is not to say that courts always find in favor of the appropriation artist when confronted with copyright infringement claims.[113] However, its influence on judicial decision-making in this area suggests that the precedent set by Cariou is here to stay, at least for the time being. Following the Supreme Court’s denial of certiorari, Cariou will stand as precedent in the Second Circuit, the home of one of the most influential art markets in the world. Given these rulings and the scholarly surveys of many other court rulings, we may expect circuit courts to continue to expand the scope of transformative use. The standards used in these cases are too often unclear and unpredictable. This trend makes it all the more important to impose sensible limitations on fair use in the making of 21st century art.

II. The Troubling Consequences of Expanding Transformative Use

The expansion of fair use illustrated by Cariou and its progeny raises several types of concerns: doctrinal, societal, and market-based. By blurring the line between transformative and derivative works, these decisions represent a significant shift in copyright law. The repercussions will affect the business relationships among artists, dealers, and investors, and will shift the legal boundaries of creativity.

A. The Doctrinal Impact

In the wake of Cariou, several observers have commented on the doctrinal shifts that the ruling represented.[114] Legal scholars were not the only critics of the opinion. Artists banded together to decry the Cariou ruling. When the Second Circuit remanded consideration of five works back to the district court, a coalition of professional associations and photographers filed a comprehensive amicus brief urging the court to reject the fair use defense as to those works.[115] The amici included the American Society of Media Photographers, the Picture Archive Council of America, Professional Photographers of America, the National Press Photographers Association, photographer Jeremy Sparig, the Graphic Artists Guild, American Photographic Artists, and the American Society of Journalists and Authors.[116] Perhaps the most disturbing aspect of Cariou is the lack of guidance offered as to how much difference is necessary for a reasonable observer to determine that the use is transformative. A balancing test based on unclear factors is easy to get wrong. If adapting one artist’s photographs by reprinting them in a different color and size and perhaps adding small decorative elements is fair use, then it is hard to imagine what kind of adaptive copying would not be permitted. A likely effect of this doctrinal vagueness is that whether one artist infringes the copyright of another will boil down to the aesthetic judgment of a particular judge or panel of judges. Subsequent decisions may therefore require lawyers and courts to parse the differences between copies of accused artworks, which may not be widely available, in order to make their best guess as to what is “different enough” to pass legal muster. A related danger of recent case law is the increasingly blurry line between derivative and transformative use. According to the Copyright Act,
A “derivative work” is a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications, which, as a whole, represent an original work of authorship, is a “derivative work.”[117]
A transformative work, by contrast, is one that adds “something new, with a further purpose or different character, altering the first with new expression, meaning or message.”[118] The definition of transformative use is comparatively vague, inviting a great deal of judicial creativity in its application. The difference between derivative use and transformative use is getting harder to detect: “[i]f a court finds that defendants’ use of an author’s work is ‘transformative’ because it reaches new markets or makes the work available to a new audience, that finding could risk usurping the author’s derivative work rights. Ultimately, those rights could hinge on a ‘race to the market’ for new and sometimes unanticipated uses.”[119] Arguably, that is what happened to Cariou. In his Canal Zone exhibit, Prince established a high-end market for what could be considered derivative works based on Cariou’s photographs, usurping that market and foreclosing the possibility of a Cariou exhibit like the one Celle had planned. A further danger of the current slide toward finding that all appropriation art is per se fair use may be a violation of the United States’ obligations under the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) and other international treaties.[120] For example, the TRIPS agreement requires that signatories’ copyright exceptions (for foreign works) meet a three-step test.[121] That test provides:
Members shall confine limitations or exceptions to exclusive rights to certain special cases which do not conflict with a normal exploitation of the work and do not unreasonably prejudice the legitimate interests of the right holder.[122]
The first of the three steps requires that any exceptions to copyright protection be limited in scope, according to the World Trade Organization’s dispute resolution panel.[123] “Normal exploitation” includes all ways in which the author would normally seek to exploit the work now or in the future.[124] In other words, an exception may not compromise a normal market for the work. The third step requires that the law protect authors from unreasonable loss of income.[125] Expanding the scope of transformative use without clearer boundaries may violate each of these three steps.

B. The Commercial Impact

In order to appreciate the impact of Cariou on the art industry, it is important to understand both the recent rise of appropriation as a means of making art and the central role of dealers and auction houses in the art market. Appropriation is a hot topic in the art world.[126] Some of the most sought after modern art is made by high-profile appropriation artists like Prince, who sold a piece at an auction for more than $3.7 million in May 2014.[127] A widely acclaimed, 24-hour long video made up of appropriated bits of film and television shows called “The Clock” has been touring major art venues around the world since its debut in 2010.[128] In recent years, appropriation art has been the focus of major exhibitions in New York, Chicago, and Los Angeles.[129] The Second Circuit’s emphasis on the socioeconomic strata and celebrity of the people who attended Prince’s opening gala correlates with an increasingly important characteristic of the art market. Dealers, collectors, museums, and auction houses all play significant roles in driving up the market prices of certain artists’ work. According to one economist, collectors describe contemporary art “in terms of innovation, investment value, and the artist being ‘hot,’ meaning a relative unknown where word-of-mouth reports make them suddenly sought-after.”[130] The valuation of any given work depends in large part on the investments that dealers, collectors, and museums make in certain emerging artists.[131] When museums exhibit an artists’ work, they add to the work’s exhibition and sale history, or provenance, thereby increasing the price that work can command in the future.[132] High-profile exhibitions like the Whitney Museum of American Art’s Biennial help create taste and add to an artists’ value.[133] So do exhibitions at certain galleries, including those of “superdealers” Larry Gagosian, who exhibited the Prince works at issue in Cariou.[134] The director of the Andy Warhol Museum observed that “[i]n many ways, having a show with [Gagosian] is synonymous with having a show at MoMA or the Tate Modern [in London].”[135] Given the increasing ubiquity of the practice, the legal scope of borrowing source material shapes both the artistic and ethical development of the profession. This is especially true for younger artists, whose attitude toward borrowing is significantly different from artists of earlier generations. As Stephen Frailey, the head of the undergraduate photography program at the School of Visual Arts in Manhattan, told the New York Times, “[t]hey feel that once an image goes into a shared digital space, it’s just there for them to change, to elaborate on, to add to, to improve, to do whatever they want with it. They don’t see this as a subversive act. They see the Internet as a collaborative community and everything on it as raw material.”[136] This sense of freedom among young artists is mirrored in the general public by the creation of apps such as Mixel, which facilitates the appropriation of images in new user-generated art.[137] The expansion of fair use will affect source artists as well. If the law permits appropriation artists like Prince to adapt materials without clear limits, it is easy to imagine that the sources such artists appropriate from may dry up for lack of commercial incentive.[138] That incentive is critical. Cariou’s investment of time and trust-building in creating his photographs was significant. He spent “some six years” with the Rastafarians he documented in Yes Rasta, “gaining their trust and taking their portraits.”[139] One could argue that that time and effort was necessary for Cariou to develop the kind of relationships with his subjects that would permit him to take the portraits in the first place. The Second Circuit’s decision undermines the importance of this kind of effort. In fact, photographers like Cariou may be more vulnerable to this expansion of fair use copying than painters, sculptors, and other visual artists. Some commentators have suggested that copyright law gives less protection to visual artists than to authors because it limits the right to copy, which isn’t as important to visual artists as it is to authors because of their different modes of profit.[140] While visual artists rely on a “single-copy business model,” selling one unique version of each work, authors, rely on a “multi-copies business model,” in which they expect to sell many copies of each original work. By focusing on the right to copy, as its name suggests, copyright law effectively discriminates against visual artists in comparison to authors.[141] This argument, however, ignores a key distinction of photography as a medium. It is easier and more common for photographers to sell copies of their work than for many other kinds of artists. Cariou primarily sold his work, for example, through a mass-produced book.[142] Appropriation artists, especially painters, primarily exhibit and sell single copies of their work, commanding higher prices in part because of their scarcity. Lastly, the expansion of fair use as illustrated by Cariou threatens the existence of the photographic licensing market. That market, which serves as a conduit between photographers and the publications or other entities that want to license their work, can be sidestepped entirely if stealing photos is fair use.[143] Indeed, the fact that there is currently an operational licensing market that Prince could have accessed makes it more difficult to justify his unlicensed use of Cariou’s photographs as fair.[144]

C. The Societal Impact

The Cariou case has important implications for the relationship between law and society as well. Prince’s business approach, like that of many appropriation artists, also raises ethical concerns. Even if courts determine that his adaptation of Cariou’s photographs was legal, was it ethical of him to use Cariou’s images without attribution? If Prince can make headlines, and millions of dollars, from taking another artists’ work, his success sends a message to younger artists that is not easily countered. It is difficult to expect art teachers to demand integrity of their students when the art world and/or the legal system discards its value.[145] The issue is especially acute for younger artists, who have come of age in an era that lauds appropriation art as much as entirely original compositions. Copyright law, like all intellectual property law, must strike a balance between the protection of original creative work and the common interest in access. If case law undermines the importance of original work, as Cariou arguably does, what is the counterweight against free-for-all use of visual works that are not yet in the public domain? Indeed, if current trends continue, the future of the “public domain” as a concept may change as well.

III. Evaluating Proposed Solutions to the Transformative Use Problem

Copyright scholars, art critics and general observers have been exchanging ideas about how to repair the damage done by Cariou since the Second Circuit’s decision issued. While many scholars have offered innovative solutions based on important insights into the nature of the problem, their proposals often suffer from a lack of practicality. However, the shortcomings of these proposals form, in part, the basis on which more workable solutions can be developed.

A. Proposed Statutory Amendments Paint With Too Broad a Brush

One potential remedy for the lack of clarity exposed by Cariou, Green Day, and similar cases might be to amend the Copyright Act to provide guidance for the proper scope and application of the transformative use defense. Congress could, for example, amend the Copyright Act to clarify the distinction between derivative use and transformative use, which is not codified in the statute.[146] Such an amendment, however, would likely do less to ease the interpretive burden on judges than the recommendations proposed in this article. No single definition of transformative use is likely to capture the fine but important distinctions inherent in the ways artists create meaning among the various types of copyrightable expression. Another scholar has proposed amending Section 101 of the Copyright Act to establish a precise list of uses that would qualify as transformative, to parallel the current statutory definition of derivative use that appears in 17 U.S.C. § 101.[147] Indeed, writers have suggested and courts have adopted a number of other more specific measures of transformative use across genres, none of them satisfactory. These include exemptions for “productive copying,”[148] copying for “socially laudable purposes,”[149] copying for “a different purpose from the original,”[150] and copying with “implied consent” which in turn would accord with the “prevailing understanding of the community” and/or “customary practice.”[151] Defining transformative use more precisely through amendment of the Copyright Act has some drawbacks. First, any illustrative list of transformative uses will, by nature, be limited in scope. A determination of fair use based on transformative use will still rely on the fact finder’s subjective analysis to some extent. The same can be said, however, for the interpretation of other kinds of fair use and, more generally, in any application of precedent. The open-ended nature of the fair use defense, and of transformative use in general, has long been recognized as a necessary condition.[152] Second, a more specific definition of transformative use may have the overall effect of narrowing the defense, thereby increasing the chances that appropriation artists will be held liable for copyright infringement. They may be discouraged, in turn, from producing work that the art market, media, and popular audiences value. Because appropriation artists’ work often commands such high prices, investors and collectors may claim that regulating appropriation art more closely will hurt the art market overall. Dealers and galleries may be more hesitant to sell and show such work if they perceive an increased risk of liability themselves. After all, Larry Gagosian, the owner and founder of the prestigious Gagosian Gallery was a named defendant in Cariou v. Prince.[153] Resistance from the intermediaries between artists and collectors may further depress the market for this lucrative type of art.

B. Compulsory Licensing for Visual Artists Is Untenable in the United States

Scholars have also proposed amending the Copyright Act to provide compulsory licensing for visual artists who incorporate copyright-protected works of others into their work.[154] Compulsory licensing already exists to some extent in music with regard to cover songs,[155] and some commentators have proposed expanding the scope of compulsory licensing to include digital sampling as well.[156] In the wake of Cariou, some commentators suggested that it might be time to revive that idea in the visual arts in order to ensure fair compensation for source artists.[157] Licensing is particularly inapt in this context because of the critical and transgressive nature of appropriation art as a movement, as described above.[158] The history of appropriation art reveals that the practice of appropriation is fundamentally aimed at challenging and departing from prior modes of representation.[159] As one scholar has put it, “[w]hile societal criticism is usually incidental to traditional parody, it is the avowed purpose of appropriationist visual art.”[160] Another difficulty inherent in a potential compulsory licensing scheme is the question of whether exhibited or published secondary works would be subject to a license fee, or whether the licensing scheme would be limited to actual sales. As noted above, appearing in an exhibit, especially at a premiere location such as the Whitney Museum or the Gagosian Gallery, can vastly increase the worth of an artist’s work.[161] A compulsory licensing scheme that addressed only the actual sale of art would address only part of the process by which art is valued, and increases in value, in the global art market. A greater challenge would be determining who might administer the licensing program. Since so many major art sales take place through galleries and auction houses, they would be the logical first choices. If galleries were compelled to direct a percentage of the sale price of an appropriation piece to a source artist(s), however, the galleries would bear the burden of identifying (or verifying, if the appropriation artist will assist in this task) the source artist(s) and the date of the source work in order to determine whether or not the work was in the public domain. If so, presumably no license fees would be due. If not, however, the gallery would then face the task of transferring payment to that person or those people. If the source artist does not know that a fee is owed to her, she has no incentive to verify the payment. That complication suggests that enforcement of the licensing scheme would be challenging as well. This would be especially difficult with regard to private sales. The difficulty of ensuring that the license fee extracted from the seller makes its way to the source artist multiplies when the seller is a private individual rather than a gallery or auction house. Increasingly, collectors and sellers are using private sales to transfer art rather than public auctions.[162] One reason is that private sales lessen the risk of failure in a prestigious market. As one New York gallery director explained, “If [a piece] doesn’t sell [privately], it’s not a public event. […] However, if your painting is on the cover of an auction catalog and it’s been marketed globally and then doesn’t sell – ouch!”[163] As more transactions are handled privately, a compulsory licensing scheme becomes harder to administer and enforce. Compulsory licensing may be easier to administer and enforce in the music business than it would be in the visual arts. Although the Supreme Court developed the transformative use defense in the context of a music case,[164] the differences between the music business and the art business help illustrate why licensing would be harder to administer in the latter. In the music industry, a few major organizations help consolidate the licensing process, including the Recording Industry Association of America (RIAA) and Broadcast Music Incorporated (BMI). In the visual arts, however, there is no comparable hegemony. Organizations such as VAGA and Artists’ Rights Society (ARS), which describes itself as the “preeminent copyright, licensing, and monitoring organization for visual artists in the United States,”[165] represent many visual artists’ interests. VAGA, for example, serves as a licensing clearinghouse for its member artists. When “any type of image user seeks to reproduce a work of art by one of our members, VAGA issues a license document, which details and limits the rights granted, contains clauses protecting the integrity of the licensed work, and ensures payment of a fee commensurate with the nature of the use.”[166] ARS, in contrast, “act[s] on behalf of [its] members to streamline the process for reviewing requests for reproduction” but does not license or sell their art on their behalf.[167] Perhaps the most intransigent difficulty in a general licensing scheme, however, has to do with the difficulty of pinpointing a single original work. As discussed above, it is difficult to pinpoint verbally what the “expression” of any artwork is, and therefore what elements can be protected by copyright, as a rule, in the same way that “expression” can be identified and quoted in written work.[168] The many problems inherent in a compulsory licensing scheme can be illustrated in part by analogy to the recent debate over the possible institution of a federal resale royalty structure.[169] A resale royalty provides that when a work of art is sold by someone other than the artist, some percentage of the sale price goes to the artist no matter how long it has been since the artist sold the work originally. Resale royalty laws are common in Europe and other parts of the world, but have been met with mixed success in the United States.[170] In 2013, however, the Copyright Office issued a report recommending that Congress consider adopting such rights.[171] In February 2014, a group of congresspersons introduced a bill which, if passed, would grant visual artists the right to collect resale royalties.[172] Critics of the bill pointed out that the logistical burden and administrative costs of such a scheme are likely to outweigh the benefits. They noted, for example, that the bill’s provisions making the collection of resale royalties transferable and retroactive would have done more harm than good.[173] Similar arguments can be made against a compulsory licensing scheme, and would likely arise if a compulsory licensing scheme were to be proposed in a more formal manner.

IV. A Three-Step Solution to Reforming Transformative Use in the Visual Arts

Resolving the current mismatch between 21st century appropriation art and copyright law requires at least three changes. First, courts should clarify that meritorious appropriation art is per se transformative use, thus reducing the current confusion as to how much variation between the original work and the new work is permissible. Second, courts should encourage expert testimony from art scholars on whether the works in question are meritorious appropriation art or not, allowing judges to resume their historic reluctance to evaluate visual art. Finally, Congress should revise the Copyright Act to narrow the scope of fair use for visual artists to reproductions, eliminating the current confusion between the protected transformative use defense and the infringing transformation of original works within the scope of the artists’ derivative rights. Taken together, these three changes will restore clarity to the question of how artists can create new works without infringing the rights of other artists. This increased clarity will allow artists to stop litigating and focus their attention on creating, a development that all parties should favor.

A. Recognize Appropriation Art as Transformative Use Per Se

As a first element of this tripartite solution, courts should accept meritorious appropriation art as transformative per se. In other words, courts should determine – preferably with the assistance of expert testimony, as described in the following section – whether the accused work is meritorious appropriation art. If so, the court should take that determination into account when evaluating the first of the fair use factors. The second, third and fourth factors should remain open to the court’s analysis, without a correlative presumption. In the past, courts have been reluctant to supplant the entire four-factor analysis with a broader presumption that appropriation art should be considered per se fair use. In Morris v. Guetta, for example, the Central District of California Appellate Court ruled that Guetta’s adjustments to photographs of Sid Vicious taken by Dennis Morris constituted copyright infringement.[174] The court rejected Guetta’s argument that appropriation art should be considered fair use per se: “[t]o permit one artist the right to use without consequence the original creative and copyrighted work of another artist simply because that artist wished to create an alternate work would eviscerate any protection by the Copyright Act.”[175] Prior to Cariou, a few scholars proposed unique fair use standards for appropriation art, but none were adopted. In 1988, for example, John Carlin suggested modifying fair use standards to better accommodate appropriation art.[176] Instead of the standard four-factor test, Carlin suggested focusing on the purpose of the copying and the nature of the work copied.[177] Carlin’s test, however, applied different standards depending on whether the copied image was recognizable to the average viewer.[178] Carlin also limited his proposed fair use determination to the appropriation of works whose creator was no longer living or actively exhibiting his work.[179] In 1993, E. Kenly Ames proposed a different approach to fair use in appropriation art cases.[180] Ames would have limited the presumption of fair use to works of visual art as defined under the Visual Artists’ Rights Act of 1990 (VARA), in part to “avoid any need to decide whether it is ‘good art,’ or even ‘art’ at all, or whether it is successful in getting its critical message across to the viewer.”[181] She further proposed a minimal standard of review for the appropriating work’s effect on the potential market for the original work, suggesting that such appropriation should be deemed fair so long as the secondary work cannot reasonably function as a market substitute for the original. [182] Both Carlin and Ames’ proposals recognized that appropriation art required different legal treatment from more traditional 19th century forms of image creation, but their standards would have been relatively difficult to implement. Carlin’s qualification that recognizable works deserved more protection introduces the unwieldy question of what an “average viewer” recognizes, and answering such a question is no easy task in a culture that is increasingly subdivided in terms of what people see and recognize. Ames’ proposal introduces the excellent notion of using the VARA standard to remove the subjective evaluation of art from the courts, but would apparently allow that determination to override the consideration of the other four fair use factors. However, a better approach would allow courts to deem appropriation art that falls under a minimal VARA standard to be transformative use, while retaining consideration of market impact and other important fair use considerations and without allowing any one of those considerations to dominate. A critical question is how much transformation of a source work is necessary to qualify as appropriation art, and therefore transformative use per se, under this proposal. This question plagued the Second Circuit in Cariou as well. In its decision, the majority determined that most of Prince’s work qualified as transformative use without specifying the standards used to reach that determination. While some of Prince’s works transformed Cariou’s photographs beyond judicial doubt, other works were too close to call. As Judge Parker noted with regard to one work, Graduation:
Prince did little more than paint blue lozenges over the subject’s eyes and mouth, and paste a picture of a guitar over the subject’s body… Where the photograph presents someone comfortably at home in nature, Graduation combines divergent elements to create a sense of discomfort. However, we cannot say for sure whether Graduation constitutes fair use or whether Prince has transformed Cariou’s work enough to render it transformative.[183]
The court remanded the question of whether Prince was entitled to the fair use defense for Graduation and four other works, but failed to provide any clear standards by which to make that determination. It is hard to see how the lower court would be any more qualified than the appellate court to make this determination, unless additional testimony was permitted on this point. Even so, it would have been difficult to introduce such testimony absent standards of proof. When a work is appropriation art, it is creative and progressive. It is “not premised on rote copying,” but is instead “about quotation, recontextualization, and criticism – the very building blocks of artistic progress.”[184] The Copyright Clause of the Constitution, after all, authorizes Congress to promote the Progress of Science and useful Arts.[185] Because genuine appropriation art represents artistic progress, it is “the sort of innovative criticism and reassessment of our environment that one might argue the Copyright Act is designed to protect.”[186] For that reason, it deserves at least per se protection as transformative use. One way to remove judges from their newly adopted and ill-suited role as art critics is to create a brighter line between what does and does not infringe a source artist’s copyright. Given the prominent role of appropriation art in the modern art canon, the time has come to recognize it explicitly in the context of copyright law. The simplest bright line to use is the term Congress has already adopted in another copyright statute designed to protect artists: VARA.[187] In adopting a relatively simple standard for basic protection, VARA relieves courts of the responsibility they are ill equipped to bear: making aesthetic judgments and determinations of artistic worth.

B. Broaden the Use of Expert Testimony by Art Scholars in Infringement Cases

Another way to restore the proper distance between judges and art evaluators is to expand the use of qualified expert testimony in visual art copyright infringement cases. Judges should not be in the business of judging art. The Second Circuit’s foray into artistic evaluation in Cariou appears to have been entirely subjective, since it did not specify any standards used to determine that twenty-five of the accused paintings were fair use and five were too close to call.[188] I propose instead that courts invite expert testimony on the issue of whether an accused work is meritorious appropriation art, mere copying without more, or something in between. Specifically, my proposal is that parties to copyright infringement cases involving appropriation art retain experts to testify as to whether the allegedly infringing work is meritorious appropriation art or not. Other scholars, most notably Monika Jasiewicz, have recently suggested inviting expert testimony on whether an artistic use is transformative so as to qualify for the fair use defense.[189] Although it is grounded in many of the same concerns, my proposal is narrower in that it calls for a parallel per se determination of transformativeness for appropriation art. Expert testimony is necessary in appropriation art cases because of its unique forms of expression, interpretation and meaning. It is harder for judges to evaluate the fair use of art than other kinds of copyrightable expression. This is especially true for appropriation art, which has its own canon and semiotics. While judges are likely to be familiar with the conventions of parody and jokes present in literary works, they are less likely to have a comparable understanding of the conventions of photography and appropriation art, because those conventions lay farther outside the popular discourse.[190] As Cariou illustrates, the current “new expression, meaning or message” test is difficult at best to implement without expert assistance. Any new depiction of a source work that varies even slightly from the original, for example, might qualify as “new expression” in that it differs from the original expression. Even if courts were to narrow the “expression” element of the current test, it is challenging to define transformative use in the visual art medium. It is significantly harder to define the “meaning or message” of a visual artwork than to define the “meaning or message” of a written work, in part because visual art is less literal by nature. There can be no single meaning of a work of art, as so much of the interpretation of a work rests with the observer.[191] Judicial opinions are also a poorer vehicle for conveying the bases of a transformative use determination in cases involving the visual arts than those involving written works. As Matthew Bunker and Clay Calvert have observed, the “perception of whether something constitutes a written parody may be more reasonably gleaned and more readily explained in a judicial opinion than the perception of whether image-based appropriation art is transformative.”[192] Indeed, judges’ willingness to engage in aesthetic judgments in the course of legal judgments is a relatively recent phenomenon. In Bleistein v. Donaldson Lithographing Co., Justice Holmes observed that
It would be a dangerous undertaking for persons trained only to the law to constitute themselves final judges of the worth of [works] … if they command the interest of any public, they have a commercial value – it would be bold to say that they have not an aesthetic and educational value, – and the taste of any public is not to be treated with contempt.[193]
Holmes’ statement underscores an important limitation on judges’ ability to interpret art in copyright cases. So, too, did Judge Wallace’s dissent in the Second Circuit’s Cariou ruling, belying his discomfort in the role of art critic. Citing a cautionary note from the Supreme Court in the Campbell case that “it would be a dangerous undertaking for persons trained only to the law to constitute themselves final judges of the worth of [a work], outside of the narrowest and most obvious limits,”[194] Judge Wallace wrote that “[i]t would be extremely uncomfortable for me to do so in my appellate capacity, let alone my limited art experience.”[195] His hesitation to engage in art criticism is well-reasoned, and should be instructive to courts in general. Nor should artists be in the business of judging their own art. Several observers have pointed out the difficulties inherent in asking artists to comment on their own intention in creating works at issue.[196] While an artist’s intent should not be viewed as dispositive, Cariou can be read to suggest that it is not even relevant. After all, in Cariou, the District Court interpreted Prince’s testimony to mean that he had no transformative intent.[197] But it is not artists’ potential inability to articulate their intent that is the problem. Indeed, any witness has the potential to be inarticulate. Dealing with that possibility is one of the trial lawyers’ responsibilities. The larger problem is that the artist’s perspective and intent is irrelevant to the commercial impact of the alleged copying, which is at the heart of the first and fourth factors of the fair use defense. [198] Scienter need not be part of a fair use determination. Whether an artist like Prince can articulate a transformative intent behind his work is not determinative of whether his work is appropriation art. As Caroline McEneaney has written, “[t]he creator often sees the work very differently from others and rarely has a true sense of the legal consequences of his own words … To rely so heavily on the testimony of the artist leaves society’s exposure to valuable cultural reference in the hands of art makers, who are not versed in the law, have very different perspectives than judges and lawyers, and may not realize the impact that their words can have.”[199] In many ways, the need for expert testimony in visual art copyright infringement cases can be compared to the need for expert testimony in patent cases, which have been standardized in claim construction hearings.[200] In such hearings, courts benefit from expert testimony from each side as to the proper construction of certain terms in the claims at issue. In patent infringement litigation, courts accept the need for expert testimony on the technical details of patented inventions because the technology is so specialized, as it must be to be patentable, that no judge can be expected to appreciate the perspective of “one of ordinary skill in the art” of the patent. This is true regardless of whether the judge sits in a court of general jurisdiction or a specialized court like the Federal Circuit. Judges are no more, or at least not much more, qualified to interpret appropriation art than they are to interpret the workings of a nonvolatile semiconductor memory device with an improved gate electrode. When courts use expert witnesses to help evaluate transformative use in the visual arts, it is critical to circumscribe their testimony. Such experts should testify only to whether the accused works meet a specific standard. This article proposes that the standard be whether the accused work is meritorious appropriation art, as described in the preceding section. There is a danger that expert testimony on transformative use will focus on the market value, if any, of the accused and original works. Indeed, the Second Circuit’s Cariou opinion included an extensive discussion of the market differences between Prince’s work and Cariou’s work.[201] This kind of testimony should be avoided. Indeed, such testimony might flow naturally from Section 107’s emphasis on the market. The first factor asks whether the accused work’s use of the original is “of a commercial nature or is for nonprofit educational purposes,” while the fourth factor focuses on “the effect of the use upon the potential market for or value of the copyrighted work.[202] Transformative use, however, is usually considered to affect the determination of the first fair use factor alone.[203] An important constraint of these proposals is that they allow the court to consider the other three factors of fair use independently. One danger of allowing marketability and market value to influence the determination of transformative use is the possibility of offering greater protection to expensive artists than to lesser known artists. While art can be big business, the price tag of a work should not influence the determination of whether it is either transformative or infringed. Given the shift in judicial attitudes evidenced in Cariou, this is a real concern. As noted above, the Second Circuit’s decision hinged in part on a finding that Cariou appealed to a different “sort of collector” than Prince. It observed that
Certain of the Canal Zone artworks have sold for two million or more dollars. The invitation list for a dinner that Gagosian hosted in conjunction with the opening of the Canal Zone show included a number of the wealthy and famous such as the musicians Jay-Z and Beyonce Knowles […] Vanity Fair editor Graydon Carter, Vogue editor Anna Wintour, […] and actors Robert DeNiro, Angelina Jolie and Brad Pitt […] Cariou on the other hand has not actively marketed his work or sold his work for significant sums, and nothing in the record suggests that anyone will not now purchase Cariou’s work, or derivative non-transformative works (whether Cariou’s own or licensed by him) as a result of the market space Prince’s work has taken up. This fair use factor therefore weighs in Prince’s favor.[204]
While the Court’s analysis is limited on its face to the fourth fair use factor, it is impossible to ignore the air of snobbery implicit in its assessment. Contrast this with the Second Circuit’s opinion in Rogers v. Koons, in which the court derided the arrogance implicit in the assumption that wealth insulates an artist from infringement allegations:
The copying was so deliberate as to suggest that defendants resolved so long as they were significant players in the art business, and the copies they produced bettered the price of the copied work by a thousand to one, their piracy of a less well-known artist’s work would escape being sullied by an accusation of plagiarism.[205]
The difference in these opinions indicates just how far the Second Circuit has slid toward accepting exactly the kind of privilege that it had derided in Rogers v. Koons. It also underscores the importance of eliminating (or at least minimizing) the effect of power and wealth on the scope of an artist’s rights. To allow market value to infect the transformativeness decision would be to perpetuate the danger that only the wealthy can afford justice. If only highly marketable artists can protect their work in court, then we as a society effectively will be determining that lesser-known artists have fewer rights. That is inapposite to copyright’s constitutional mandate “to promote the Progress of Science and useful Arts.” We should not equate artistic value with commercial value. What kind of experts should be employed? The experts testifying in transformative art cases could be art critics, art historians, or other professionals with expertise in the types of art at issue. One danger of employing gallerists and art dealers as experts instead is the possibility that their knowledge of the market and of relative value will unduly influence their opinion as to whether the accused work is meritorious appropriation art. While there need not be a bright-line exclusion of art market players from this kind of expert testimony, courts should guard against allowing market value to influence their opinions as the Second Circuit arguably did in Cariou.[206]

C. Limit Visual Artists’ Derivative Rights to Reproduction Rights

The third element of this proposal is to amend the Copyright Act to limit the scope of derivative rights for visual artists to reproductions of their work, within limits. Authors’ derivative rights in the characters they create make sense in ways that artists’ derivative rights in the particular work do not. The visual image is the creative work itself. Characters, on the other hand, exist independently of the specific words used to create them. Under the terms of this proposal, artists would retain derivative rights in reproductions of their works, including variations in size, format, materials and coloration. The reproduction of a work on a t-shirt, a poster, or a website would not qualify as transformative and, presumably, would not be fair use in most cases. Allowing for these minor differences in expression of the work is also consistent with the sensible outcomes of cases like Friedman v. Guetta.[207] In that case, Ron Friedman sued Thierry Guetta for copyright infringement based on Guetta’s use of Friedman’s photograph of the hip-hop group Run D.M.C. Guetta asserted the fair use defense, and lost. The court rejected the claim that Guetta’s adaptation of the photograph was “transformative” even though his work differed in minor ways from Friedman’s.[208] Put simply, this limitation would help bring copyright law into line with the reality of appropriation art. If courts continue to engage in subjective analyses of how much variation of an original work is transformative, the doctrinal chaos advanced by Cariou will continue to confuse artists and scholars. Only those artists wealthy enough to roll the legal dice will be able to risk an infringement decision (especially if their pockets are deep enough to afford appellate counsel). The majority of artists cannot afford to take those risks. The uncertainty caused by diffuse standards may chill the creation of new works, depriving society of the “progress of the … useful arts” that the Constitution seeks to protect.[209] It may also result in fewer source works for artists to appropriate in future years. Restoring a bright line, even one that is more conservative than that established by the current case law, will provide the certainty artists and art markets need. The scope of rights suggested here squares with case law, including Cariou, and has the benefit of being both simple and realistic. To be sure, some reproductions of copyrightable works will still be found to be fair use, for example, where the reproduction serves a different purpose from the original work.[210] And reproduction may still be found to misappropriate an image even where it is surrounded by original creative elements, as was the case in Hart v. Electronic Arts.[211] As a general principle, however, limiting the derivative rights of visual artists to reproductions with minimal variations will help restore the proper boundaries between derivative and transformative use in this sphere.


Reforming the determination of transformative use in this comprehensive manner is necessary to reign in the fragmentation of precedent that has left artists, scholars, and investors wondering what transformative use means now. The Cariou decision and other recent cases expanding the application of the fair use defense are cause for concern, not just in the multi-billion dollar global art market but for the preservation of the creative process in general. The explosion of images available on the internet feeds the development of appropriation art, demanding a legal treatment that fairly defines the rights of all players in this market. Copyright law (like all intellectual property law) seeks the right balance between rewarding the creators of new works and ensuring that those works can be used appropriately by the public, and it must adapt to evolving technology. By allowing appropriation artists apparently unfettered access to copyrighted materials, judicial decisions like Cariou threaten the incentives of more original artists to create the sources on which appropriation art depends. Left unchecked, it will continue to plague the art market, adversely affect lesser known artists, and entrust the legal boundaries of creative expression to the wide range of judicial discretion. Given the likely doctrinal, commercial and societal effects of these cases, there is a need for comprehensive reform. The proposals set forth in this article will clarify the rights of appropriation artists and source artists as well as the proper roles of judges and experts in 21st century art copyright cases. The first proposal, treating meritorious appropriation art as transformative use per se, removes the uncertain element of judicial subjectivity that currently makes it hard for artists to know a priori what their rights are when accusing someone or being accused of copyright infringement. It also allows courts to retain consideration of purpose, market impact, and other more easily determined elements of a fair use defense. The second proposal, encouraging the use of expert witnesses to determine whether the accused works meet the appropriation art test, acknowledges the limits of judges’ ability to evaluate the visual arts to the same extent that they can evaluate written works. It also dampens the likelihood that socioeconomic factors will play a large part in the court’s determination of what is and is not protectable, although the costs of litigation will always affect access to justice to some extent. The third proposal, limiting source artists’ copyright essentially to reproductions of their work, makes sense for the proper balance of rights in the visual arts context and is necessary for the first proposal to work well. This comprehensive set of reforms is necessary to restore much-needed clarity to the art world and to bring copyright jurisprudence into line with current ways of making and understanding art. As technology continues to multiply the images available for artists to work with and simultaneously fractures the viewing public into an infinite number of sub-communities, the tripartite reform proposed here is not only warranted but critical to align the interests of artists, consumers, copyright lawyers, and courts alike.
* Assistant Professor of Law, Bentley University, Waltham, Massachusetts. The author wishes to thank Sharon Patton for her assistance in preparing this article.
[1] See, e.g., Kyle Chayka, The Art Market was Worth $64 Billion in 2012, Hyperallergic (Jan. 2, 2013),; see also TEFAF Art Market Report 2013, TEFAF Maastricht, (Mar. 13, 2013),
[2] See Kathryn Tully, Are Investors Bullish on the Art Market?, Forbes (Apr. 30, 2013, 7:13 PM),
[3] Id.
[4] Ben Beaumont-Thomas, Christie’s post-war sale reaches $744m via Warhol, Bacon and Newman, The Guardian, (May 14, 2014, 7:16 PM),
[6] Cariou v. Prince, 714 F.3d 694, 709 (2d Cir. 2013) cert. denied, 134 S. Ct. 618 (2013).
[7] Id.
[8] Cariou, 714 F.3d at 710.
[9] Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 577 (1994) (internal quotation marks omitted) (citing Stewart v. Abend, 495 U.S. 207, 236 (1990)).
[10] See, e.g., Matthew D. Bunker & Clay Calvert, The Jurisprudence of Transformation: Intellectual Incoherence And Doctrinal Murkiness Twenty Years After Campbell v. Acuff-Rose Music, 12 Duke L. & Tech. Rev. 92, 127 (2014) (suggesting inter alia that transformative use be limited to certain types of copyrightable expression); Deepa Varadarajan, Improvement Doctrines, 21 Geo. Mason L. Rev. 657, 682 (2014) (suggesting a “substantial improvement” limitation to the fair use defense); Monika Isia Jasiewicz, Note, “A Dangerous Undertaking”: The Problem of Intentionalism and Promise of Expert Testimony in Appropriation Art Infringement Cases, 26 Yale J.L. & Human. 143, 146 (2014) (proposing that courts invite expert testimony on whether an artistic use is “transformative” in a way that would qualify for the fair use defense).
[11] MOCA The Museum of Contemporary Art, Los Angeles, (last visited Sept. 2, 2014).
[12] Remixthebook, Appropriation, (last visited Oct. 29, 2014).
[13] Mike Masnick, AP and Shepard Fairey Settle Lawsuit over Obama Image; Fairey Agrees to Give up Fair Use Rights to AP Photos, Techdirt (Jan. 12, 2011, 11:22 AM),
[14] See Hal Foster et al., Art Since 1900: Modernism, Antimodernism, Postmodernism, Vol. 1: 1900 to 1944, at 112 (Thames & Hudson eds., 2004).
[15] See John Carlin, Culture Vultures: Artistic Appropriation and Intellectual Property Law, 13 Colum.-VLA J.L. & Arts 103, 109 (1988).
[16] For a more extensive discussion of the evolution of appropriation art, please see Jasiewicz, supra note 11, at 147-151.
[17] Id. at 150.
[18] Id. at 151.
[19] Festival of Inappropriation, About the Festival (Oct. 28, 2014),
[20] Hactivism is “a neologism that mashes up the creative use of digital tools associated with the computer hacker with the interventionist strategies of political activists. Cleverly inserting themselves into the networked space of flows, digitally inclined hactivists use whatever new media technologies they may have access to subvert the mainstream media discourse and tweak the way we construct meaning in the corporate media economy.” Remixthebook, Hactivism, (last visited Oct. 28, 2014).
[21] Remix Culture, (last visited Oct. 28, 2014); Remixthebook, The Course, (last visited Oct. 28, 2014).
[22] See, e.g., Seth Fiegerman, More than 500 Million Photos are Shared Every Day, Mashable (May 29, 2013),
[23] See, e.g., Rebecca Corliss, Photos on Facebook Generate 53% More Likes than the Average Post, Hubspot (Nov. 15, 2012, 9:00 AM), 33800/Photos-on-Facebook-Generate-53-More-Likes-Than-the-Average-Post-NEW-DATA.aspx.
[24] See Pierre N. Leval, Commentary, Toward a Fair Use Standard, 103 Harv. L. Rev. 1105 (1990); see also Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 579 (1994).
[25] See 17 U.S.C. § 107 (2012).
[26] Id.
[27] See Leval, supra note 25, at 1111.
[28] Id.
[29] Mattel, Inc. v. Walking Mountain Prods., 353 F.3d 792, 803 (9th Cir. 2003).
[30] Campbell, 510 U.S. at 579.
[31] Id. at 571.
[32] Id. at 578.
[33] The term “relied on” raises a host of issues itself, since almost all art derives in some way from previous works.
[34] Cariou v. Prince, 134 S. Ct. 618 (2013).
[35] Cariou v. Prince, 784 F. Supp. 2d 337, 343 (S.D.N.Y. 2011), rev’d in part, vacated in part, 714 F.3d 694 (2d Cir. 2013).
[36] Id.
[37] Id.
[38] Press Release, Gagosian Gallery, Richard Prince: Cowboys (Jan. 28, 2013), available at
[39] Carol Vogel, Bacon is Again a Top Draw at Auction, N.Y. Times, (Jul. 2, 2008),
[40] Cariou, 784 F. Supp. 2d at 343.
[41] Id. at 344.
[42] Id.
[43] Id. at 350.
[44] Id. at 344.
[45] Cariou, 714 F.3d at 704.
[46] Cariou, 784 F. Supp. 2d at 355.
[47] Id. at 347-51.
[48] Id. at 348 (citing Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 579 (1994)).
[49] Id.
[50] Id. at 349.
[51] Id.
[52] Cariou, 784 F. Supp. 2d at 350.
[53] Id. at 349 (internal quotation marks omitted).
[54] Id. at 350-51.
[55] Id. at 351.
[56] Id. at 352 (citing Howard B. Abrams, The Law of Copyright, § 15:52 (2006)).
[57] Id.
[58] Cariou, 784 F. Supp. 2d at 352.
[59] Id. at 353.
[60] Id.
[61] Id. (citing J.D. Salinger v. Random House, Inc., 811 F.2d 90, 99 (2d Cir. 1987)).
[62] Id. (citing Castle Rock Entm’t, Inc. v. Carol Pub. Grp, Inc., 150 F.3d 132, 145-46 (1998)).
[63] Cariou, 784 F. Supp. 2d at 344.
[64] Id.
[65] Id.
[66] Id. at 353.
[67] Id. at 355.
[68] Cariou, 714 F.3d at 704.
[69] Id. at 697.
[70] Id. at 695.
[71] Id. at 699.
[72] Id. at 700.
[73] Cariou, 714 F.3d at 706.
[74] Id.
[75] Id. (internal quotation marks omitted) (citing Campbell Acuff-Rose Music, Inc, 510 U.S. 569, 579 (1994)).
[76] Id. (citing Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 579 (1994)).
[77] Id. at 707.
[78] See Cariou, 714 F.3d at 708 (“Although there is no question that Prince’s artworks are commercial, we do not place much significance on that fact due to the transformative nature of the work.”).
[79] See id. at 709 (“Although certain of Prince’s artworks contain significant portions of certain of Cariou’s photographs, neither Prince nor the Canal Zone show usurped the market for those photographs.”).
[80] Id.
[81] Id.
[82] Id. Although the ruling did not so specify, it is reasonable to infer from both the elite nature of the Gagosian Gallery and the price point for Prince’s work that only the wealthiest collectors could afford to buy these pieces.
[83] Cariou, 714 F.3d at 712.
[84] Id.
[85] Prince’s response to the verdict was interesting. When the twenty-five paintings which had been held for five years pending the resolution of the case were finally returned to him after the Second Circuit’s ruling, he tweeted: “Canal Zone paintings finally back. Saw Em for the first time in 5 years. What they should of [sic] sued me for was making shitty paintings. XingEmOut.” Irina Tarsis, Photographs and Richard Prince: The Gifts That Keep on Giving, Center for Art Law, (Feb. 24, 2014),
[86] Seltzer v. Green Day, Inc., 725 F.3d 1170, 1179 (9th Cir. 2013).
[87] Id. at 1173.
[88] Id. at 1174.
[89] Id. at 1175.
[90] Id. at 1176.
[91] Id. at 1177.
[92] See Matthew Sag, Predicting Fair Use, 73 Ohio St. L.J. 47, 52 (2012).
[93] Id. at 84.
[95] Id. at 734.
[96] Id. at 736.
[97] Id.
[98] Id. at 740.
[99] Id. at 742.
[100] Kim J. Landsman, Does Cariou v. Prince Represent the Apogee or Burn-Out of Transformativeness in Fair Use Jurisprudence? A Plea for a Neo-Traditional Approach, 24 Fordham Intell. Prop. Media & Ent. L.J. 321, 354 (2014).
[101] Netanel, supra note 95, at 745.
[102] Id. at 744.
[103] Rogers v. Koons, 751 F. Supp. 474 (S.D.N.Y. 1990), aff’d, 960 F.2d 301 (2d Cir. 1992), cert. denied, 506 U.S. 934 (1992).
[104] See Rogers, 751 F. Supp. at 480.
[105] See Rogers, 960 F.2d at 306.
[106] Blanch v. Koons, 467 F.3d 244, 246-47 (2d Cir. 2006).
[107] See id. at 247.
[108] Id. at 247-248.
[109] Id. at 248.
[110] Id.
[111] Id. at 252-253.
[112] Id. at 259.
[113] See, e.g., Morris v. Guetta, No. LA CV12-00684 JAK (RZx), 2013 WL 440127, at *8 (C.D. Cal. Feb. 4, 2013) (rejecting defendant’s fair use defense to plaintiff photographer’s copyright infringement claims); Friedman v. Guetta, No. CV 10–00014 DDP (JCx), 2011 WL 3510890, at *7 (C.D. Cal. May 27, 2011) (finding infringement despite defendant’s claims that his use of plaintiff’s photograph was transformative).
[114] See, e.g., Elizabeth Winkowski, A Context-Sensitive Inquiry: The Interpretation of Meaning in Cases of Visual Appropriation Art, 12 J. Marshall Rev. Intell. Prop. L. 746, 760 (2013); Copyright Law – Fair Use – Second Circuit Holds That Appropriation Artwork Need Not Comment on the Original to Be Transformative. – Cariou v. Prince, 714 F.3d 694 (2d Cir. 2013), 127 Harv. L. Rev. 1228, 1229 (2014).
[115] Brief for The American Photographic Artists et al. as Amici Curiae Supporting Plaintiff, Cariou v. Prince, 784 F. Supp. 2d 337 (S.D.N.Y. 2011) (No. 08 CIV 11327), available at
[116] Id.
[117] 17 U.S.C. § 101 (2010).
[118] Campbell, 510 U.S. at 579.
[119] See Fair Use: Hearing Before the Subcomm. on Courts, Intellectual Property, and the Internet of the H. Comm. on the Judiciary, 113th Cong. 10 (2014) (statement of June M. Besek, Exec. Dir. of the Kernochan Center for Law, Media and the Arts and Lecturer-in-Law, Columbia Law School), available at—besek.pdf [hereinafter, Statement of June M. Besek].
[120] Id. at 12-13.
[121] Id.
[122] Agreement on Trade-Related Aspects of Intellectual Property Rights, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1C, art. 13, 1869 U.N.T.S. 299 (1994).
[123] See Panel Report, United States – Section 110(5) of the US Copyright Act, WT/DS160/R (June 15, 2000), available at
[124] See Statement of June M. Besek, supra note 120, at 12.
[125] Id.
[126] See, e.g., Kennedy, supra note 6.
[127] Richard Price, Untitled (Cowboy), Christie’s, (last visited May 27, 2014).
[128] See, e.g., Christian Marclay’s The Clock Makes Midwest Debut, Wexner Ctr. for the Arts, (last visited Sept. 2, 2014).
[129] See, e.g., Kennedy, supra note 6; Deborah Vankin, An Appropriate Time for Appropriation Art at Hammer, (Feb. 7, 2014),; A Study in Midwestern Appropriation, Hyde Park Art Center, (last visited Sept. 2, 2014).
[130] Don Thompson, The $12 Million Stuffed Shark: The Curious Economics of Contemporary Art 12 (2008).
[131] See, e.g., Elizabeth M. Petty, Rauschenberg, Royalties and Artists’ Rights: Potential Droit de Suite Legislation in the United States, 22 Wm. & Mary Bill of Rts J. 977, 1005-1006 (2014).
[132] Id.
[133] Id.
[134] See Eric Konigsberg, The Trials of Art Superdealer Larry Gagosian, Vulture (Jan. 20, 2013, 9:10 PM),
[135] Id.
[136] See, e.g., Kennedy, supra note 6.
[137] See, e.g., Mixel, (last visited Sept. 2, 2014).
[138] This is not to suggest that all artists have a profit motive—indeed, Patrick Cariou did not commercialize his art extensively—but simply to recognize that commodifying art requires compensation.
[139] Cariou v. Prince, 784 F. Supp. 2d 337, 343 (S.D.N.Y. 2011) rev’d in part, vacated in part, 714 F.3d 694 (2d Cir. 2013).
[140] See, e.g., Guy A. Rub, The Unconvincing Case for Resale Royalties, 124 Yale L.J. F. 1 (April 25, 2014),
[141] See, e.g., U.S. Copyright Office, Resale Royalties: An Updated Analysis 2 (Dec. 2013), available at (“many visual artists [are placed] at a material disadvantage vis-à-vis other authors”); Rub, supra note 141 at 31 (“[C]opyright law has effectively discriminated against [visual artists] in many respects for centuries.”) (quoting Shira Perlmutter, Resale Royalties for Artists: An Analysis of the Register of Copyrights’ Report, 16 Colum.-VLA J. L. & Arts 395, 403 (1995)); see also Petty, supra note 132, at 986-987.
[142] Cariou v. Prince, 784 F. Supp. 2d at 343.
[143] See, e.g., Brief for The American Photographic Artists et al., supra note 116, at 18.
[144] See Harper & Row, Publishers, Inc. v. Nation Enters., 471 U.S. 539, 568 n.9 (1985) (“[here] there is a fully functioning market that encourages the creation and dissemination of memoirs of public figures. In the economists’ view, permitting ‘fair use’ to displace normal copyright channels disrupts the copyright market without a commensurate public benefit”); Am. Geophysical Union v. Texaco Inc., 60 F.3d 913, 931 (2d Cir. 1994) (“it is sensible that a particular unauthorized use should be considered ‘more fair’ when there is no ready market or means to pay for the use, while such an unauthorized use should be considered ‘less fair’ when there is a ready market or means to pay for the use”).
[145] Cariou can also be viewed as an example of the imbalance of power in the legal system. While the identity of counsel is not generally considered relevant to the outcome of the case, it would be disingenuous to ignore the fact that Prince’s appellate law firm was Boies, Schiller & Flexner LLP, one of the most expensive and prestigious law firms in the country. The dramatic reversal of the Second Circuit’s opinion must have resulted from a significant legal effort by appellate counsel, some of which was described in a New York Times article on the increasing prevalence of appropriation art. See Kennedy, supra note 6.
[146] In fact, the Judiciary Committee held a hearing on the proper scope of the fair use defense on January 28, 2014. The Scope of Fair Use: Hearing Before the Subcomm. on Courts, Intellectual Prop. and the Internet of the H. Comm. on the Judiciary, 113th Cong. (2014), available at
[147] Michael A. Einhorn, Media, Technology and Copyright: Integrating Law and Economics, 33 (2004).
[148] Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417, 455 n.40 (1984).
[149] Id. at 478-9 (Blackmun, J., dissenting).
[150] Am. Geophysical Union v. Texaco, 802 F. Supp. 1, 14-15 (S.D.N.Y. 1994), aff’d, 60 F.3d 913 (2d Cir. 1994).
[151] Lloyd L. Weinreb, Fair’s Fair: A Comment on the Fair Use Doctrine, 103 Harv. L. Rev. 1137, 1143-4, 1160 (1990).
[152] See, e,g., Matthew Sag, G-d in the Machine: A New Structural Analysis of Copyright’s Fair Use Doctrine, 11 Mich. Telecomm. & Tech. L. Rev. 2 (2005).
[153] See Cariou v. Prince, 784 F. Supp. 2d 337, 343 (S.D.N.Y. 2011), rev’d in part, vacated in part, 714 F.3d 694 (2d Cir. 2013).
[154] See, e.g., Judith Bresler, Begged, Borrowed or Stolen: Whose Art Is It, Anyway? An Alternative Solution of Fine Art Licensing, 50 J. Copyright Soc’y of the U.S.A. 15 (2002).
[155] Section 115 of the Copyright Act provides for compulsory licensing in order to perform or record someone else’s original song. 17 U.S.C. § 115(a)(1) (2012).
[156] See, e.g., Kenneth M. Achenbach, Grey Area: How Recent Developments in Digital Music Production Have Necessitated the Reexamination of Compulsory Licensing for Sample-Based Works, 6 N.C. J. L. & Tech. 187, 190-191 (2004); Chris Johnstone, Note, Underground Appeal: A Sample of the Chronic Questions In Copyright Law Pertaining to the Transformative Use of Digital Music in a Civil Society, 77 S. Cal. L. Rev. 397, 399-402 (2004); Lucille M. Ponte, The Emperor Has No Clothes: How Digital Sampling Infringement Cases Are Exposing Weaknesses In Traditional Copyright Law and the Need for Statutory Reform, 43 Am. Bus. L.J. 515, 547 (2006) (critiquing compulsory licensing proposals).
[157] See, e.g., Tarsis, supra note 86.
[158] See, e.g., Martha Buskirk, Commodification as Censor: Copyrights and Fair Use, 60 October MIT Press 82, 102 (1992) (explaining that Rogers v. Koons “raises a number of important and troubling questions about the legal status of artistic appropriation, and it may set an important precedent with respect to the appropriation of images in works of art…. The decision is particularly troubling given the way in which strategies of appropriation have often performed a critical function”).
[159] Jasiewicz, supra note 11, at 151.
[160] E. Kenly Ames, Note, Beyond Rogers v. Koons: A Fair Use Standard for Appropriation, 93 Colum. L. Rev. 1473, 1500 (1993). But cf. Darren Hudson Hick, Appropriation and Transformation, 23 Fordham Intell. Prop. Media & Ent. L.J. 1155, 1177 (2013) (rejecting the idea that “we [can] describe the contemporary category of appropriation art on the basis that it is essentially a form of social commentary.”).
[161] See, e.g., Petty, supra note 132, at 1006-7.
[162] Katya Kazakina, Bargain Warhols, Secrecy Bring Collectors to Private Art Sales, Bloomberg (July 27, 2009, 12:01AM),
[163] Id.
[164] See Campbell, 510 U.S. at 569.
[165] History of ARS, Artists Rights Soc’y, (last visited Oct 26, 2014).
[166] General Information and Services, Vaga Rights, (last visited Oct. 26, 2014).
[167] Services Provided, Artists Rights Soc’y, (last visited Oct. 26, 2014).
[168] That said, it could be argued that determining whether an excerpt of a written work is the “heart” of the original, as fair use requires us to do when evaluating the use of quotes is a comparably difficult exercise. See, e.g., Campbell, 510 U.S. at 569.
[169] The concept of a resale royalty itself is not meant to redress the imbalance of power between a source artist and an appropriation artist. In other words, resale royalties would not compensate a source artist like Cariou when an appropriation artist like Prince uses his work.
[170] See, e.g., Petty, supra note 132, at 985 (noting that every European country other than Switzerland has a resale royalty law, as do several Latin and South American countries); see also Rub, supra note141.
[171] See, e.g., U.S. Copyright Office, supra note 142.
[172] The American Royalties Too Act of 2014, H.R. 4103, 113th Cong. (2014).
[173] See, e.g., Rub, supra note 141 at 2; Petty, supra note 132, at 1006-7.
[174] Morris v. Guetta, No. LA CV12-00684 JAK (RZx), 2013 WL 440127, at *8 (C.D. Cal. Feb. 4, 2013) (rejecting defendant’s fair use defense to plaintiff photographer’s copyright infringement claims).
[175] Id. at *13.
[176] Carlin, supra note 16, at 137-38.
[177] Id. at 139.
[178] Id.
[179] Id.
[180] See Ames, supra note 161, at 1515-1516.
[181] Id. at 1518-1519.
[182] Id. at 1523.
[183] Cariou v. Prince, 714 F.3d 694, 701-11 (2d Cir. 2013).
[184] Jasiewicz, supra note 11, at 147.
[185] U.S. Const. art 1, § 8.
[186] Jasiewicz, supra note 11, at 151.
[187] 17 U.S.C. § 106A (2006).
[188] Cariou, 714 F.3d at 708-711.
[189] See Jasiewicz, supra note 11, at 146.
[190] Bunker & Calvert, supra note 11, at 127.
[191] See, e.g., Alex Kiefer, The Intentional Model in Interpretation, 63 J. Aesthetics & Art Criticism 3, 271-281 (2005).
[192] Bunker & Calvert, supra note 11, at 127.
[193] Bleistein v. Donaldson Lithographing Co., 188 U.S. 239, 251-252 (1903).
[194] Cariou v. Prince, 714 F.3d at 714 (citing Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 582 (1994) (quoting Bleistein, 188 U.S. 239, 251 (1903))).
[195] Id.
[196] See, e.g., Caroline L. McEneaney, Transformative Use and Comment on the Original: Threats to Appropriation in Contemporary Visual Art, 78 Brook. L. Rev. 1521, 1543 (2013).
[197] Cariou v. Prince, 784 F. Supp. 2d 337, 349 (S.D.N.Y. 2011), rev’d in part, vacated in part, 714 F.3d 694 (2d Cir. 2013).
[198] See 17 U.S.C. § 107 (2006).
[199] McEneaney, supra note 197, at 1543.
[200] See Markman v. Westerview Instruments, Inc., 517 U.S. 370 (1996).
[201] Cariou v. Prince, 714 F.3d 694, 709 (2d Cir. 2013).
[202] See 17 U.S.C. § 107 (2006).
[203] See Blanch, 467 F.3d at 251; Campbell, 510 U.S. at 579; Cariou, 714 F.3d at 705-706.
[204] Cariou, 714 F.3d at 709.
[205] Rogers, 960 F.2d at 303.
[206] Cariou, 714 F.3d at 709.
[207] Friedman v. Guetta, No. CV 10-00014 DDP (JCx), 2011 WL 3510890 (C.D. Cal. May 27, 2011) at *7.
[208] Id. at *6.
[209] U.S. Const. art 1, §8.
[210] See, e.g., Perfect 10, Inc. v., Inc., 508 F.3d 1146 (9th Cir. 2007) (holding that framing and hyperlinking as part of image search engine constituted fair use of Perfect 10 images because the use was highly transformative).
[211] Hart v. Elec. Arts, Inc., 717 F.3d 141, 159-69 (3d Cir. 2013).

Media Law and Copyright Implications of Automated Journalism

Media Law and Copyright Implications of Automated Journalism
By Lin Weeks* Download a pdf version of this article here.  


The following paragraphs appeared in a story on on May 22, 2014:
Workday is expected to book a wider loss than a year ago when it reports first-quarter earnings on Tuesday, May 27, 2014. Analysts are expecting a loss of 28 cents per share, down from a loss of 20 cents per share a year ago. The consensus estimate is down from three months ago when it was a loss of 26 cents, but is unchanged over the past month. For the fiscal year, analysts are projecting a loss of $1.15 per share. Revenue is projected to be 66% above the year-earlier total of $91.6 million at $152.4 million for the quarter. For the year, revenue is expected to come in at $735.4 million.[1]
In a critique of the write-up, one might note a lack of conclusions about the information presented. This could be intentional: Forbes may believe investors should draw their own conclusions from the simple, informational story. From a stylistic standpoint, the prose is choppy, but technically sound; it is unclear whether the writer has spoken to the “analysts” referenced in the story or just noted their opinions online or in print. A more perceptive reader might notice the striking similarity to another story published an hour later on the same day:
Aeropostale is expected to book a wider loss than a year ago when it reports first-quarter earnings on Thursday, May 22, 2014. Analysts are expecting a loss of 72 cents per share, down from a loss of 16 cents per share a year ago. The consensus estimate remains unchanged over the past month, but it has decreased from three months ago when it was a loss of 17 cents. For the fiscal year, analysts are expecting a loss of $1.75 per share. A year after being $452.3 million, analysts expect revenue to fall 9% year-over-year to $409.9 million for the quarter. For the year, revenue is projected to come in at $1.94 billion.[2]
Now what looked like curt but useful prose looks like formulaic, if not lazy, writing. Questions of self-plagiarism arise; it appears that the article is written from a template. A close examination reveals that the phrasing of the second paragraph of each piece is slightly different, and that the syntax of the second and third sentences of that paragraph is flipped in a similar fashion. At the very least, one could feel reasonably comfortable in the assumption that the two articles were either authored by the same person, or that the latter piece was written by a person free to take liberties with the first writer’s work. But neither article was written by a person at all; both are the product of a computer program. New software allows computer programs to translate data-heavy content, such as box scores, stock prices, housing starts, and weather reports, into prose that reads much like traditional news stories. In the above example, Forbes used software produced by a company called Narrative Science to automatically generate blog posts for its website. These articles are generated and derived from information about the stock market,[3] but they include statistic-driven vocabulary that refers directly to the opinions of analysts. Other ventures into automated journalism are ongoing — the Knight Lab at Northwestern University is “working at advancing news media innovation through exploration, experimentation” in the digital realm.[4] The new technology has several interesting legal implications, specifically in the realms of copyright and media law. Part I of this note further introduces the technology underlying automated journalism, and explores its development, usage, and business applications. Part II examines both the traditional mass media law and copyright-related problems created by the usage of automated journalism programs, including problems affecting input, output, and the algorithm itself. These could include bad input or programming that leads to a falsehood in an automated story and potentially exposes the publisher to liability for defamation. In another scenario, competition between media entities might lead to copyright disputes over the algorithms or output of automated journalism stories. A theme is present throughout the note: Computer-generated journalism is just one type of information that will be disseminated with increasing frequency as similar technologies are adapted to various ends. The popularity of algorithmic reporting will require courts to more fully and definitively articulate a set of first principles for free speech lest they work case-by-case or see a fractal splintering of decisions in the lower courts. One effect of the relative clarity of copyright’s theoretical underpinnings, in comparison with the more open questions surrounding the First Amendment, will be a more straightforward translation of existing jurisprudence to the new questions presented by automated journalism technology.

I. Introduction to the Technology

The weather report and a listing of stock prices and changes were once pillars of major American newspapers. The practice was rooted in tradition, but it was also deeply practical — people care about things that affect their lives. The stock market is a proxy for retirement savings; the weather may affect commutes and plans for the day. Those two sections are low-level journalism, easy to investigate and simple to report. But the newspaper is far from the only way to get such information. Consider the stock ticker and the digital thermometer. Each takes a raw data input and processes it into output that humans can quickly and intuitively understand. News consumers take for granted the accuracy of this output, despite the lack of human moderation in the form of fact checkers or editors standing by to ensure the accuracy of a temperature or stock price. Similar output occur at stoplights, when GPS systems give directions, and even through Artificial Intelligence bots capable of sustaining a facsimile of conversation through a chat program. Returning to journalism, what happens when computers are enabled to provide information on topics like the weather and financial sector? More interestingly, what happens when computers are asked to tackle topics more complex than a simple report of a temperature or price? Traditional print news reporting is a highly developed field, with many conventions that have been developed to serve readers. But what if computers could be taught to “write” reports on multi-faceted subjects much the same way humans do? This technology is being developed and, in some instances, already being used.

A. Definitions and Terminology

This note will use the term “automated journalism” to refer to the process by which computer algorithms turn data-rich input into prose that reads like a traditional write-up. “Algorithm” is a general term that refers broadly to the category of computer programs that transform input into different sets of output. Input will be at times referred to as “data” or “clean data,” terminology that allows a distinction between the numbers and information that go into a story and the spreadsheet formatting itself. “Output,” “reports,” and “stories” are used interchangeably throughout.

B. Database Journalism

In a way, automated journalism is one of the most logical outgrowths of database journalism, although the two may seem at odds. Data journalism is a subversion of the normal prose structure of news stories, which was catalyzed by the realization that some of what traditional journalists do is better stored as numbers in a spreadsheet rather than in prose form.[5] For instance, if a journalist were to track down every phone call made during a certain time period from certain state offices through public records requests, society might benefit more from the production of an organized spreadsheet identifying caller, recipient, time of day, etc. rather than a simple repurposing of that data into one story and one interpretation. Of course, data journalism still leaves room for the reporter to write his story — the point is simply that by making the clean data available for mining by others, perhaps more patterns or narratives will emerge. Automated journalism operates on a different part of the process, by attempting to use the systems inherent in data journalism to identify the most relevant story. It also thrives on the exploitation of large data-rich caches of information already available in several areas of public interest.[6] In some cases, the information needs to be organized or cleaned up. In other cases, it is already in usable form. But the upshot is that automated journalism programs are a systematic, rather than human-driven, way of turning data collections into a format most news consumers are comfortable with: a prose translation of the underlying information into words, sentences, paragraphs, and articles.

C. The Business of Automated Journalism

Narrative Science, one example of the practicing leaders in the field, was buoyed when the New York Times published an article in September 2011 introducing the technology to a large cross section of the public.[7] This led to a bout of coverage in mass-media publications with headlines such as “This Article Was Not Written By a Computer,”[8] “Can the Computers at Narrative Science Replace Paid Writers,”[9] and, perhaps most optimistically, “Can an Algorithm Write a Better News Story than a Human Reporter?”[10] Reports have indicated that the company raised $6 million and $11.5 million in two highly publicized rounds of venture capital funding.[11] To understand the value investors see in Narrative Science, and to understand the legal implications, it is instructive to break down in general terms how the program creates a story. For an individual client, such as a media outlet — although, uses for the technology have been imagined in the medical, financial, and tech industries, as well as a host of others — the company tailors an algorithm to its needs, based on the expected output. For instance, the vocabulary utilized in the output story is tweaked:[12] The outcome of a baseball game and a football game are both dependent on the number of points scored by each of two competing teams, but any human reader would blanch at a description of a 21-7 contest that stated that the Packers beat the Vikings by 14 runs. Specializations also exist for various fields; the algorithm that interprets housing starts is different from one that deals with polling numbers. But in every case, the key is data-rich input. Automated journalism software is adept at interpreting a large set of data, be that barometric pressure over time or TV ratings, running that data through an algorithm, and releasing a story about that data using traditional grammar, vocabulary, and syntax. The business implications of such technology are deep and still developing. Bloomberg, Forbes, and the Big 10 Network all have some form of automated journalism integrated into their regular news output.[13] In June of 2014, the Associated Press announced that it would soon follow suit.[14] Though it remains to be seen whether the lowered cost and increased speed of reporting such technology provides can compensate for the lack of human voice and interpretation, it is likely — inevitable, in fact — that future uses of this technology will not be confined to journalism, however broadly defined. Other such uses are outside the scope of this note, which is confined to automated journalism “reporting,” while focusing specifically on the mass media implications of such work.

II. Automated Journalism and the First Amendment

A. A Three-Dimensional Problem: Theories of Protection, Manner of Restraint, Type of Output

Does algorithmic output fall within the realm of speech protected by the First Amendment? Courts have only begun to flesh out the answer to this question in the multitude of circumstances in which it might arise. But the normative answer likely depends on one’s preferred theory of First Amendment protection as well as the type of protection being contemplated. Once an abstract framework is in place for these concepts, it becomes easier to make sense of ramifications for the various points along the potential spectrum of machine-generated output. As a category, algorithmic output may be considered more or less valuable — that is, more or less worth protecting — depending on the lens through which one views the First Amendment. The four traditional justifications for the protection of free speech[15] may lead proponents to different baseline calibrations for evaluation. Adherents to the theory of the “marketplace of ideas,” following Justice Holmes’ famous articulation that “the best test of truth is the power of the thought to get itself accepted in the competition of the market,”[16] may welcome any new voice, human or otherwise. Likewise, as long as programmers stand behind it, those that see individual self-fulfillment as the main function of speech might appreciate algorithmic output as such.[17] Proponents of the self-governance theory would probably view machine speech more skeptically, as the role of algorithmic output in achieving Justice Brandeis’ construction of the goal of the state (“to make men free to develop their faculties; and that in its government the deliberative forces should prevail over the arbitrary”)[18] certainly depends on how you define “deliberative.” And there would seem to be almost no room for algorithmic output as speech for those who envision free speech’s main social benefit as providing a forum for potentially dangerous actors to let off steam in a manner less harmful than engaging in physical action.[19] The application of media and copyright law to automated journalism raises several important First Amendment questions within this framework. In the media law realm, the Supreme Court’s recent decision in Brown v. Entertainment Merchants Association sounds in the area of content-based governmental restriction, but some of the most interesting as-yet unanswered questions arise in tort. For instance, when will false information disseminated by an algorithm be considered defamation? The First Amendment questions surrounding copyright law go the other direction. When does Congress’s goal of “promot[ing] the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries”[20] supersede the free usage of those creations? The first-principles formulation of copyright law is more well settled than that of free speech — the moral rights doctrine having been basically rejected in favor of a pecuniary rights regime (excepting the limited protection of VARA)[21] — but open questions still exist as to authorship. The theoretical lines are familiar, but technology has presented a new palette with which to color. Courts and scholars have discussed the spectrum of possible algorithmic output. This discussion warrants a brief overview, as it helps contextualize the specific type of output that is this note’s focus. From a positive standpoint, it is clear that in some cases the product of an algorithm or software program triggers the same protections as a piece of political writing produced by traditional means.[22] However, it is equally clear that in other cases it does not. For example, no one argues that the “opinion” expressed by an automatic door that opens in response to motion, nor a sign on subway platforms indicating when the next train will arrive should receive special protection of any sort. Indeed, these examples are definitively outside protection. Much output produced by computer algorithms does not meet the threshold of the “ideas” and “social messages” that the Court considers sufficient for First Amendment purposes. For illustration, in a set of debating articles published in the University of Pennsylvania Law Review in 2013, Stuart Minor Benjamin and Tim Wu both concede that there are plenty of permutations of “speech” produced by a machine, computer or algorithm that neither receive nor deserve constitutional treatment, regardless of where the line is drawn for First Amendment protection.[23] In his article, Wu notes the importance of such line drawing stating, “Too little protection would disservice speakers who have evolved beyond the printed pamphlet. Too much protection would threaten to constitutionalize many areas of commerce and private concern without promoting the values of the First Amendment.”[24] The articles conceive of “machine speech” as a category, on one end of which lie videogames, on the other, automatic doors, car alarms, and the like. Wu, Benjamin and other scholars have dived eagerly into borderline cases. Arguments have been made for and against the speech value of GPS directions, search engine results, and Facebook “likes.”[25] Necessarily, such discussions revolve around multiple axes. For instance, Wu distinguishes “speech” from “communication,” investigates questions of personhood, and further explores the traditional exclusions and inclusions that the Supreme Court has defined for the category of speech — explicit exclusions including incitement, false statements of fact, obscenity, and child pornography will receive no First Amendment protection regardless of their vessel. Wu and Benjamin reach opposing conclusions about where the line should be drawn on First Amendment protection for machine speech. Benjamin would exclude “algorithmic outputs that do not reflect human decision making,”[26] whereas Wu advocates for an extended application of the functionality doctrine that he detects in First Amendment jurisprudence.[27] Regardless, it is clear that any attempt at line drawing requires an accounting for at least three dimensions of the problem. Not only must the specific character of algorithmic output in question be identified, but, equally important, courts and scholars attempting to fit new technologies into existing First Amendment schema must contemplate the type of restriction at issue and establish first principles as well.

B. Media Law

1. Adjudicated Issues in Media Law: Implications of Brown for Automated Journalism
In Brown v. Entertainment Merchants Association, the Supreme Court spoke volumes about the First Amendment value of algorithmic speech by its omission of any acknowledgement of the category.[28] In that case, the constitutionality of California Assembly Bill 1179, which prohibited the sale of some violent video games to minors, was in question.[29] Specifically, the Bill banned the sale of those games for which a “reasonable person, considering the game as a whole, would find appeals to a deviant and morbid interest of minors.”[30] The statute was therefore a content-based restriction; one question addressed by the court was whether the videogame medium was truly speech. The Court’s opinion, written by Justice Scalia, dispenses with this query immediately: “California correctly acknowledges that video games qualify for First Amendment protection.”[31] The idea that the output might be distinguishable from the code that created the game is not touched upon. Rather, Scalia is blunt in stating the Court’s view that “[l]ike the protected books, plays, and movies that preceded them, video games communicate ideas — and even social messages — through many familiar literary devices … that suffices to confer First Amendment Protection.”[32] In fact, Scalia writes, “whatever the challenges of applying the Constitution to ever-advancing technology, ‘the basic principals of freedom of speech and the press, like the First Amendment’s command, do not vary,’ when a new and different medium for communication appears.”[33] Because the Court holds that the conveyance of “ideas” and “social messages” is sufficient for First Amendment protection, it appears that the relatively narrow question of whether stories created by automated journalism programs will be treated as speech can be answered in the affirmative.[34] Though Scalia moves on from the speech categorization question without much discussion (as the point was uncontroverted by the parties in dispute), the Court’s justification for the holding is worth parsing further — what happens if an algorithmic output lacks the requisite “ideas” or “social messages?” Rather than grounding its argument in any of the traditional theories of protection, the Court avoids explicitly endorsing any framework in favor of oblique references (intended or not) to the marketplace of ideas[35] and safety valve theories.[36] The Court also touches on a justification from history in stating, “[f]or better or worse, our society has long regarded many depictions of killing and maiming as suitable features of popular entertainment, including entertainment that is widely available to minors.”[37] The overarching result of Brown is clarity as to the speech value of machine output of the highest cognitive level — specifically, output expressing ideas and social messages along the lines of what humans express. This clearly includes automated journalism. Accordingly stories produced using automated journalism technology will trigger strict scrutiny for content-based regulation and intermediate scrutiny for content-neutral regulation. However, the court’s reluctance to explicitly endorse one or several rationales for accepting video games as speech leaves open the issue of the speech value of more borderline cases: Do videogames that do not express an idea warrant categorization as speech? What about an automated journalistic output with incorrect input — seven paragraphs of gibberish about the market’s expectations for the National League MVP’s third quarter earnings? In declining to address the foundation from which it categorized video games as speech beyond repeated reference to the jurisprudential tradition of recognizing new technologies as they arise, the Court missed a valuable chance to pick the low hanging fruit of the machine speech conversation. As discussed below, issues concerning authorship and personhood are much thornier and harder to reach.
2. Open Questions in Media Law: Defamation
Given the several sources of human control inherent in a piece of automated journalism — e.g. the input may be recorded falsely by an overworked newsroom employee, the algorithm may contain flaws that lead to inconsistent output — there is real potential for automated pieces to occasionally contain inaccuracies or falsehoods. This means that the potential exists for disgruntled subjects to commence legal action against outlets that use automated journalism technologies. However, in a defamation suit, the analysis might be different than it would be for a piece authored by a human. For instance, imagine that a Forbes employee accidentally entered data from 2009 into the algorithm that created the story about Aeropostale quoted above. The story is a prediction, and would still register as such, but it would be premised on false information. A prima facie defamation claim requires that the defendant publish a false, defamatory statement of fact concerning the plaintiff, with some level of fault with respect to the falsity of the statement.[38] The implications of some parts of this definition are independent of the machine status of the author. However, some aspects of such a claim, especially the level of fault, raise interesting implications for the best practices of a media organization attempting to regularly publish stories produced by an algorithm. The truth or falsity of the statement is one aspect of defamation that will not have to be re-examined in light of a machine author. This is because courts have tended to make tests of the meaning of the words in question dependent on the understanding of outside parties, rather than on the intent of the writer. Some courts ask, “How would a reasonable actor interpret the allegedly defamatory statement?”[39] Others afford the statement a meaning that would be given by a reasonable person of ordinary intelligence.[40] In either case, the court adopts an external, reader-centric viewpoint; the intent or status of the writer will not be in question at this point. United States courts generally require that a statement’s topic contain a degree of moral opprobrium in order to be defamatory.[41] This, too, is a requirement that hinges on the perception of readers, not on the intent or actions of the defendant. Still, one can imagine a situation in which the relevant moral opinion of a “substantial and respectable minority,”[42] of the community is influenced differently by a statement written by a human versus that of an algorithm. But until courts decide on an appropriate application of scienter, it will be difficult to predict the way this standard will swing.
a. How Should Actual Malice or Negligence Be Determined in Defamation Cases Arising from Animated Journalism Articles?
The level of fault required in a successful defamation suit depends on the type of plaintiff claiming to have been defamed. For public figures and public officials, “actual malice” is required for defamation to be found.[43] (For non-public figures, mere negligence is the standard; see the discussion below.) Actual malice is defined as false information published “with knowledge that the information was false,” or with “reckless disregard for whether it was false or not.” This is a standard based on the state of mind of the publishing party — unlike the standards for moral opprobrium and falsity, the actual malice standard asks the court to take into consideration the mindset of the speaker and not simply the perception of subjects or recipient parties. This has not traditionally been a problem, nor would it be for a mass media enterprise in possession of an automated journalism program today. The court would simply be able to impute the level of fault of a publishing entity, through its various copy editors and fact checkers, in much the same way it does in other organizational contexts. But that set up is certainly the easy case in today’s media landscape, as the Internet has decreased the cost of publishing to almost nothing. This has enabled individuals or small enterprises without traditional editing systems to reach larger audiences than ever before. For an illustration of the problem of assigning a mental state for works produced via automated journalism, recall the crossed input example above, with some tweaks to avoid complications posed by group or organizational defamation. Imagine a computer programmer with a passing interest in politics. On his personal computer, he registers a domain name for a website onto which he begins to post blog entries. After a while, his workload picks up, and he begins staying later at the office. So as not to abandon his side project, he licenses or creates an algorithm that combines keywords from certain news stories with results from a reputable public opinion poll to create articles juxtaposing candidates’ latest public statement with their polling numbers on that topic. After seeing that it has worked correctly the first few days, he lets this program run without supervision. But soon, due to a programming error that confuses the two inputs in a small number of cases, the headline appears about a popular but beleaguered candidate: “Smith tells voters he’s accepted campaign bribes, 75% believe ‘I love this country.’” Would that publisher’s failure to exercise oversight over the automated statement generated by his algorithm rise to the level of actual malice? What if, instead of a public figure, the defamed subject’s name and information were pulled randomly from the blogger’s Facebook friends? The private figure analysis is even more fraught with difficulty. Clearly, the algorithm itself cannot be said to have acted with actual malice or even negligence in any situation. One interesting effect of automated journalism is that it removes any possible culpability from the “writer” of the story and places it squarely upon the publisher, whether a media conglomerate or an individual blogger. Precedent indicates courts’ hesitance to assign this level of responsibility to a non-writing party. Taking public figures first, the mere failure of a fact checker to catch an error does not rise to the level of actual malice.[44] In fact, courts have held that even a publisher’s possession of facts that contradict false information contained in a story does not automatically amount to actual malice, either (though, it would violate the negligence requirement for defamation cases in which the plaintiffs are non-public figures or public officials).[45] However, there are instances in which editorial oversights are egregious enough to rise to the level of actual malice, particularly in cases where there is evidence of some suspicion that further investigation may be needed to verify information contained in a story.[46] For instance, the Supreme Court has held that “inherently improbable” information, such that “only a reckless man would put … in circulation,” may lead to a finding of actual malice when a publisher does not follow up with fact checking.[47] In Harte-Hanks Communications, Inc. v. Connaughton, the Court further clarified that “evidence of an intent to avoid the truth” is also sufficient to satisfy the actual malice standard.[48] For private individuals, however, the only constitutional requirement placed on state defamation statutes is that the plaintiff be required to show negligence.[49] While some state statutes, such as New York’s, heighten the standard by “requir[ing] private figure[s] to show that the media defendant acted in a grossly irresponsible manner regarding its statements about a legitimate public concern,” others, like Pennsylvania, require only that a private figure show “mere negligence.”[50] So, while a news outlet’s failure to catch a mistaken defamatory statement about a public figure might not lead to a successful defamation claim in some jurisdictions,[51] a simple user input error could lead to culpability in others. Though state-by-state analysis is not conducive to generalized discussion, the negligence requirement, at least, seems to translate fairly well from traditional journalism — the requirement is that an editor or fact checker act as a reasonably prudent person would under a corresponding set of circumstances.[52] It will also be important for courts to determine whether automated journalism programs act as newsgatherers, or whether their function is more akin to that of a page designer. In other words, is the main function to report a previously unknown story or to take a story that the media entity already owns and simply place it on the page? Criticisms of either view are conceivable — an algorithm, by definition, relies on input that the news outlet must have in its possession. On the other hand, such a program may perform a reporting function in its ability to draw conclusions from a quantity or type of data that would be impractical for human reporters. Will courts continue to apply the current standards, which afford leeway for poor fact checking by publishers, to defamation cases where the “writer” of an allegedly defamatory story is a computer rather than a human being? If courts are sympathetic to viewing algorithms as newsgatherers, perhaps one way to determine how they will treat such cases is to see how they have dealt with unknown or unreliable writers or sources. In St. Amant v. Thompson, the Supreme Court stated, “Professions of good faith will be unlikely to prove persuasive, for example, where a story is fabricated by the defendant, is the product of his imagination, or is based wholly on an unverified anonymous telephone call.”[53] Based on this skepticism of “unverified” sources, lower courts have been loath to accept arguments of good faith reliance upon anonymous sources without further verification prior to publication.[54] The analogy is imperfect, but one might extrapolate from these examples that courts will ask publishers of automated journalism — which, in a way, involve unnamed sources — to meet a higher level of verification than they would ask for traditional human-written pieces. But if courts view automated journalism programs as simple republishers, the fact checking question would fall to the original data gatherers instead.
b. How Will Section 230 Be Applied to the New Technology?
Section 230 of the Communications Decency Act (“CDA”) limits the liability of online service providers for defamation claims. Congress passed the section as an explicit response by Congress to the ruling in Stratton Oakmont v. Prodigy, which held that Prodigy could be liable for statements made on its online bulletin board, even if Prodigy had no knowledge of the information being posted.[55] In part, the section reads, “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”[56] Interestingly, within § 230, Congress signaled its preference for a marketplace of ideas theory of the First Amendment as well as its distaste for the safety valve theory. As the section states, “It is the policy of the United States … to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation … [and] to ensure vigorous enforcement of Federal criminal laws to deter and punish trafficking in obscenity, stalking, and harassment by means of computer.”[57] Section 230 has had several implications for algorithm-generated content since its passage in 1996. For instance, in Parker v. Google, Inc., Google’s status as an interactive computer service immunized it from libel claims stemming from the search engine’s caching and displaying of defamatory content originally created by USENET users.[58] Courts have also found immunity for website operators whose sites contain defamatory material in posts that they did not author.[59] To envision a more controversial application § 230, imagine an Internet provider who provides users with an algorithm with which they can input their own data. By statutory definition, a provider “means a provider of software … or enabling tools that … (A) filter, screen, allow, or disallow content; (B) pick, choose, analyze, or digest content.” The applicability of § 230 to automated journalism will depend on how courts view the technology. If courts are apt to view the algorithm simply as a proxy for a traditional editor, it is unlikely that § 230 will provide shelter from defamation claims. Further, the Ninth Circuit has held that “the CDA does not grant immunity for inducing third parties to express illegal preferences” through the use of form questionnaires.[60] Only if courts give great deference to Congress’ preference for the marketplace of information rationale as to third-party content hosted on the Internet could such an algorithm be viewed as a simple “tool” used by the “information content providers,” to allow algorithm writers to escape culpability for any potential defamation.

C. Copyright

The oft-cited line from Feist Publications, Inc. v. Rural Telephone Service Co., Inc. is the starting point for most discussions of whether certain content is too formulaic or obvious to receive copyright protection: “The sine qua non of copyright is originality.”[61] In that case, the Supreme Court found that entries in a phonebook were not protected because the facts therein (phone numbers, names, etc.) were not protected, and the organizational scheme employed (alphabetization by last name) was not original enough to meet the Court’s standard. Justice O’Connor, writing for the Court, uncoupled the concepts of ideas within a work and the work’s expression of those ideas, stating: “A factual compilation is eligible for copyright if it features an original selection or arrangement of facts, but the copyright is limited to the particular selection or arrangement. In no event may copyright extend to the facts themselves.”[62] At the highest level of abstraction, automated journalism stories consist of an algorithm, of input (known in the industry as clean data), and of prose output. However, the new technology poses a number of questions related to the organization and usage of clean data input. As for output, major questions on assignation of authorship loom as the popularity of automated journalism technology grows.
1. Adjudicated Issues in Copyright: Protection for Algorithms
One relatively uncontroversial aspect of the new automated journalism technology is the protection of the algorithm itself. Professor Arthur Miller, in his article on copyright protection for computer programs, explains that just as other forms of expression have been codified into the Copyright Act, computer programs are the most recent candidate for the same reasons that Congress has historically extended intellectual property protection.[63] Miller notes that, historically, many new technologies have brought about “fear and concern” that the traditional doctrines and boundaries of protection would not cover them adequately, writing “[t]hese apprehensions were voiced about photography, motion pictures, sound recordings, radio, television, photocopying, and various modes of telecommunication … As their labors progressed, most members of CONTU[64] became convinced that computer programs were the latest manifestation of this recurrent phenomenon.”[65] In support of the 1980 Computer Software Copyright Act, Miller notes, “[c]omputer programs, like other literary works, are expressive. The imagination, originality, and creativity involved in writing a program is comparable to that involved in more time-honored literary works.”[66] The 1980 Computer Software Copyright Act, now codified as 17 U.S.C. § 117, states in part that the lease, sale, and transfer of rights in a computer program or of its exact copies may be made only with the authorization of the copyright owner. [67] As for the definition of computer program, § 101 of the Copyright Act reads in relevant part, “A ‘computer program’ is a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result.”[68] There can be little doubt that the algorithm used to produce an automated journalism story falls under this rubric. According to Miller, the fact that automated journalism algorithms are designed to mimic the human process of writing and are thus a form of artificial intelligence, does not change the paradigm.[69] In fact, the very thing that makes artificial intelligence different from standard computer programs “is more comfortably dealt with under traditional copyright principles than the issues raised by [1993’s] comparatively mundane commercial software.”[70] As Miller would have it, “these issues were nothing more than the same old wine, and they fit nicely into the old doctrinal bottles.”[71]
2. Open Questions in Copyright: Forms, Fair Use, and Authorship
a. What Protection Should Be Given to the Spreadsheet Used to Create Automated Journalism Stories?
Facts cannot be copyrighted.[72] However, an interesting question arises when the role of facts for automated journalism is considered in context. In order to create news stories, many automated journalism programs require data sets to be organized in a specific fashion, generally through the use of a spreadsheet program.[73] These set-ups, which are used to organize “clean data,” allow systematic sorting and usage of raw input into the eventual prose story. The organization of a typical spreadsheet may be particular to an algorithm, and may in fact be necessary to its function. As such, publishers may wish to protect the organization of their input, the input itself, or both. The law is somewhat in conflict on whether such organizational systems can be copyrighted. In general, this has meant that creative compilations, using systems of organization less obvious than simple alphabetization, have been copyrightable.[74] However, some recent decisions in the Courts of Appeals have called into question the precise boundaries for protection on “blank forms.” Since Lotus Development Corp. v. Paperback Software International, there has been a tension in the lower courts between decisions that have granted protection to spreadsheet programs[75] with those that have denied it to the data-entry inroads used in professions like medicine and dentistry. Decisions denying copyright protection to such systems generally cite to the 1880 Supreme Court case Baker v. Seldon,[76] and to the Copyright Act, which states that no “idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated or embodied in such work,” may receive protection.[77] The circuits are split on how to treat so-called “blank forms.” According to the Code of Federal Regulations, “[b]lank forms, such as time cards, graph paper, account books, diaries, bank checks, scorecards, address books, report forms, order forms and the like, which are designed for recording information and do not themselves convey information,” are not subject to copyright.[78] But, considering the issues of construction inherent in that regulation,[79] the circuits have split on borderline cases.[80] The Ninth Circuit, in Bibbero Sys., Inc. v. Colwell Sys., Inc. articulated a bright-line rule for blank forms, stating that just because a form contains “possible categories of information” that does not make it any less blank: “[a]ll forms seek only certain information, and, by their selection, convey that the information sought is important. This cannot be what the Copyright Office intended by the statement ‘convey information’ in 37 C.F.R. 202.1(c).”[81]The bright-line rule for the Ninth Circuit is thus defined by what it calls the “text with forms” exception:[82] Text integrated with blank forms comprises copyrightable work; blank forms, even those with unique organizations or carefully chosen categories, do not. Other circuits, however, have declined to follow Bibbero in applying a bright-line rule.[83] In Whelan Assos., Inc. v. Jaslow Dental Laboratory, Inc., the Third Circuit noted that like “the majority of courts,” it would find copyrightability for blank forms “if they are sufficiently innovative that their arrangement of information is itself innovative.”[84] Particularly useful for the purposes of this note is the Second Circuit’s decision on this topic, in which it considered whether a “baseball pitching form,” could be copyrighted.[85] According to the District Court’s statement of facts, “[t]he form listed various statistics in a tabular format with a legend at the bottom to explain the categories.” The creator of the form, George Kregos, included nine categories, among which were the names of the starting pitchers, the game time, which team was favored to win, as well as each pitcher’s statistics for the current season and his success against the present opponent.[86] Some newspapers then published Kregos’s form in that precise format — a step less than one might imagine a company like Narrative Science taking.[87] The Second Circuit held that a decider of fact would not likely find Kregos’ form to lack the creativity Feist requires, and that such a conclusion “certainly could not be reached as a matter of law.”[88] Thus, the nearly identical form that the Associated Press had been circulating could be subject to an infringement claim by Kregos. More generally, the court noted, “all forms need not be denied protection simply because many of them fail to display sufficient creativity.”[89] This is surely welcome news for the media entity that wishes to protect its unique method of data organization for the clean data it feeds into an automated journalism program. Further good news for such entities, and in further contravention of the Ninth Circuit’s bright-line rule, is the treatment computer spreadsheet programs have received. These programs have generally received copyright protection, resolving some of the tension at the margin of what is and is not considered a “blank form.” The leading cases on this area both involve Lotus Development Corporation, which twice sued to protect the “menu command structure” of its program, Lotus 1-2-3, a main competitor in the market for spreadsheet applications in the late 1980s and early 1990s. In Lotus Development Corp. v. Paperback Software Intern., the Massachusetts District Court found copyright protection for the command elements and menus of Lotus 1-2-3,[90] which comprise the parts of any spreadsheet program that can be considered creative and therefore protectable. As noted above, it is a matter of some dispute whether the spreadsheet itself should receive copyright protection, but it is relatively clear that, in combination, a spreadsheet with attendant data is indeed copyrightable. One ancillary question to this discussion is whether a second news organization could use this spreadsheet and data combination for its own end by applying the doctrine of fair use. In other words, does the transformation that the clean data and spreadsheet undergoes on its way to becoming an English-language news story rise to the level needed for the fair use limitation to apply to the original author’s exclusive copyright? The four factors weighed in a decision as to whether a certain use of copyrighted work falls under fair use are: (1) the purpose and character of the 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 the copyrighted work.[91] Also of note is the list of “purposes” identified in the Copyright Act’s section on fair use, which includes “criticism, comment, news reporting, teaching … scholarship, or research.” An analogy can be drawn between the unauthorized use of an unpublished data-spreadsheet set and the facts of the case in Harper & Row Publishers, Inc. v. Nation Enterprises.[92] That case, in which The Nation magazine had scooped Time magazine by publishing extensive quotes from an soon-to-be published excerpt of President Gerald Ford’s memoirs for which Time had paid $25,000 for the right to publish, was decided for the plaintiffs on the grounds that “The Nation effectively arrogated to itself the right of first publication, an important marketable subsidiary right.”[93] Fair use doctrine, Justice O’Connor wrote for the court, “has always precluded a use that ‘supersedes the use of the original.’” On this view of the role organized data plays in the automated journalism process (that is, as a “marketable subsidiary right”), courts would be unlikely to be sympathetic to a fair use argument. However, it is possible that courts would see the usage as a technological interchange — the data and its organization could be analogized to a videogame cartridge; the algorithm to a system that can interpret the data therein to form a cognizable image on a television screen. The analogy here would implicate the Ninth Circuit’s decision in Sony Computer Entertainment, Inc. v. Connectix Corp.[94] In that case, Connectix corporation had created a “Virtual Game Station,” which was intended to perform a very similar function as a Sony PlayStation, but, rather than hooking up to a television, the Virtual Game Station was designed to allow users to play PlayStation games on their computers.[95] Sony sued for a violation of the copyright it held in the PlayStation’s firmware,[96] which was known as BIOS. The Ninth Circuit found that Connectix’s reverse engineering and copying of BIOS for usage in its Virtual Game Station was “modestly” transformative, found fair use, and encouraged Sony to avail itself of the patent system. In sum, if courts view the cumulative input of automated journalism as similar to exclusive, unpublished news material, they will probably be unsympathetic to fair use arguments. However, if the material is seen more as a pathway or reverse engineering of a component piece necessary to the functioning of a system, fair use arguments are more likely to succeed.
b. Who Will Courts Favor in an Authorship Dispute?
A final open question in copyright implicated by automated journalism is the treatment of the output of such programs. The major question presented is one of authorship. Namely, who is the author of the work generated by a computer for the purposes of the initial allocation of copyright? There are three obvious potential answers to this question, not necessarily exclusive, each of which has been explored to a varying degree in scholarship surrounding this issue. First, the authorship for computer-generated works could be assigned to the programmer or firm who created the algorithm by which the work was generated. Second, it could be assigned to the data entry clerk or data provider, much like the authorship of a photograph attaches to the person standing behind the sight and depressing the shutter.[97] Or, third, the rights could be assigned to the computer program itself, by finding that the algorithm, in its creative endeavor, has attained the legal personhood necessary to be assigned copyright. To illustrate how an argument for assigning exclusive rights to a computer program would proceed, Annemarie Bridy’s recent article published in the Stanford Technology Law Review is instructive.[98] Essentially, the argument goes that legal personhood is often uncoupled from being human — business corporations and government agencies have legal personality in some instances, for example; on the flip side of the coin, slaves “were not legal persons at all under antebellum law.”[99] Therefore, given the stunning advances made in computer-generated works, the law should be prepared to recognize the true talent (balancing the “creativity of the coder with the creativity of the code”) by awarding some form of copyright to the algorithm itself.[100] An argument for such a drastic change in the copyright system reflects an opinion that “few on either side of the ‘copyfights’ would argue that the system is not broken, and many believe it is irretrievably so.”[101] So far, US courts have not agreed. One day automated journalism programs that “write” news stories may be accompanied by automated data collectors, automated newsroom meetings that decide which stories to pursue, automated data input systems, automated editors, and automated publishing suites. But until such a system is in place, the human input necessary for automated journalism to be produced will probably control the copyright. This being the case, the assignation of authorship between the former two categories articulated above — the programmer or the data entrant — will become a very important copyright question as automated journalism gains popularity and wider usage. In the famous case involving a photograph of Oscar Wilde, the Supreme Court found that the photograph in question was copyrightable and that such copyright vested initially in the person taking the picture (as opposed to the manufacturer of the camera or the subject of the photograph).[102] But the Court’s opinion anticipated arguments that there was no creativity inherent in new technologies like photography, which held the composer at more of a remove from the process than previous methods like painting. In predicting how courts will resolve the divide between programmers and those that input data, it is useful to return to the theoretical underpinnings of copyright law. Traditionally, American copyright law and jurisprudence “seeks to vindicate the economic, rather than the personal, rights of authors.”[103] Where a strict moral conception of copyright might assert that all Polaroid photographs owe dependency to Edwin H. Land,[104] or that the creator of an algorithm has a claim in everything that algorithm output, our current pecuniary conception values the promulgation of technologies into more and newer works. If faced with the decision, therefore, courts will probably prefer the rights of parties who enter data over the claims of algorithm writers in deference to copyright law’s abstract framework.


In both media law and copyright, the advent of new technology such as automated journalism raises important questions about attribution, mental state, fair use, and more. Some of the questions are easily answered, while others are unlikely to be definitively addressed by the courts for years. However, in identifying these new questions, while courts have been clear in defining a set of first principles and embracing a consistent theoretical structure for copyright law, they have been much less so in the media law realm. This observation does not necessarily lead to a simple conclusion — one’s penchant for judicial principles spanning time, taste, and technology probably inform the perceived wisdom of articulating such principles. But as computer technologies rapidly proliferate and concepts like automated journalism arise, courts large and small will have to choose between ruling on correspondent questions case-by-case or picking a conceptual structure to follow.
* J.D. Candidate, New York University School of Law, 2015; B.A. Economics, University of Wisconsin-Madison, 2012. Special thanks to Professor David McCraw, Assistant General Counsel, New York Times, and Leah Rosenbaum, NYU JIPEL Senior Notes Editor 2013–2014, for their thoughtful editing and feedback.
[1] Narrative Science, Loss Expected to Widen for Workday, Forbes (May 22, 2014, 9:00 AM),
[2] Narrative Science, Loss Expected to Widen for Aeropostale, Forbes (May 22, 2014, 10:00 AM),
[3] Narrative Science, About, Forbes, (July 10, 2014).
[4] About Us, Knight Lab, (last visited July 10, 2014).
[5] See, e.g., Nate Silver, What the Fox Knows, FiveThirtyEight (Mar. 17, 2014, 5:38 AM), (“Data journalists, meanwhile, can organize information by running descriptive statistics on it, by placing it into a relational database or by building a data visualization from it.”).
[6] See, e.g., Michael Sallah, Debbie Cenziper & Steven Rich, Left With Nothing, Washington Post (Sept. 8, 2013), 8/left-with-nothing/ (investigation into property tax liens placed on homeowners in the District of Columbia).
[7] Steve Lohr, In Case You Wondered, a Real Human Wrote This Column, New York Times (Sept. 10, 2011),
[8] Rachel Arndt, This Article Was Not Written By a Computer, Fast Company (Nov. 8, 2011, 5:37 PM),
[9] Joe Fassler, Can the Computers at Narrative Science Replace Paid Writers?, The Atlantic (Apr. 12, 2012, 8:03 AM), /04/can-the-computers-at-narrative-science-replace-paid-writers/255631.
[10] Steven Levy, Can an Algorithm Write a Better News Story Than a Human Reporter?, Wired (Apr. 24, 2012, 4:46 PM),
[11] John Pletz, Narrative Science Gets $11.5 Million to Write Next Chapter, Crain’s Chicago Business (Sept. 10, 2013), 11/130919987/narrative-science-gets-11-5-million-to-write-next-chapter.
[12] Lohr, supra note 7 (“The data also determines vocabulary selection. A lopsided score may well be termed a ‘rout’ rather than a ‘win.’”).
[13] Lohr, supra note 7.
[14] Paul Colford, A Leap Forward in Quarterly Earnings Stories, Associated Press (June 30, 2014),
[15] Namely, “the need to protect the truth-seeking function of the marketplace of ideas; the facilitation of democratic self-actualization; the pragmatic value of providing a social safety valve; and the safeguarding of individual liberty or autonomy.” Steven G. Gey, The First Amendment and the Dissemination of Socially Worthless Untruths, 36 Fla. St. U. L. Rev. 1, 6 (2008); see also Thomas I. Emerson, Toward A General Theory of the First Amendment, 72 Yale L.J. 877, 902 (1963).
[16] Abrams v. United States, 250 U.S. 616, 630 (1919) (Holmes, J., dissenting).
[17] Or maybe not — as Emerson construes the self-fulfillment theory,
Man is distinguished from other animals principally by the qualities of his mind. He has powers to reason and to feel in ways that are unique in degree if not in kind. He has the capacity to think in abstract terms, to use language, to communicate his thoughts and emotions, to build a culture. He has powers of imagination, insight and feeling. It is through development of these powers that man finds his meaning and his place in the world.
Thomas I. Emerson, Toward A General Theory of the First Amendment, 72 Yale L.J. 877, 879 (1963).
[18] Whitney v. California, 274 U.S. 357, 375 (1927) (Brandeis, J., concurring), overruled by Brandenburg v. Ohio, 395 U.S. 444 (1969).
[19] This may be a function of journalism, rather than of automated journalism, however. See John J. Watkins Charles, Gertz and the Common Law of Defamation: Of Fault, Nonmedia Defendants, and Conditional Privileges, 15 Tex. Tech L. Rev. 823, 850 (1984) (“[A]s Professor Nimmer has noted, the self-fulfillment and safety valve aspects of the first amendment have little relevance to the press.”).
[20] U.S. Const. art. I, § 8, cl. 8.
[21] Visual Artists Rights Act, 17 U.S.C. § 106A, 1990; See Carter v. Helmsley-Spear, Inc., 861 F. Supp. 303, 313 (S.D.N.Y. 1994) (“In passing VARA, Congress for the first time provided for protection of artists’ “moral rights” under the Copyright Act.”).
[22] Brown v. Entm’t Merchants Ass’n, — U.S. —, 131 S. Ct. 2729, 2733 (2011) (stating that video-games deserve First Amendment protection).
[23] See Tim Wu, Machine Speech, 161 U. Pa. L. Rev. 1495, 1496 (2013); Stuart Minor Benjamin, Algorithms and Speech, 161 U. Pa. L. Rev. 1445, 1450 (2013).
[24] Wu, supra note 23, at 1498.
[25] See Bland v. Roberts, 730 F.3d 368, 380 (4th Cir. 2013).
[26] Benjamin, supra note 23, at 1450.
[27] Wu, supra note 24, at 1479.
[28] Brown, — U.S. at —, 131 S. Ct. at 2733.
[29] Id. at 2732.
[30] Id.
[31] Id. at 2733.
[32] Id.
[33] Id. (citing Burstyn, Inc. v. Wilson, 343 U.S. 495, 503 (1952)).
[34] To elaborate, it is hard to imagine a court acknowledging that “ideas” and “social messages” are inherent in videogames yet lacking in a news story.
[35] The marketplace of ideas is the theory that “government has no power to decree [esthetic and moral judgments about art and literature], even with the mandate or approval of a majority.” Brown, — U.S, at —, 131 S. Ct, at 2733 (quoting United States v. Playboy Entm’t Group, 529 U.S. 803, 818 (2000)).
[36] The safety valve theory states that “the obscenity exception to the First Amendment does not cover whatever a legislature finds shocking, but only depictions of “sexual conduct.” Brown, — U.S, at —, 131 S. Ct. at 2734.
[37] Id. at 2745.
[38] Restatement (Second) of Torts § 558 (1977).
[39] See, e.g., Masson v. New Yorker Magazine, Inc., 501 U.S. 496, 515 (1991) (“[W]e can think of no method by which courts or juries would draw the line between cleaning up and other changes, except by reference to the meaning a statement conveys to a reasonable reader.”).
[40] See, e.g., Romaine v. Kallinger, 537 A.2d 284, 288 (N.J. 1988) (“In making this determination [on whether the statement at issue is reasonably susceptible of a defamatory meaning], the court must evaluate the language in question according to the fair and natural meaning which will be given it by reasonable persons of ordinary intelligence.” (internal quotation marks omitted)).
[41] For instance, false information about a party’s address would probably not be defamation, but falsely descriptions of a party abusing his child probably would be. See, e.g., Moss v. Camp Pemigewassett, Inc., 312 F.3d 503, 507 (1st Cir. 2002) (defining a defamatory statement as one that “tends to lower the plaintiff in the esteem of any substantial and respectable group of people” and finding that false accusations of “inappropriate contact” with young campers meet the definition) (citation omitted).
[42] See Jews For Jesus, Inc. v. Rapp, 997 So. 2d 1098, 1100 (Fla. 2008) (quoting Restatement (Second) of Torts § 559 (1972)).
[43] See, e.g., New York Times Co. v. Sullivan, 376 U.S. 254, 279–80 (1964); Curtis Pub. Co. v. Butts, 388 U.S. 130, 133–34 (1967).
[44] Sullivan, 376 U.S at 277–78 (finding that “negligence in failing to discover the misstatements … is constitutionally insufficient to show the recklessness that is required for a finding of actual malice).
[45] Great Lakes Capital Partners Ltd. v. Plain Dealer Publ’g Co., 8th Dist. Cuyahoga No. CV-599853, 2008-Ohio-6495, ¶ 45.
[46] 1 Rodney A. Smolla, Law of Defamation § 3:49 (2d ed.).
[47] St. Amant v. Thompson, 390 U.S. 727, 732 (1968).
[48] Harte-Hanks Commc’ns, Inc. v. Connaughton, 491 U.S. 657, 693 (1989).
[49] Gertz v. Robert Welch, Inc., 418 U.S. 323, 347 (1974) (holding that “states may define for themselves the appropriate standard of liability” as long as they do not “impose liability without fault” for defamatory injuries to private individuals).
[50] Franklin Prescriptions, Inc. v. The New York Times Co., 267 F. Supp. 2d 425, 432 (E.D. Pa. 2003).
[51] See, e.g., Chapadeau v. Utica Observer-Dispatch, Inc., 341 N.E.2d 569, 571 (N.Y. 1975) (stating that failure of newspaper to catch an error does not raise a question as to “grossly irresponsible conduct” so as to preclude summary judgment in its favor).
[52] See, e.g., Straw v. Chase Revel, Inc., 813 F.2d 356, 359 (11th Cir. 1987) (“The jury was entitled to find that Mr. Smith’s failure to verify the assertions contained in it amounted to a failure to exercise that degree of care exercised under the same or similar circumstances by ordinarily prudent persons…”).
[53] St. Amant, 390 U.S. 732.
[54] See, e.g., Holter v. WLCY T.V., Inc., 366 So. 2d 445, 453 (Fla. Dist. Ct. App. 1978) (“[W]here an anonymous tipster conveys the information, one would be hard put not to have serious doubts about the authenticity of the tip.”).
[55] Stratton Oakmont, Inc. v. Prodigy Servs. Co., 1995 WL 323710, at *3 (N.Y. Sup. Ct. May 24, 1995).
[56] 47 U.S.C.A. § 230.
[57] Id.
[58] Parker v. Google, Inc., 422 F. Supp. 2d 492, 500–01 (E.D. Pa. 2006) aff’d, 242 F. App’x 833 (3d Cir. 2007).
[59] Best W. Int’l, Inc. v. Furber, CV-06-1537-PHX-DGC, 2008 WL 4182827, at *9 (D. Ariz. Sept. 5, 2008).
[60] Fair Hous. Council of San Fernando Valley v. Roommates.Com, LLC, 521 F.3d 1157, 1165 (9th Cir. 2008) (“Roommate’s own acts – posting the questionnaire and requiring answers to it – are entirely its doing and thus, section 230 of the CDA does not apply to them.”).
[61] Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., Inc., 499 U.S. 340, 345, (1991).
[62] Id. at 350–51.
[63] Arthur R. Miller, Copyright Protection for Computer Programs, Databases, and Computer-Generated Works: Is Anything New Since CONTU?, 106 Harv. L. Rev. 977, 982–83 (1993) (articulating three reasons computer programs should be extended the same rights as other forms of expression).
[64] See, e.g., id. at 979 (CONTU is the National Commission on New Technological Uses, established by Congress in 1974).
[65] Id. at 982.
[66] Id. at 983.
[67] See 17 U.S.C.A. § 117(b).
[68] 17 U.S.C. § 101.
[69] See Miller, supra note 63, at 1036.
[70] Id.
[71] Id. at 979.
[72] Feist, 499 U.S. at 350–51.
[73] See Harper & Row Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 550 (1985); accord, S. Rep. No. 94–473, at 65 (1975) [hereinafter Senate Report].
[74] See, e.g., Miller, supra note 63, at 1039 n.278 (citing instances in which non-alphabetized databases were/may be copyrightable and explaining growing Congressional debate over the issue).
[75] See Lotus Dev. Corp. v. Paperback Software Int’l, 740 F. Supp. 37, 54 (D. Mass. 1990) (holding that some computer programs with literal and nonliteral aspects that are distinguishable from universal aspects of the article may be copyrightable).
[76] Baker v. Selden, 101 U.S. 99 (1879) (holding that the text of a book describing a special method is copyrightable, but the method itself is not). Cf. Utopia Provider Sys., Inc. v. Pro-Med Clinical Sys., L.L.C., 596 F.3d 1313, 1320 (11th Cir. 2010) (citing Baker v. Seldon, 101 U.S. 99 (1879); 17 U.S.C. § 102).
[77] 17 U.S.C. § 102(b).
[78] 37 C.F.R. § 202.1(c).
[79] Clearly, the list is not meant to be an exclusive rendering of things considered “blank forms.” But, as there is no general definition given, courts have taken it upon themselves to shade in the rest of the picture.
[80] See Utopia Provider Sys., 596 F.3d at 1320 n.17 (discussing various cases which support the tension in the courts and the split over whether spreadsheets are copyrightable).
[81] Bibbero Sys., Inc. v. Colwell Sys., Inc., 893 F.2d 1104, 1107 (9th Cir. 1990).
[82] Id. at 1106–07 (“Although blank forms are generally not copyrightable, there is a well-established exception where text is integrated with blank forms”).
[83] See Utopia Provider Sys., 596 F.3d at 1320 n.17 (summarizing many of the decisions weighing in on this issue).
[84] Whelan Associates, Inc. v. Jaslow Dental Lab., Inc., 797 F.2d 1222, 1243 (3d Cir. 1986).
[85] Kregos v. Associated Press, 937 F.2d 700, 702 (2d Cir. 1991).
[86] Kregos v. Associated Press, 731 F. Supp. 113, 114 (S.D.N.Y. 1990), aff’d in part, rev’d in part, 937 F.2d 700 (2d Cir. 1991) (“The first major category lists each pitcher’s statistics for the current season. Under this heading are the sub-categories of wins, losses, and earned run average. The second general category represents the pitcher’s performance during his career against the scheduled opponent. Plaintiff further tailors this category to only include the pitcher’s statistics against this opponent at the particular site where the upcoming game is to be played. This category is then divided into wins, losses, innings pitched, and earned run average. Finally, the last of the main categories lists various statistics for the pitcher’s last three starts. Included within this category are wins, losses, innings pitched, earned run average, and men on base average (‘MBA’)”).
[87] An automated journalism program could take a similar spreadsheet to Kregos’s form to allow for an algorithm to produce previews upcoming baseball games in much the same fashion, but probably would not publish the underlying spreadsheet.
[88] Kregos, supra note 85, at 705.
[89] Kregos, supra note 85, at 709.
[90] Lotus Dev. Corp. v. Paperback Software Int’l, 740 F. Supp. 37, 70 (D. Mass. 1990).
[91] 17 U.S.C.A. § 107.
[92] Harper & Row Publishers, Inc., 471 U.S. 539.
[93] Id. at 549.
[94] Sony Computer Entm’t, Inc. v. Connectix Corp., 203 F.3d 596, 598 (9th Cir. 2000).
[95] Id.
[96] Firmware is software that is embedded in a particular product to allow that product to permanently function as the manufacturer intended.
[97] C.f. Burrow-Giles Lithographic Co. v. Sarony, 111 U.S. 53 (1884).
[98] Annemarie Bridy, Coding Creativity: Copyright and the Artificially Intelligent Author, 2012 Stan. Tech. L. Rev. 5 (2012).
[99] Id. at 69, n.157.
[100] Bridy would like to do so by recognizing AI-authored works as works for hire (from computers).
[101] Compare Annemarie Bridy, supra note 96, at 4 n.189, with Miller, supra note 63.
[102] Burrow-Giles Lithographic Co., 111 U.S. 53.
[103] Gilliam v. Am. Broad. Companies, Inc., 538 F.2d 14, 24 (2d Cir. 1976).
[104] Eric Pace, Edwin H. Land Is Dead at 81; Inventor of Polaroid Camera, New York Times (Mar. 2, 1991),

Song on Wire: A Technical Analysis of ReDigi and the Pre-Owned Digital Media Marketplace

Song on Wire: A Technical Analysis of <em>ReDigi</em> and the Pre-Owned Digital Media Marketplace
By James Huguenin-Love* Download a PDF version of this article here.  


If you have ever impulsively purchased the latest trendy song on iTunes[1] and then, 34 repetitious plays later, wondered, “Did I really need that?”, your salvation may have stealthily surfaced in the middle of the night only to be shot down by the sheriff before it could see the sunrise.  Just like the time you purchased that Macarena CD in 1995 and then sold it on eBay five years later for a dollar, a new wave of businesses have attempted to create a marketplace for the resale of previously owned digital media files.  Many such businesses rely on taking a cut from your resale of that Psy album you purchased online while providing you a place to sell it at a discounted price. This creative business prowess deserves applause, but media companies are less than thrilled.  Their quarrel is obvious: As the number of secondhand sales increases, the number of new sales decreases. In some instances, media companies make nothing from the secondhand sales.  Accordingly, some media companies have turned to copyright law to protect their content (and their revenue) by claiming that digital resales violate their exclusive rights[2] as owners of the content.  If the first big lawsuit[3] on this issue is any indication, such copyright challenges may successfully block the development of a secondhand digital market.  Nonetheless, the issue is far from decided.  Given the narrow holding in Capitol Records v. ReDigi, Inc., there remain viable options for startups that want to revolutionize the way digital media is bought and sold. Moreover, the ReDigi court’s reluctance to engage the finer technical aspects of digital media, as compared to traditional media, may leave the door open for disagreement by other courts. Section I of this note summarizes the facts of the ReDigi court, including an analysis of the court’s decision on reproduction and distribution rights and ReDigi’s attempted fair use and first sale defenses. Section II looks in depth at copyright law’s reproduction right and why ReDigi was unsuccessful arguing that its business method did not infringe it.  Section III identifies the technical, device-level view of digital files so that the copyright holder’s reproduction right is not necessarily infringed if the files are properly transferred.  Section IV quickly visits the distribution right under this view.  Section V looks at the policy considerations and implications surrounding the ReDigi court’s decision.  Section VI reflects on the future outlook for previously owned digital media markets.

I. ReDigi Case

On March 30, 2013, the Southern District of New York decided a case in which Capitol Records, a major music publishing company, sued ReDigi, a startup company that allowed its users to resell previously owned music, for copyright infringement.[4]  In contrast to the historical practice of selling physical objects like compact discs or vinyl records, ReDigi resold digital media that their users had previously purchased and downloaded from iTunes.  The outcome of the case turned on whether ReDigi’s service involved the creation of a new – and unauthorized – reproduction of a pre-owned digital file. Despite reassurances from ReDigi that the digital file was eliminated from the subscriber’s computer during upload to an individualized storage space hosted by ReDigi (a subscriber’s “Cloud Locker”),[5] and hence resulted in a “migration” rather than a reproduction of the media file, the court held that a violation of Capitol Record’s reproduction and distribution rights occurred once the file was stored in the Cloud Locker.[6]

A. Facts

Among the facts established at trial was the process by which a digital resale occurs. A ReDigi subscriber downloads ReDigi’s Media Manager software, which analyzes the subscriber’s computer to create a list of music files available for resale.[7]  Only files purchased via iTunes or from another ReDigi user are eligible for resale.[8]  This was a legal decision took to ensure the subscriber actually owned — instead of merely licensed — the music file so that the first sale doctrine[9] applied to all subsequent transfers.[10]  After the initial analysis, Media Manager continues to run on the subscriber’s computer in order to flag any attempts by the subscriber to copy or transfer the file to a remote device.  According to ReDigi CEO John Ossemacher, the Media Manager software contains a “really cool forensic engine that . . . determines where the song came from, whether you’re the lawful owner, whether it was moved from one computer to another and so on.”[11]  If a copy is detected, ReDigi asks the subscriber to delete it or face suspension of his account.[12] The subscriber can choose to upload any authorized file to his Cloud Locker.  The upload process is the crux of the lawsuit.  While ReDigi asserts that the upload is a migration of the original, purchased iTunes file, Capitol Records insists that any upload necessarily involves copying the file.[13]  Regardless of how one classifies the movement, no file is retained on the subscriber’s computer.[14]  Thereafter, the subscriber can choose to use the Cloud Locker to stream the music, sell the music, or transfer it back to his computer,[15] but access to the file is terminated once the subscriber sells the music to another subscriber.[16]  No money is transferred between the subscribers; instead, subscribers accumulate credits from ReDigi as compensation for the sale.  Subscribers may also purchase credits directly.  Those credits can then be used to buy additional music, but cannot be exchanged for money.[17]  Individual songs are priced between 59–79¢, which is split 20/20/60 between the seller (in the form of credits), the artist, and ReDigi, respectively.[18]

B. Reproduction Right

Artists and their record labels receive a copyright in the sound recording of their music.[19]  Sound recordings are works that result from fixation in a material object called a phonorecord, which include disks and tapes.[20]  The copyright owner has the exclusive right “to reproduce the copyrighted work in copies or phonorecords.”[21] The Southern District of New York recognized the unprecedented nature of the ReDigi case from the very beginning.  Unlike previous copyright infringement cases that involved duplication of digital files, the issue in this case was “whether the unauthorized transfer of a digital music file over the Internet — where only one file exists before and after the transfer — constitutes reproduction within the meaning of the Copyright Act.”[22] The court reasoned that the copyrighted sound recording constituted a reproduction of the phonorecord once fixed in the subscriber’s Cloud Locker after upload.  Thus, the ReDigi server — a collection of hard drives in Arizona that contained the same sound recording — represented the infringing, reproduced phonorecord.  The court did not care whether ReDigi characterize it as a transfer, migration, or pilgrimage because “[i]t is simply impossible that the same ‘material object’ can be transferred over the Internet.”[23]  The fact that the file was deleted on the subscriber’s computer was irrelevant.  Even deletion of the file located in the subscriber’s Cloud Locker would be no saving grace.  “Simply put, it is the creation of a new material object and not an additional material object that defines the reproduction right.”[24]

C. Distribution Right

The Copyright Act also provides the copyright owner the exclusive right “to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending.”[25]  ReDigi did not contest that it was distributing the sound recordings.[26]  Instead, it relied on defenses under the fair use and first sale sections of the Act[27] to argue it was within its legal rights to distribute the previously owned music.

D. Fair Use and First Sale Defenses

The court promptly dismissed ReDigi’s fair use defense, weighing all four factors[28] in the analysis against ReDigi.[29]  The court was more deliberate in discarding the first sale defense since, at first glance, reselling used digital music seems akin to reselling used compact discs and vinyl records.  However, in contrast to physical sales, the court found it significant that the phonorecord, which was resold and redistributed by ReDigi, had already been unlawfully reproduced, as analyzed above.  Since the reproduction was not “lawfully made under this title,” as the first sale defense requires, the defense could provide no shield.[30]  Whereas the original phonorecord created in the subscriber’s computer hard drive would retain the benefit of the first sale defense,[31] under the court’s interpretation, that file had been deleted, and with it went the first sale defense.  Thus, the infringement of the distribution right in this case was directly tied to the court’s decision about whether an illegal reproduction occurred in the first place. The court found security in its decision due, in large part, to the Copyright Office’s report on the Digital Millennium Copyright Act, which explained why the first sale doctrine should not be extended to digital works.  The Copyright Office justified its reasoning for limiting the first sale doctrine by noting both the relative difficulty with which physical copies are transported as compared to digital copies, which tends to keep the resale market in check, as well as the fact that physical copies degrade over time, making them less desirable than new copies.[32]  On the other hand, “[d]igital information does not degrade, and can be reproduced perfectly on a recipient’s computer.  The ‘used’ copy is just as desirable as (in fact, is indistinguishable from) a new copy of the same work.”[33] The court’s proposition raises an interesting philosophical question: If digital copies are “indistinguishable,” and there is no other phonorecord with which to compare, how can the court know that the phonorecord stored on ReDigi’s server is a new phonorecord rather than the original?  This question and others will be explored in later sections.

II. Reproduction Right Pertaining to Previously Owned Digital Media

Once ReDigi lost its argument that uploading the digital music files to its Cloud Locker service was not an infringement of the copyright owner’s reproduction rights, its remaining arguments and defenses fell along with it.[34]  Thus, the critical aspect to the legality of digital media resale seems to be avoiding infringement of reproduction rights.

A. Argument Made by ReDigi

From the very start, ReDigi put itself behind the eight ball.  In one of its first memorandums to the court opposing Capitol Records’ motion for a preliminary injunction, ReDigi repeatedly, and unfortunately, referred to uploaded music files as “copies” of the music file on the subscriber’s computer.[35]  After Capitol Records exposed this vulnerability,[36]  ReDigi was left trying to explain how the word “copy” was used in its colloquial sense rather than as a term meant to describe reproduction in the legal sense.[37] ReDigi’s unfortunate characterization of its uploading process is understandable given the way modern technology has altered the meaning of several common words such as “chat” and “cookie.”  The court tried to allay fears that it based its holding on semantics by explaining that even if no copying takes place, “the fact that a file has moved from one material object—the user’s computer — to another — the ReDigi server — means that a reproduction has occurred.”[38]  If the court had accepted the theory that the file was moved, instead of copied, it would need an additional reason to believe that a new phonorecord had been created, as required to infringe the owner’s exclusive reproduction rights.  In that sense, one cannot help but feel that the opinion was written with a certain degree of skepticism towards ReDigi’s recasting of copying as migration that pervades much of the analysis.
1. Was ReDigi’s Argument Dismissed Too Casually?
No matter the operating system — Windows, Mac OS X, Linux, or Unix — all have distinct commands for “copying” as opposed to “moving” a file.  When “copying,” there are always at least two files in existence after command execution, but when “moving,” only one file exists both before and after command execution.[39]  Thus, modern technology parlance would suggest that ReDigi is well within its bounds to call its proprietary upload process a move or migration. ReDigi attempted to use this differentiation to analogize its proprietary technology to the defendant’s action in C. M. Paula Co. v. Logan, where the defendant transferred — one could say moved — copyrighted prints from the plaintiff’s greeting cards and notepads onto ceramic plaques.[40]  The images were chemically stripped from the paper they were printed on, temporarily supported by a resin emulsion, before being adhered to the ceramic plaques.[41]  The court held that the affixation of the image on the ceramic plaque was not a reproduction or duplication of the print because there was no copying involved.[42]  Key in its decision was the fact that the defendant legally purchased another print from the plaintiff every time the defendant wanted to make another ceramic plaque.  The court also held that the first sale doctrine protected the defendant from infringing the plaintiff’s “exclusive right to vend,” otherwise known as the right to distribute.[43]  “[T]he policy favoring a copyright monopoly for authors gives way to the policy opposing restraints of trade and to restraints on alienation.”[44] Since each transferred print was fixed in the resin emulsion before finally being fixed on a ceramic plaque, both of which meet the definition of new material objects, the ReDigi court could have argued that the defendant in C. M. Paula actually unlawfully reproduced each copyrighted print twice.  But the court, rightfully, did not.  Instead, it considered the holding in C. M. Paula to be based on “questionable merits” and distinguished ReDigi’s service from the chemical stripping that occurred in C. M. Paula.[45]  With chemical stripping, “the copyrighted print, or material object, was lifted from the greeting card and transferred in toto to the ceramic tile; no new material object was created.”[46]  In contrast, ReDigi’s service “creates a new material object when a digital music file is either uploaded to or downloaded from the Cloud Locker.”[47] The distinction presented by the court looks quite natural at first glance.  However, this distinction seems to be contrived through clever wordplay in the name of convenience.  For, when citing Nimmer on Copyright earlier, the court correctly wrote, “the reproduction right is the exclusive right to embody, and to prevent others from embodying, the copyrighted work (or sound recording) in a new material object (or phonorecord).”[48]  But when analyzing C. M. Paula a page later, the court loosely interchanges a “copyrighted work” with a “material object,” saying that one and the same were lifted from the card.[49]  However, the print was transferred separately of the material object; the card (which was the material object in which the print was fixed) actually peeled away.[50]  When the court’s equating of the copyrighted print to a material object is juxtaposed with its explanation of the reproduction right as preventing someone from embodying a copyrighted work in a material object, something is amiss.  It is difficult to believe that the print is a material object itself which is also embodied in another material object: the card, resin, or a ceramic tile. Without the card, resin, or ceramic tile, it strains logic to imagine an audience perceiving the print (i.e., work) when the material object is the tangible thing that allows the work to be perceived, reproduced, or otherwise communicated.[51] If the court is steadfast in its equating the copyrighted print to a material object, in disregard of the Copyright Act’s plain language,[52] then ReDigi should also be allowed to equate the copyrighted sound recording (i.e., work) to a material object as well.  In essence, ReDigi would be stripping the sound recording (print) from the subscriber’s hard drive (paper) and transferring it “in toto” to the Cloud Locker (ceramic tile) without reproduction just as in C. M. Paula.  No new material object could be said to have been created because, like the ceramic tile, the Cloud Locker already existed as a material object and another material object (i.e., the sound recording) would simply be placed in the Cloud Locker.  One could even consider the transitory nature of the sound recording as it passes through network equipment over the Internet analogous to the transitory state of the print in the resin emulsion. The court would probably insist that its “copyrighted print, or material object” language was being misread.  But in order to do this and still conclude, consistently with the C. M. Paula court, that no new material object was created, it would have to contend that the copyrighted print was still fixed in the paper when it was stripped from the paper.  That contention runs counter to the stripping process in C. M. Paula that was described as “involv[ing] the use of acrylic resin . . . as a transfer medium to strip the printed indicia from the original surface on which it is printed. . . .”[53]  Thus, C. M. Paula actually comports quite nicely with a favorable result for ReDigi. Despite the aforementioned analysis, the ReDigi court used C. M. Paula against ReDigi.  If the court felt persuaded to find against ReDigi for policy reasons external to the law, the best option for the court may have been just to declare that C. M. Paula was not precedent in the Southern District of New York and to distinguish its decision as an exercise of independent judgment in light of different facts and different time periods.  Indeed, the court would have been perfectly free to do this, especially since it could have noted that the court in C. M. Paula (decided in 1973) was completely unaware of how technology has made copyright infringement so easy and pervasive. For this reason, the court’s decision could also be understood as a response to the ease and increase in copyright infringement resulting from technological advances.

B. File Sharing Zeitgeist

A palpable undercurrent of paranoia regarding illegal file sharing runs throughout the ReDigi decision, despite no explicit policy argument alluding to the practice.  For example, the court explicitly relies on previous cases concerning peer-to-peer file sharing systems to provide analytical guidance.  Specifically, the court uses London-Sire Records, Inc. v. Doe 1 for the proposition that an electronic download of a music file is a reproduction of the sound recording when magnetically encoded on the downloader’s hard drive as a phonorecord.[54]  But London-Sire involved anonymous users of peer-to-peer file sharing software that were copying files from other users’ computers.  In each instance, a copy of the file simultaneously existed on the downloader’s computer, while the original was retained by the supplier.  That court stated, “[plaintiffs] note, correctly, that an electronic download does not divest the sending computer of its file . . . .”[55]  It continued, “because the data at point A[, the source,] is not necessarily destroyed by the process of reading it, the person at point A might retain ownership over the original . . . .”[56]  Thus, the facts on which the London-Sire court based its understanding of the reproduction and distribution rights differ substantially from the facts in ReDigi.  Whereas the alleged infringers in London-Sire retained a copy of the music file that was “not necessarily destroyed,” in ReDigi, the original file is necessarily moved from source to destination without retention, as designed and implemented by ReDigi’s Media Manager software.[57] However, the court ignored this fairly significant difference.  Instead, it extrapolated from London-Sire the belief that the “distinction is immaterial under the plain language of the Copyright Act.  Simply put, it is the creation of a new material object and not an additional material object that defines the reproduction right.”[58]  The only additional form of support for its opinion is a reference to the dictionary definition of “reproduction,” which means, inter alia, “to produce again” and not, as the court says, “to produce again while the original exists.”[59]  While the court makes a well-founded point, it is generally difficult to know whether an object has been reproduced unless the original (i.e., source) still exists.[60] Fortunately, we have more evidence to resolve the specific facts in this case.  The Media Manager software holds the key to whether the original was reproduced or simply moved.  Unfortunately, all of the technical code is protected as a trade secret.[61]  Nevertheless, the technical aspects of file storage and transfer will be analyzed in Section IV, which will shed light on how files are fixed on hard drives and alleviate concerns of rampant file sharing abuse. Before analyzing the technical details of file storage and transfer, it is important to recognize that the court was in a difficult situation.  ReDigi presented a novel question that had never been litigated before,[62] and there was limited legal doctrine to apply to the facts of this case.  So it is perhaps natural that the morally opprobrious shadow illegal file sharing casts would also influence the court.  It may have been tough for the court to conceptualize ReDigi’s process when, traditionally, technology has made it easier to copy files for redundancy, archival, and distribution purposes, sometimes illegally.  Not that the situation cannot be conceptualized; without the potential to resell files, ReDigi subscribers are simply migrating their files to the trashcan for deletion.  Obviously, this is absurd. In a way, the court may be thinking that it is being hoodwinked; that ReDigi, with a wink and a nod, is telling the world that it is moving the file when in reality it is copying.  With these reservations, it is difficult to intuit that ReDigi is more like eBay than it is like the original Napster.[63]  By exploring the technical side of file storage and transfer, the distinction becomes more palatable.

III. Storing Digital Files on a Hard Drive Is Fixation Capable of Being Moved Without Being Reproduced

Throughout its briefing of the case, ReDigi stressed the importance of understanding its technology to understanding its defense that it was not reproducing digital music files.  Even while dealing with the sort of generalities inherent in analyses of proprietary processes, an argument can still be made that ReDigi is not infringing the copyright owner’s reproduction right without knowing the details of the software.

A. Fixation of Sounds in Physical Structures

Before the advent of the Internet, and certainly before anyone had heard of an “MP3” file or compact disc, music was (and still is) recorded on vinyl records.  Records are made by physically pressing grooves into a vinyl disc.  As seen in Figure 1a, a record player’s needle follows grooves in a disc as the disc spins. The needle moves within the grooves in accordance with their vertical and lateral undulations.  That mechanical movement is then converted into electronic signals by electronic circuitry.  These signals are ultimately amplified and then converted back into mechanical movements by the speaker, which produces sound waves that travel to the human ear.[64] Although sound quality improved drastically with compact disc (CD) technology, the process of storing information on CDs remained very similar to that used with vinyl discs.  On CDs, audio waveforms from vocals and musical instruments are converted into binary digits through a process of sampling (or digitizing) the waveform at intervals known as the sampling period.[65]  Each sample of the audio waveform creates a series of binary digits based on the waveforms’ amplitudes.[66]  Instead of stamping grooves into vinyl, CDs are stamped with pits to differentiate between a “1” bit and a “0” bit of the digitized sequence.[67]  Figure 1b shows those pits as viewed from the topside of the stamped layer.[68]  A polycarbonate plastic encasing surrounds the CDs stamped layer for protection.[69]  As the disc spins, a laser (rather than a needle) changes its radial distance from the center of the disc to read the particular physical changes in the CD.[70]  When the laser hits a flat part of the CD, it reflects directly into a detector.[71]  When the laser hits a pit, it scatters, reducing the intensity of the beam at the detector. [72]  The difference in the detected intensity stemming from the physical changes of the CD creates the bit pattern read by the CD drive.[73]  Because there is no conversion from mechanical movement to electronic signals, the noise levels are reduced and the sound quality remains clear. Apparent from this description of vinyl records and CDs is the fact that the sound recordings are physically sculpted into such phonorecords.  Understood in this manner, the fixation that occurs in vinyl records and CDs epitomizes the prototypical fixation of phonorecords contemplated by the House of Representatives when they passed the Copyright Act.[74] This conception of fixation also helps to explain the court’s adherence to the proposition that “it is the creation of a new material object and not an additional material object that defines the reproduction right.”[75]  Because grooves and pits are physically sculpted as material objects into the recording layer of the disc, any new material object fixed with the same sound recording will necessarily be an additional material object.  That is, the material fixation of the embedded sculpture is intimately tied to the recording layer.  In this scenario, it is impossible to imagine moving the material object (i.e., the grooves or pits as a collection) without moving the recording layer of the vinyl disc or the CD as well.  However, the notion of fixation changes when vinyl discs and CDs are replaced by hard drives composed of electric and magnetic fields.
Huguenin Figure 1(a) Vinyl Record
Figure 1a : Magnified images of a vinyl record[76]
Huguenin Figure 1(b) Compact Disk
Figure 1b : Magnified images of a CD[77]

B. Fixation of Sounds in Transferable Material Objects

When a ReDigi subscriber uploads his iTunes music from his personal computer to ReDigi’s cloud service, he moves that music from a magnetic hard drive or solid-state drive to another magnetic hard drive or solid-state drive, both of which could be used as the actual storage mechanism of the server.  But magnetic hard drives and solid-state drives are fundamentally different than vinyl records and CDs in how information is stored.  Whereas it makes sense to describe information as fixed grooves and pits in a vinyl record or CD, that description is inapposite when describing information storage in magnetic hard drives and solid-state drives.  This is because information is stored as electrical and magnetic signals (i.e., fields), which can actually be moved from one drive to another via electromagnetic waves and electrical lines that compose the current infrastructure of the Internet.[78]  So although an electromagnetic representation of grooves and pits can be transferred over the Internet, the actual grooves and pits cannot be transferred over the Internet.[79] Figure 2a shows a schematic drawing of a magnetic hard drive, specifically a single hard drive platter that stores digital information.  Magnetic hard drives typically contain multiple, stacked platters, which are rigid, circular discs made from aluminum or glass.[80]  Platters are divided into circular tracks, which can be further subdivided into sectors.  Each sector contains a fixed number of storage layer domains, which are the physical implementations of data bits (0s or 1s).[81]  When writing data, the write head element passes over the domains and impresses magnetic fields into the domains.  During impression, the write head element creates a strong magnetic field at its tip (represented by the red arrows) to align the magnetic material in that domain in the same direction.  The magnetic field is stored in one of two directions (represented by the black arrows).[82] In order to read the data, the read head element passes over the domains.  Instead of impressing the magnetic field like the write head element, it detects the direction of the magnetic field in each domain.  If the magnetic field is constant from one domain to the next, no electrical signal is induced in the read head element, which interprets the data as a 0 bit.  If the magnetic field changes from one domain to the next, an electrical signal is induced in the read head element, which interprets the data as a 1 bit.[83] ReDigi’s servers likely contain magnetic hard drives to store the iTunes music files because of their massive storage capabilities.  Many of ReDigi’s subscribers likely have magnetic hard drives in their personal computers as well.  However, due to their rapidly decreasing prices, non-moving parts, and superior read and write speeds,[84] some ReDigi servers and ReDigi subscribers may have solid-state drives.  Despite the differences between magnetic and solid-state drives, data in each is typically stored in a binary fashion. Figure 2b shows a schematic drawing of a simplified solid-state hard drive.  The drawing shows a memory unit capable of storing 32 bits of information.  One bit of information is stored in each of the transistors, which are arranged into eight rows and four columns.  Each bit is chosen for storing information by applying appropriate voltages to its corresponding word line and bit line.[85]  The right side of Figure 2b shows an enlarged diagram of the transistor corresponding to word line six and bit line three.  The transistor is composed of a silicon base and two other silicon layers (the gates) separated by two insulating layers (blue layers).  Each transistor operates in two states: an “on” state (1 bit), and an “off” state (0 bit).  The “off” state is programmed by applying a positive voltage to the control gate to attract a negative electrical charge (in the form of numerous electrons) into the floating gate.  The transistor is erased to the “on” state when the electrical charge is removed from the floating gate by applying a negative potential to the control gate.[86]
Huguenin Figure 2(a) Magnetic Hard Drive
Figure 2a : Diagram of Digital Media Stored on a Magnetic Hard Drive
Huguenin Figure 2(b) Solid State Drive
Figure 2b : Digital Media Stored on a Solid State Drive
  The electrical charge stored in the floating gate directly effects whether current will flow through the silicon base layer.  In order to read the data stored in the transistor, the current is measured.  If current flow is detected, a 1 bit is read.  If current flow is not detected, a 0 bit is read.[87] Although it is tempting to define these electrical charges and magnetic fields as fixed (in the legal copyright sense) in the drive, they are perhaps better described as contained or stored at a waypoint.  This is because they are not intimately tied to the recording layer like grooves and pits, but instead are merely stored in an electronic transistor or a magnetic domain until they are transferred to a new storage unit.[88]  Furthermore, because grooves and pits are physically fixed in the recording layer, they cannot be extracted and transferred in media that carry only electrical and magnetic signals. The key point of this analysis is that when digital files are transferred from magnetic hard drives and, certainly, solid-state drives, no new material object is created because the electrical charge and magnetic fields that constitute the data are actually transferred from waypoint to waypoint.  A more insightful way to conceptualize such data storage is to view the electrical charge and magnetic fields as material objects themselves, rather than assigning that role to the magnetic storage layer or transistor.  In this schemata, every time data is transferred, the material object is transferred, which further implies that no new material object is created.  This conceptualization posits that, upon transfer, the electrical charge or magnetic field is released from the waypoint; otherwise, the data would necessarily be copied into a new material object.  And, just as the foregoing analysis indicated that electrical charge is easily stored and removed from the floating gate, magnetic fields can be stored and removed from their domains.  While it may be unlikely that the exact material object in the legal sense (electron/magnetic field) is transferred from one waypoint to another, one cannot definitively say they are not transferred because they all appear identical to human observers.[89]  This shows how digital files can be differentiated from physical grooves and pits, since it is never possible for a physical, sculpture-like material object to be transferred along a medium conducive to electromagnetic signals. Perhaps an analogy would help solidify the concept.  Consider a series of five buckets at point A, of which the first three contain water and the last two do not.  The five buckets at point A can be imagined to represent five bits in a “11100” sequence.  One way to transfer that information is to carry the five buckets, with their contents, to point B.  However, if the only way to transfer the bit sequence from point A to point B is copper tubing, carrying the buckets is no longer feasible.  Nonetheless, the information can still be transferred to point B using the copper tubing, a prearranged timing protocol to know when to expect the water (if there is any) from each bucket, and five receiving buckets available at point B.  Only the water, not the buckets, is essential to the communication because the water, not the bucket, is indicative of the bit sequence.[90]  The water (electric charges and fields) is the material object in which the information (sound recording) is fixed, while the bucket (magnetic hard drive or solid state drive) is simply a storage container. When discussing vinyl records and CDs, however, there is no water.  The shape of the bucket is the data-carrying object in this alternate universe.  Although the user at point A could send color-coded water through the copper tubing to signify whether the bucket shape is, for example, cylindrical or rectangular, if the person at point B uses that information to create cylindrical and rectangular buckets of their own, we know they must be new material objects because the buckets cannot physically pass through the copper tubing. It is this conceptual difference the court was unwilling to recognize in its ReDigi opinion.  Instead of discussing the physics of storing digital information in magnetic and solid-state drives, the court chose to make a conclusory declaration that “[i]t is simply impossible that the same ‘material object’ can be transferred over the Internet.”[91]  Axiomatically, the court stated, “[t]his understanding is, of course, confirmed by the laws of physics.”[92]  However, if courts are going to premise infringement of reproduction rights on the creation of a new material object, it is critical that they recognize what fits that category.  With today’s modern technology, the line differentiating material objects from containers storing such objects has become clearer.  Though the two are essentially indistinguishable with vinyl records and CDs, they can be conceptually separated in modern mass storage devices.

IV. Distribution Right Pertaining to Previously Owned Digital Media

Even if ReDigi did not infringe the copyright owner’s reproduction right, the company openly admitted to distributing the iTunes music files from its website.[93]  Without a proper defense, this constitutes direct infringement of the copyright owner’s distribution right under 17 U.S.C. § 106(3).  Accordingly, ReDigi asserted the first sale defense, which entitles “the owner of a particular copy or phonorecord lawfully made under this title, . . . without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.”[94]  However, the court rebuffed ReDigi’s attempt to use the first sale defense because “as an unlawful reproduction, a digital music file sold on ReDigi is not ‘lawfully made under this title.’”[95]  Obviously, this conclusion is dependent upon the court’s finding that the phonorecord uploaded to the ReDigi server is a new reproduction of a phonorecord.  And because the court believes it is “impossible for the user to sell her ‘particular’ phonorecord on ReDigi, the first sale statute cannot provide a defense.”[96] But, as the previous section on reproduction rights attests, the court likely cannot—and does not even attempt to—substantiate its statement that it is impossible for a subscriber’s particular digital phonorecord to be transferred to the ReDigi server.  This is because the media used to send electromagnetic signals across the Internet do not transfer the sculpted grooves of vinyl records or pits of CDs, but rather transfer the electrical charge and magnetic fields that are the stored material of today’s digital files.  Thus, the court’s conclusion that “[t]he first sale defense does not cover [transferring digital files] any more than it covered the sale of cassette recordings of vinyl records in a bygone era” is inappropriate in this context.[97] As techniques and technology improve to more simply and efficiently transfer data, analogies to anachronistic practices become obsolete as well.  A cassette recording of a vinyl record necessarily entails two phonorecords. Regardless of whether the cassette tape or vinyl record was made first, the fact that another phonorecord was produced implies that a new phonorecord was produced.  Because the new phonorecord (i.e., the cassette recording in the court’s analogy) is unlawfully reproduced, the first sale defense is inapplicable.  In contrast, material objects that store digital phonorecords (e.g., electrons) are completely transferrable and thus no new material object need be created.[98]  Once one recognizes that a new phonorecord is not necessarily being created, the conclusion that the first sale defense is inapplicable to ReDigi is called into question.[99]

V. Policy Considerations

Despite ReDigi’s lack of success in the Southern District of New York, one piece of good news for consumers is that, in the same opinion, the court declared moving digital files around one’s computer for personal reasons, like defragmentation or transferring digital files from an old computer to a new computer, did not constitute an illegal reproduction of those files.[100]  Unlike ReDigi’s service, which “creates a new material object,” the court claims that “relocating files between directories and defragmenting” (which also creates a new material object under the court’s interpretation of a reproduction) are “almost certainly protected under other doctrines or defenses.”[101]  However, it does not state upon which legal doctrine this declaration is premised.  In fact, upon further review, it is not clear whether these personal file reorganization actions would qualify as either fair use or de minimis, the two most germane defenses.

A. Less Law, More Feel?

Fair use depends on
(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (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.[102]
For these illustrative file reorganization actions, the second and third factors certainly weigh against granting the actions a fair use defense because digital media is commercial in nature and the entire work is reproduced.  Factor one is less definitive.  While the actions are not for profit, they are not educational either.  Nor do they qualify under any of the specifically mentioned fair use purposes of “criticism, comment, news reporting, teaching . . . scholarship, or research . . . .”[103]  The otherwise helpful transformative use inquiry[104] fails to provide guidance here, since file equivalency is desired. Factor four is also less definitive, but the fact that a copyright holder’s revenue would increase if consumers were required to repurchase music that moved from one directory to another, or from one computer to another, suggests that the statutory text would weigh against these actions.[105]  So, even though the first and fourth factors (which tend to predict the outcome of the fair use defense more than the second and third factors)[106] don’t definitively weight against fair use, it is no stretch of the imagination to believe that such actions may not “almost certainly [be] protected under [fair use].”[107] Even more fickle in outcome is the de minimis defense.  While the court could rightfully declare that moving files between directories or while defragmenting are de minimis reproductions, it is not clear why moving files to the Cloud would not then also be de minimis.  In any case, the de minimis defense is usually limited to minimal and insignificant copying or displaying[108], neither of which applies under these actions.  The court in ReDigi may be relying more on Capitol’s concession[109] than on any legal defense asserted by ReDigi, given its perfunctory dismissal of the irrational outcomes that its holding could produce for the average computer user reorganizing files. So what is really happening here?  The answer probably has more to do with a policy of common sense than it does with the law.  We all, including judges and copyright holders themselves, organize digital media on our computers or transfer digital media to our new computers.[110]  In both actions, one file remains accessible to the user while the original instance is forgotten.  Few people would welcome the thought of an infringement lawsuit under these circumstances. The crux must be then the commercial nature of ReDigi’s transactions.  The court has to be worried that the copyright holder loses potential revenue that it could have earned if the different user had purchased the right to reproduce a new copy.  But, since moving digital media from one location to another on one’s personal computer or transferring files from an old computer to a new computer is also a reproduction, it would only seem consistent to be worried that the copyright holder is also losing potential revenue that it could have earned if the same user was required to purchase the right to reproduce a new copy when performing these personal file reorganization actions as well. Coherently differentiating ReDigi’s plight from the situations that raise no ire from the court is not an easy task.  Perhaps the policy rationale that the court manifested is that, in very close calls, err on the side of the copyright holder.

B. Global Policy Divergence

If the United States is leaning one way on the digital resale issue, the European Union appears to be leaning the other way.  In a factual scenario much like that in ReDigi, the European Union’s Court of Justice (ECJ) held that a resold user license to computer software permitted the secondary market purchaser to download (read: “reproduce”) computer software onto the purchaser’s computer.[111]  UsedSoft resold “used,” unlimited period licenses to Oracle software that UsedSoft purchased from original users.  The ECJ stated that the first sale of the computer software enabled the copyright holder to obtain appropriate remuneration for exhaustion of the distribution right to the computer software.[112]  It acknowledged that the reproduction right was not exhausted by the first sale but noted that any reproduction necessary for the use of the computer program by a lawful user is authorized.[113]  Such necessary reproduction would entail the secondary market producer to download another copy of the computer software.  Moreover, the reproduction “may not be prohibited by contract.”[114]  However, the ECJ sensibly stated that the original user must make his or her own copy unusable at the time of resale or the original user would infringe the copyright holder’s right of reproduction.[115] Although the UsedSoft decision was limited to computer software, it is not difficult to imagine its extension to digital media.  If this occurs, there will be a divergence in how the Unites States and the European Union handle reselling digital content in the secondary market.  While this could lead to different price points in the two jurisdictions, a more likely result is the proliferation of restrictive “terms of use” agreements.  Since the unlimited period of the license was critical to the ECJ’s judgment in UsedSoft, it is only a matter of time before all digital media purchases end on resell.  If purchases are defined as licenses[116] rather than outright sales, they can be terminated due to certain unfavorable actions.

C. Economic Policy

The digital world seems to be moving to a license-based purgatory in order to maintain more control over copyrighted works.  Licensed users are restricted from using the first sale doctrine as a defense to distributing the digital media and therefore every user is forced into licensing from the copyright owner.  In theory, this seems like the optimal way to generate the most revenue.  But a pre-owned digital media marketplace may actually provide a better way to free untapped revenue.  First, if consumers are able to resell their digital music and obtain some resale value, they may be willing to pay more upfront.  Second, consumers that in the past avoided purchasing digital music due to its inalienability may be willing to purchase instead of stream if it can be resold.  Lastly, digital music cannot be resold until it is originally sold and consumed.  Only when a critical mass of copies has infiltrated the market and original owners have no further use of their original copies will original sales decline because of resales.  Since sales are heavily concentrated in the first few weeks[117], if not days, of release, one wouldn’t be unreasonable in projecting that resales won’t have as large an impact on overall sales as one might initially assume. For example, Figure 3 shows Beyoncé’s self-titled album sales tracked over approximately 16 weeks from its release date.[118]  The numbers indicate that the majority of sales took place within the first three days (basically over the weekend).  Assuming that most of those original purchasers didn’t get their fix of Beyoncé over the weekend, the stragglers will continue to have to purchase original versions.  Determining what effect a secondary market would have on overall original purchasers would vary to a large degree on the connectedness and magnetism of the music.  However, regardless of its magnetism, it instantaneously becomes more seductive to would-be stragglers who are worried about buyer’s remorse because of the resale fallback opportunity.  Theoretically, then, there could be more “weekend” purchasers than under the current, no resale model.
Huguenin Figure 3 Self-Titled Album
Figure 3: US Sales of Beyoncé’s Self–Titled Album
  There are certainly attendant economic risks associated with a secondary resale market. But as they aren’t clearly irrational risks, it would be surprising if Capitol Records engaged in this sort of cost-benefit analysis before commencing litigation against ReDigi in an attempt to shut down the resale market. After all, the secondary market isn’t a file sharing market (as used in its pejorative sense).  And, as the ECJ prudently noted, reselling on the secondary market is authorized only on the condition that the original user render the original version unusable, assuring the copyright holder has seen revenue at some point from every copy in the market.[119]  Much of the paper has focused on this same notion — that the original version (as a material object) is in fact made unusable because that original version (the material object itself) is transferred to the new consumer.

VI. Future Outlook of Previously Owned Digital Media

If patent activity is any indication of the future of used digital media, this will not be the last case courts confront on the issue of reproduction and distribution of digital media.  Amazon[120] and Microsoft[121] have already received patents on technology enabling secondary markets for digital media.  Apple has applied for a patent[122] on its own method, and ReDigi has not given up on the business idea, filing a new patent application[123] on a system that completely avoids the unlawful reproduction issues addressed in its case against Capitol Records.

A. Possible Solutions

For those entities still looking to create a business around reselling used digital media, there are a few possible options available to continue that pursuit.
1. Legal Battle Option
The first option is to pursue the argument made above — that, contrary to the opinion of the Southern District of New York, ReDigi did not reproduce the digital media files on its servers.  The advantage of resolving the complex issue this way is that it puts digital media files stored on magnetic and solid-state drives on a level playing field with digital media files stored on more physically mobile forms of storage, such as CDs, vinyl, and USB flash drives.  Physical displacement of physically mobile storage devices from transferor to transferee is a well accepted means of transferring ownership without reproduction, and transferring digital media stored as electric charge and magnetic fields via electrical lines and electromagnetic waves should be a no less accepted means of transferring ownership without reproduction in the modern age of digital communication. The disadvantage of proffering this argument is simple but paramount in practice — it is unlikely to win judicial support.  While it embraces the intersection of science and law in an attempt to create a well-reasoned rule, the court, at least in the ReDigi case, seems ready to dismiss anything more than a cursory examination[124] of the scientific principles that guide how copyright law might be interpreted when applied to innovative, new technology.[125] Furthermore, the argument laid out above that ReDigi effected only an object transfer, not creation, has several vulnerabilities.  While it is true that electrons can move from point A to point B in a conductive wire, it is highly unlikely that all the electrons used to store the bits of the digital file on the ReDigi server were those used to store bits of the digital file on the subscriber’s personal computer.  This is because free electrons “hop” from ion to ion when traveling down a conductive wire.[126]  Copper atoms, for example, that compose wires impede the movement of electrons as temperatures rise due to thermal vibrations, making it more challenging for a particular electron to reach point B as its distance from point A increases.[127]  Similarly, although electromagnetic waves represent the fundamental underpinnings of wireless communication, electromagnetic waves are impeded by physical barriers and magnetic fields stray along wired communication lines and thus don’t correlate exactly with the magnetic fields used to store the bits of the digital file.[128]  These weaknesses only increase the resistance with which a court would meet any proposed scientific argument.  Nonetheless, data stored at a subatomic scale is different from data stored on a macroscopic scale, like on paper or in a CD, precisely because subatomic particles and magnetic fields can be physically transferred, indeed are the transferring agents, along internet communication channels whereas macroscopic material objects cannot.[129]  And even though an observer cannot definitively say that the same subatomic material objects originally fixing the copyrighted work were transferred to the recipient, a critic would actually fare worse because the critic would have to show how two identical particles (the original material object and accused, different, transferred material object) are actually different.[130]  The boundary between material objects and the communication channels used to transport them is blurred to the point that the court can no longer rely on archaic analogies to times past when interpreting anachronistic laws. However, even if a court were to accept the above argument, the copyright holder could still wield his distribution right to show infringement.  This is because consumers who are considered licensees, as opposed to owners, with restricted transfer and use rights are unable to invoke the first sale doctrine to distribute digital media files without repercussions.[131]  If the copyright holder or its authorized vendor (e.g., iTunes) licensed the use of digital media files via carefully constructed license agreements[132] (instead of selling them), a reselling licensee would still be a sitting duck for an infringement claim on the copyright holder’s distribution right.  Thus, any legal victory for a defendant under the reproduction right would likely be a mere consolation prize once infringement of the distribution right was adjudged.[133]
2. Technological Workaround Option
The second option is to pursue a solution outside of the legal system.  Because the legal system can be slow to reverse course, using technology to work around the obstacles set up by the legal system can actually lead to faster and less costly solutions.[134]  And, in fact, this is precisely what ReDigi did.[135]  As discussed in ReDigi’s patent application, the essence of the workaround takes the form of redirection software installed on the subscriber’s computer.  That software redirects downloaded packets (i.e., pieces) of the digital media file from the subscriber’s personal computer to the subscriber’s personal space on ReDigi’s cloud storage servers.[136]  Therefore, the subscriber’s personal computer acts as another node of the Internet in which the packets simply pass through on their way to the ReDigi cloud storage server.[137]  The downloaded digital file is stored for the first time on the ReDigi cloud storage server, not the subscriber’s personal computer.[138]  Because the file stored on the ReDigi cloud storage server is the original file downloaded from the online retailer (e.g., iTunes), there is no reproduction (and, of course, no unauthorized reproduction).  Once the subscriber decides to sell the used digital content, ReDigi can simply update the owner of the allocated space occupied by the digital file on the server.[139]  In other words, ReDigi can change the ownership permissions from transferor to transferee without actually moving the digital file around on its cloud storage server, thereby avoiding any further complications over unauthorized reproductions.  The subscriber can still access the file by streaming its contents in a manner akin to services like Amazon Cloud Player, Google Play, and iTunes Match, whose services at this point have a favorable legal track record.  This is due, in part, to similar remote television streaming services being held compliant with copyright law in the Second Circuit[140] and, in larger part, to the contractual agreements they have covering much of the music they stream. While the technological workaround avoids any further liability to ReDigi from the ReDigi case itself, the legal ramifications of the opinion will continue to haunt future defendants in similar situations.  If the court’s holding remains unchallenged, it will continue to carry precedential value, potentially expanding copyright protection beyond a reasonable interpretation of the Copyright Act.  ReDigi should not be expected to solely carry the burden of safeguarding the public’s interest against copyright expansion, but it may be necessary to compete with bigger companies that can easily bargain their way to immunity.  Nonetheless, since ReDigi does not have the bargaining power of giants like Amazon, Google, and Apple, it is also possible Capitol Records would still pursue legal action against ReDigi for infringing public performance rights until ReDigi paid for a licensing agreement.
3. Contractual Option
The first two options are really rivers that ultimately lead to the vast ocean of contractual agreements.  By agreeing to a contract, both parties remove legal action from the realm of copyright infringement into the realm of contract law.[141]  This eliminates a large degree of uncertainty and allows the parties to set their own terms for ownership of intellectual property without wondering how a court will interpret congressional action. The trend of relying on contracts instead of judges will only increase as these major players experiment with the secondary market for digital media.[142]


Capitol Records has two obvious concerns associated with ReDigi’s business model.  First, despite ReDigi’s most thorough efforts, users can store files externally to their local computer in order to retain a copy for themselves prior to becoming a subscriber.  Second, if users are purchasing previously owned music from other users, then they are not purchasing “new” music from providers that share profits with Capitol Records.  While the first is a legitimate legal concern, it is a separate issue from whether ReDigi is committing or inducing copyright infringement, especially since ReDigi actively eliminates copies stored on the user’s computer when the user sells the music.  The second is a legitimate business concern but, again, separate from the issue of copyright infringement. Technology will always be one step ahead of the glacially-moving legal system.  Rather than attempt to rein in technology through legal maneuvering, copyright holders should try to incorporate it into their business models.  With the uncertainty surrounding digital music transferring and copyright holders pressing the issue with almost nothing to lose, licensing agreements will continue to be sought after by both parties looking to mitigate potential loses. Because court decisions loom large when determining which party has more leverage in contractual agreements, every court decision should be analyzed and scrutinized for flawed reasoning.  These instances of flawed reasoning will be few and far between when legal reasoning is involved because judges have a vast amount of experience, and interpretation of the law is often subjective.  However, most judges outside of the Federal Circuit have little experience with scientific reasoning, which can lead to incongruent holdings and confused parties.  This is what happened in the ReDigi case. While ReDigi’s technological acumen has allowed it to sidestep this problem for now, future entrants in the digital resale market may be less fortunate.
* James received his J.D. from New York University School of Law in 2014. He received a Ph.D. in Electrical Engineering from the University of Nebraska in 2010. He also received a B.S. in Electrical Engineering and a B.S. in Computer Engineering from the University of Nebraska in 2005. He would like to thank Professor Barton Beebe and the JIPEL members who helped edit and publish this article.
[1] For those readers of the future where digital content is a relic of the past, iTunes was the leading online marketplace to buy digital media.  Users could purchase music, television shows, movies, and books in digital form at prices that were usually less than their tangible counterparts.
[2] There are six exclusive rights granted to the owner of the copyrighted work.  17 U.S.C. § 106 (2006).  The issue of reselling previously owned digital media focuses on three: the reproduction right, the distribution right, and the public performance right.
[3] Capitol Records, LLC v. ReDigi Inc., 934 F. Supp. 2d 640 (S.D.N.Y. 2013).  This case is discussed thoroughly in the next section.
[4] Id.
[5] The files stored in a subscriber’s Cloud Locker are, in reality, stored on a server in Arizona. Id. at 645.
[6] Id. at 650–51.
[7] Id. at 645.
[8] Id.
[9] More information on the first sale doctrine’s applicability to this case is provided infra Part I.D.
[10] See Def.’s Mem. of Law in Opp’n to Pl.’s Mot. for Prelim. Inj. at 19, Jan. 27, 2012, ECF No. 14 (“[U]nlike the terms of service for Amazon’s online music store, the iTunes Terms of Sale (‘iTunes TOS’) formally provide that title to music files downloaded from iTunes passes to the consumer.” (emphasis in original)).
[11] Matt Peckham, How ReDigi Lets You Resell Digital Music (and Why It’s a Big Deal), Time (June 27, 2012),
[12] Id.
[13] ReDigi, 934 F. Supp. 2d at 645–46.
[14] Id. at 646.
[15] Id.
[16] Id.
[17] Def.’s Counter Statement Pursuant to Local Rule 56.1 ¶ 18, Aug. 14, 2012, ECF No. 83.  It should be noted that the closed credit system was adopted, at least in part, at the behest of the record labels who believed it prudent to keep the money “in the music ecosphere.”  Id. ¶ 19.
[18] ReDigi, 934 F. Supp. 2d at 646.
[19] 17 U.S.C. § 102(a)(7) (1990).  Artists also receive a copyright in the underlying musical composition.  U.S. Copyright Office, Circular 56A, Copyright Registration of Musical Compositions and Sound Recordings (2012),  This was not an issue in ReDigi since the artists were not plaintiffs.
[20] 17 U.S.C. § 101.
[21] 17 U.S.C. § 106(1).
[22] ReDigi, 934 F. Supp. 2d at 648.
[23] Id. at 649.
[24] Id. at 650.
[25] 17 U.S.C. § 106(3).
[26] ReDigi, 934 F. Supp. 2d at 651.
[27] 17 U.S.C. § 107 and 17 U.S.C. § 109, respectively.
[28] The factors to be considered in a fair use defense are: “(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (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.” 17 U.S.C. § 107.
[29] ReDigi, 934 F. Supp. 2d at 652–54.
[30] 17 U.S.C. § 109(a).
[31] Under a strict reading of section 109, the first sale doctrine would apply to the original phonorecord stored in a subscriber’s computer hard drive only if the subscriber purchased the right to fix the sound recording in a phonorecord from a store that transferred ownership to that particular phonorecord instead of simply granting a license to use that particular phonorecord.  The court never addressed this issue because it resolved the question of the application of first sale defense without regard to the phrasing of the iTunes purchasing agreement.  However, ReDigi asserted that ownership was transferred.  Def.’s Mem. of Law, supra note 10.
[32] U.S. Copyright Office, DMCA Section 104 Report 82–83 (2001), available at
[33] Id. at 82.
[34] When the court decided that the subscriber’s act of uploading was a reproduction, the court reasoned that the “reproduced” file was not under protection of the first sale defense.  Thus, ReDigi also infringed distribution rights by selling the illegally “reproduced” file.  From here, the court found ReDigi liable for direct and secondary infringement since it actively participated in, and benefitted from, its subscribers’ infringing conduct.  ReDigi, 934 F. Supp. 2d at 656–60.
[35] Def.’s Mem. of Law, supra note 10, at 9 (“The only copying which takes place in the ReDigi service occurs when a user uploads music files to the ReDigi Cloud, thereby storing copies thereof in the user’s personal Cloud Locker . . . .”).
[36] Pl.’s Reply Mem. of Law in Further Supp. of Pl.’s Mot. for Partial Summ. J. at 1, Aug. 8, 2012, ECF No. 87 (“The only plausible reading of this statement . . . is that uploading delivers a copy of a music file to the ReDigi cloud.”).
[37] Def.’s Mem. of Law in Opp’n to Pl.’s Mot. for Partial Summ. J. at 6, Aug. 14, 2012, ECF No. 79.
[38] ReDigi, 934 F. Supp. 2d at 650.
[39] Usually, when a move command is initiated by the user, the operating system simply updates the link that points to the file’s location on the hard drive without actually moving where the bits of the file are stored.  So, if the user wanted to move the file from directory A to directory B, the operating system would internally manage the “movement” such that the link to the file appears when the user accesses directory B, but not directory A.  This does not happen when ReDigi moves the file, however, because the file is being moved from one file system, the subscriber’s computer, to a different file system, the subscriber’s Cloud Locker.  However, moving the file is probably a more appropriate description than copying the file in this case since, regardless of the actual implementation of the move command, the subscriber has no volition, intent, or knowledge of any copying.  ReDigi’s Media Manager software is proprietary, so a step-by-step analysis of the code cannot be performed. Assuming, however, that ReDigi was aware of the potential copyright issues, it is at least conceivable that it deliberately wrote the software to avoid creating copies.  See Def.’s Mem. of Law in Further Supp. of ReDigi’s Summ. J. Mot. at 6, Aug. 24, 2012, ECF No. 90 (explaining the upload process as “wholly unlike a copy and delete operation, which happens in two distinct steps”).
[40] C. M. Paula Co. v. Logan, 355 F. Supp. 189, 190 (N. D. Tex. 1973).
[41] Id.
[42] Id. at 191.
[43] Id.
[44] Id.
[45] ReDigi, 934 F. Supp. 2d at 650.
[46] Id. at 650–51.
[47] Id. at 651.
[48] Id. at 649.
[49] Id. at 650–51 (“There, the copyrighted print, or material object, was lifted from the greeting card and transferred in toto to the ceramic tile; no new material object was created.”) (emphasis added).
[50] C. M. Paula, 355 F. Supp. at 190.
[51] See 17 U.S.C. § 101 (defining the word “copy” as the material object “in which a work is fixed . . . and from which the work can be perceived, reproduced, or otherwise communicated” and the word “phonorecord” as the analogous term to “copy” where “sounds” replace “work”).
[52] See 17 U.S.C. § 101 (“‘Copies’ are material objects . . . in which a work is fixed . . . .”).  So copyrighted works are fixed or embodied in material objects, colloquially known as copies.
[53] C. M. Paula, 355 F. Supp. at 190.
[54] “[W]hen a user on a [P2P] network downloads a song from another user, he receives into his computer a digital sequence representing the sound recording. That sequence is magnetically encoded on a segment of his hard disk (or likewise written on other media). With the right hardware and software, the downloader can use the magnetic sequence to reproduce the sound recording. The electronic file (or, perhaps more accurately, the appropriate segment of the hard disk) is therefore a ‘phonorecord’ within the meaning of the statute.” ReDigi, 934 F. Supp. 2d at 649 (quoting London-Sire Records, Inc. v. Doe 1, 542 F. Supp. 2d 153, 171 (D. Mass 2008)).
[55] London-Sire, 542 F. Supp. 2d at 172.
[56] Id.
[57] See ReDigi, 934 F. Supp. 2d at 646 ( “[A]t the end of the process, the digital music file is located in the Cloud Locker and not on the user’s computer.”); see also Def.’s Statement of Undisputed Facts Pursuant to Local Rule 56.1 ¶ 12, July 20, 2012, ECF No. 56 (“Once a user requests to place a legally acquired phonorecord in the Cloud Locker, the file is migrated to the Cloud Locker so that it is no longer on the user’s local device.”).
[58] ReDigi, 934 F. Supp. 2d at 650.
[59] Id.
[60] For example, if your friend gives you a fruitcake as a gift and you find it so fantastic that you exactly replicate it as a return gift for your friend, it is difficult for your friend to know whether you have exactly reproduced the fruitcake or sheepishly re-gifted the one your friend gave you.  If you can produce the original fruitcake (or at least parts of it), you can probably salvage your relationship since your friend will know you didn’t re-gift.  If you can’t produce the original fruitcake, your friend will have to take your word for it but will not know for sure whether it is a reproduction or the original.
[61] This is not surprising given how profitable the software can be if it is ultimately deemed legal.  ReDigi CEO, John Ossenmacher, has already admitted that they are in talks with several interested companies to license their software.  “There aren’t many ways to do this without copying — we know, and they know, they’d be using our technology to do it.”  Peckham, supra note 11.
[62] ReDigi, 934 F. Supp. 2d at 648 (“The novel question presented in this action is whether a digital music file, lawfully made and purchased, may be resold by its owner through ReDigi under the first sale doctrine.”).
[63] It is certainly possible for subscribers to game the ReDigi system.  Dubious subscribers could create an external copy of their music prior to downloading Media Manager, which would not flag those copies since the software is unaware of prior events.  However, this activity would be occurring despite Media Manager, not in concert with it.  Furthermore, those subscribers would also likely realize that there are other easier methods to obtain digital files without using a scrupulous system like ReDigi.
[64] 9 Marshall Cavendish Corporation, How It Works: Science and Technology 1284 (Wendy Horobin et al. eds., 3d ed. 2003).
[65] John Y. Hsu, Computer Architecture: Software Aspects, Coding, and Hardware 3 (2001); see also Scott Mueller, Upgrading and Repairing PCs 525–26 (20th ed. 2011).
[66] Hsu, supra note 65, at 3.
[67] It is actually the detected transition from flat part to pit or pit to flat part that determines whether a “1” bit is read.  When no transition is encountered over a threshold period, a “0” bit is read.  CDs that are burned instead of stamped (e.g., by personal CD burners) differentiate between “1” bits and “0” bits by changes in the reflectivity of the recording material.  The laser in the CD burner literally heats up portions of the writeable CD’s recording layer, which creates the differentiating reflectivities necessary to create bit patterns.  Mueller, supra note 65, at 521, 532.
[68] Since the laser and detector are aimed at the underside of the CD, the plateaus are actually seen as pits from the laser’s perspective.
[69] Id. at 520.
[70] Id. at 521–22.
[71] Id.
[72] Id.
[73] Id. at 521.
[74] H.R. Rep. No. 94-1476, at 56 (1976) (defining phonorecords as “physical objects in which sounds are fixed”).
[75] ReDigi, 934 F. Supp. 2d at 650.
[76] Susumu Nishinaga, Needle Playing a Record (scanning electron microscope image), Science Photo Library,
[77] CD Scanning Electron Microscope Image, LPD Lab Services,
[78] John Rhoton, The Wireless Internet Explained 5–6, 10–11, 22 (2002).
[79] Therefore, any digital creation of a physical fixation that was transferred only with the help of the Internet, like that in vinyl discs and CDs, will necessarily involve a new fixation of the information since the original fixation could not have been transferred.
[80] Mueller, supra note 65, at 445.
[81] Id. at 438–40.
[82] Id. at 422–24.
[83] This simple encoding mechanism, where no magnetic field change equals a “0” bit and a magnetic field change equals a “1” bit, is no longer used in practice because more advanced encoding techniques are available to increase storage capacity.  Id. at 432–37.
[84] Id. at 501.
[85] The bit line selects a certain column in the cell array and the word line selects a certain row in the cell array.  All unselected cells in the series bit line are driven into a conducting mode.  Thus, if the entire bit line conducts, the selected cell is “on” (conducting state), whereas if the bit line does not conduct, the selected cell is “off” (non-conducting state).  Rino Micheloni et al., Inside NAND Flash Memories 20–24 (Rino Micheloni et al. eds., 2010).
[86] Giulio G. Marotta et al., Nonvolatile Memory Technologies with Emphasis on Flash 64 (Joe E. Brewer & Manzur Gill eds., 2008).
[87] Id.
[88] See, e.g., Christoph Friederich, Inside NAND Flash Memories 67, 77 (Rino Micheloni et al. eds., 2010) (explaining how a programming operation injects electrons into the floating gate of a transistor cell and how an erase operation removes electrons from the floating gate of a transistor cell).
[89] David J. Griffiths, Introduction to Quantum Mechanics 179 (1995) (“The fact is, all electrons are utterly identical, in a way that no two classical objects can ever be. It is not merely that we don’t happen to know which electron is which; God doesn’t know which is which, because there is no such thing as ‘this’ electron, or ‘that’ electron; all we can legitimately speak about is ‘an’ electron.”).  In fact, John Wheeler, a well-renowned American physicist, actually postulated that there is only one electron and that all electrons are simply manifestations at a particular slice in time of the world line of that singular electron.  Richard P. Feynman, Nobel Lecture: The Development of the Space-Time View of Quantum Electrodynamics (Dec. 11, 1965), in Nobel Lectures, Physics 1963-1970, at 155, 163 (1972), available at (“I received a telephone call one day at the graduate college at Princeton from Professor Wheeler, in which he said, ‘Feynman, I know why all electrons have the same charge and the same mass’ ‘Why?’ ‘Because, they are all the same electron!’”).  Magnetic fields are invisible forces.  So a similar conclusion can be reached knowing that magnetic fields generated by flowing electrons are indistinguishable from those generated by materials composed of magnetic domains.  Neville G. Warren, Excel Preliminary Physics 74 (2004).
[90] One could just as easily imagine having a protocol where the person at point A pours whatever water is contained in a bucket into the copper tubing every minute.  In that case, the user at point B only needs to stand under the copper tubing and determine which minutes of the five he or she gets wet to receive the communication.
[91] ReDigi, 934 F. Supp. 2d at 649.
[92] Id.
[93] Id. at 651.
[94] 17 U.S.C. § 109.
[95] ReDigi, 934 F. Supp. 2d at 655 (quoting 17 U.S.C § 109(a)) (emphasis added).
[96] Id.
[97] Id.
[98] See infra note 129 and accompanying text.
[99] This conclusion requires that the digital music phonorecord be transferred and, by implication, not retained by the transferor.  Aaron Perzanowski and Jason Schultz advocate for a similar position but under the common law exhaustion principle on a policy basis rather than the first sale statute on physics principles.  They say that if the original owner transfers his or her ownership interest in the file and the owner did not retain any copy of the file after transfer, the file should be sanctioned by the exhaustion principle.  Without this policy change, the current law on copyright practically prevents the owner from alienating his or her digital music at all.  Aaron Perzanowski & Jason Schultz, Digital Exhaustion, 58 UCLA L. Rev. 889, 938 (2011).
[100] ReDigi, 934 F. Supp. 2d at 651 (“As Capitol has conceded, such reproduction is almost certainly protected under other doctrines or defenses, and is not relevant to the instant motion.”).
[101] Id.
[102] 17 U.S.C. § 107.
[103] Id.
[104] Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 579 (1994).
[105] See Am. Geophysical Union v. Texaco Inc., 60 F.3d 913, 931 (2d Cir. 1994) (concluding that the fourth factor favored the copyright holder because photocopying academic articles in a commercial business decreased potential licensing and subscription revenue that the business would have had to pay when it wanted to access the articles if they had not been photocopied).  Contrarily, the Court might determine that the fourth factor favors time-shifting actions by viewing these activities as “caus[ing] . . . nonminimal harm to the potential market for . . . copyrighted works.” Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 456 (2012). However, this contrary position may be attributed to default bias in that there is a long-standing tradition to look past these actions instead of challenging them.
[106] Barton Beebe, An Empirical Study of U.S. Copyright Fair Use Opinions, 1978–2005, 156 U. Pa. L. Rev. 549, 584–85 (2008) (discovering that factor four and one coincided with the outcome of the fair use defense in 83.8% and 81.5%, respectively, of the 297 opinions analyzed while factor two coincided with the outcome in only 50.2% of the opinions).
[107] ReDigi, 934 F. Supp. 2d at 651.
[108] See, e.g., Newton v. Diamond, 388 F.3d 1189, 1196 (9th Cir. 2004) (holding that a three-note sequence from a jazz composition was a “simple, minimal, and insignificant” sampling, constituting de minimis use); Sandoval v. New Line Cinema Corp., 147 F.3d 215, 218 (2d Cir. 1998) (holding that copyrighted photographs shown in the movie Seven for 35.6 seconds was de minimis because the photographs were obscured, severely out of focus, and virtually unidentifiable).  But see Ringgold v. Black Entm’t Television, Inc., 126 F.3d 70, 77 (2d Cir. 1997) (holding that a copyrighted poster shown in a TV show for 26.75 seconds was not de minimis because the poster was clearly visible and recognizable with sufficient observable detail).
[109] The court noted that Capitol conceded defragmentation and file relocation were protected from copyright infringement.  See ReDigi, 934 F. Supp. 2d at 651 (“As Capitol has conceded, such reproduction is almost certainly protected under other doctrines or defenses, and is not relevant to the instant motion.”).
[110] As more files are stored remotely, i.e., stored in the “Cloud,” moving and transferring digital media will become nearly irrelevant for individual consumers but a highly relevant legal issue for remote storage companies.  Unlike individual consumers, these companies will have the bargaining power to secure these reproduction rights for themselves and for their users via contracts, avoiding uncertainties in the default copyright law rules.
[112] Id. ¶¶ 63, 89.
[113] Id. ¶ 85.
[114] Id. ¶ 76.
[115] Id. ¶ 78.
[116] See, e.g., iTunes Store – Terms and Conditions, Apple (Sept. 18, 2013), (“The software products made available through the Mac App Store and App Store . . . are licensed, not sold, to you.”).
[117] See Alan T. Sorensen, Bestseller Lists and Product Variety, 55 J. Indus. Econ. 715, 724–25 (2007) (presenting data of 1,217 books off the New York Times bestseller list that indicated 73.8% hit a sales peak within their first four weeks on sale with a resulting exponential decay afterwards and noting that these sales patterns can be seen in other entertainment areas).
[118] E.g., Silvio Petroluongo, Beyonce Bound for No. 1 as Sales Soar Past 400,000, Billboard (Dec. 14, 2013, 8:28 PM),‌beyonce-bound-for-no-1-as-sales-soar-past-400000; Keith Caulfield, ‘Beyonce’ Sales Grow to 550k-Plus, Set for No. 1, Billboard (Dec. 15, 2013, 10:14 PM),‌articles/news/5839792/beyonce-sales-grow-to-550k-plus-set-for-no-1; BEYONCÉ Shatters iTunes Store Records with 828,773 Albums Sold in Just Three Days, Apple (Dec. 16, 2013),; Keith Caulfield, Beyonce Spends Second Week at No. 1 on Billboard 200 Chart, Billboard (Dec. 26, 2013, 2:13 PM),; Keith Caulfield, Beyonce Leads for Third Week at No. 1 on Billboard 200 Chart, Billboard (Jan. 2, 2014, 12:54 PM),‌articles/‌news/‌5855135/‌beyonce-leads-for-third-week-at-no-1-on-billboard-200-chart; Danielle Harling, Hip Hop Album Sales: Week Ending 3/30/2014, HipHop DX (Apr. 2, 2014, 12:55 PM),; Andres Tardio, Hip Hop Album Sales: Week Ending 04/06/2014, HipHop DX (Apr. 9, 2014, 10:00 AM),  Although less established musicians may require a few weeks or months to create peak sales, those sales will still likely be made by original purchasers because the secondary supply will not meet consumer demand.  In cases like these, the exponential decay will not begin immediately but instead follow the fast rise.
[119] UsedSoft GmbH, ¶ 78.
[120] U.S. Patent No. 8,364,595 (filed May 5, 2009).
[121] U.S. Patent No. 7,818,811 (filed Dec. 6, 2005).
[122] U.S. Patent Appl. No. 13/531,280 (filed June 22, 2012).
[123] U.S. Patent Appl. No. 13/760,823 (filed Feb. 6, 2013).
[124] See ReDigi, 934 F. Supp. 2d at 649 (stating an ostensible maxim “confirmed by the laws of physics” that “[i]t is simply impossible [for] the same ‘material object’ [to be] transferred over the Internet”).
[125] See, e.g., 17 U.S.C. § 101 (defining a “digital transmission”); 17 U.S.C. § 117 (limiting certain exclusive rights for computer programs); Digital Millennium Copyright Act, Pub. L. No. 105–304, 112 Stat. 2860, 2873–74 (1998) (discussing limitations on liability for digital transmissions).
[126] 1 Surinder Pal Bali, Electrical Technology: Electrical Fundamentals 17–18 (2013).
[127] U. A. Bakshi & V. U. Bakshi, Basic Electrical Engineering 1-14 (2d ed. 2009).
[128] Curt White, Data Communications and Computer Networks: A Business User’s Approach 78, 83, 104 (5th ed. 2009).
[129] Bali, supra note 126, at 17–18; White, supra note 128, at 83.
[130] See supra note 89 and accompanying text.
[131] Vernor v. Autodesk, Inc., 621 F.3d 1102, 1107, 1111 (9th Cir. 2010) (noting that “[t]he first sale doctrine does not apply to a person who possesses a copy of the copyrighted work without owning it, such as a licensee” and holding that a software user is a licensee rather than an owner when the copyright owner “(1) specifies that the user is granted a license; (2) significantly restricts the user’s ability to transfer the software; and (3) imposes notable use restrictions”).
[132] In a case similar to Autodesk, involving promotional CDs rather than computer software, the Ninth Circuit held that a boilerplate “promotional statement” affixed to the promotional CDs did not constitute a license agreement and therefore did not prevent transfer of ownership to the recipients.  UMG Recordings, Inc. v. Augusto, 628 F.3d 1175, 1180 (9th Cir. 2011).  Even though the “promotional statement” stated that the CD remained property of the record company and was only licensed to the recipient for personal use, because the promotional CDs were dispatched without prior arrangement with the recipients, the CDs were not numbered, and no attempt was made to keep track of them, the court held that no license agreement had been created.  Id. at 1180–82.
[133] In the ReDigi case, ownership of the digital file was not contested.  See ReDigi, 934 F. Supp. 2d at 645–46.
[134] Technological workarounds are frequently seen in the patent realm where the infringing party believes it easier and less costly to change software and hardware rather than pay a licensing fee.  E.g., Facetime Workarounds of VirnetX Patents Bring Complaints, Costs, MacNN (Aug. 30, 2013, 7:00 PM),‌ (stating that Apple was working on fixing problems to a workaround for a patent infringing FaceTime component, which had been costing Apple $2.4 million per month in royalty payments).
[135] Because the new technique was launched on June 11, 2012, after Capitol Records filed the complaint, it was not considered in the ReDigi case.  ReDigi, 934 F. Supp. 2d at 646 n.3.
[136] ’823 Patent Appl., supra note 123, ¶¶ 35-46.
[137] Id.
[138] Id.
[139] Id. ¶ 31.
[140] Cartoon Network LP v. CSC Holding, Inc., 536 F.3d 121, 139 (2d Cir. 2008) (“Because each RS-DVR playback transmission is made to a single subscriber using a single unique copy produced by that subscriber, we conclude that such transmissions are not performances ‘to the public,’ . . . .”); Am. Broad. Cos., Inc. v. Aereo, Inc., 874 F. Supp. 2d 373, 378 (S.D.N.Y. 2012), aff’d sub nom. WNET, Thirteen v. Aereo, Inc., 712 F.3d 676 (2d Cir. 2013) (finding that a streaming television service did not violate the copyright holder’s public performance right because broadcasts captured by each user’s uniquely assigned antenna were not shared with or accessible to other users).  But see Fox Television Stations, Inc. v. FilmOn X LLC, 966 F. Supp. 2d 30, 47–48 (D.D.C. 2013) (reasoning that a streaming television service operating a unique mini-antenna for each user did infringe the plaintiff’s public performance right because other devices in the transmission, like the tuner, server, router, and video encoder, were aggregated among all users in a public manner); Fox Television Stations, Inc. v. BarryDriller Content Sys., PLC, 915 F. Supp. 2d 1138, 1143–44 (C.D. Cal. 2012) (disagreeing with the Second Circuit’s interpretation of 17 U.S.C. § 106(4), which grants an exclusive right “to perform the copyrighted work publicly,” and coming to the conclusion that the seemingly private streams are in fact public).
[141] London-Sire, 542 F. Supp. 2d at 174.
[142] For instance, Google Music, a free streaming music service for users that have uploaded their collection to Google servers, initially launched in May 2011 without licensing agreements.  Antony Bruno, Why Record Labels and Google Music Couldn’t Agree on the Cloud, The Hollywood Reporter (May 12, 2011, 3:30 AM),; Google Music Is Open for Business, Google Official Blog (Nov. 16, 2011),  By November 2011, Google had come to terms with three major record labels, obviously concerned about possible record label backlash.  Donald Melanson, Google Partners with Universal, EMI, Sony Music, 23 Independent Labels on Google Music, Scores Exclusive Content, Engadget (Nov. 16, 2011, 5:34 PM),  Before that time, Apple had already secured agreements with the major record labels for their paid iTunes Match service, which allows users to stream music in their collection without actually uploading any files to Apple’s servers.  Aaron Gottlieb, iCloud: The Devil Is in the Details, Music Bus J. (Aug. 2011), available at  Amazon has also secured licensing agreements with the major record labels to add similar subscription-based scan and match capabilities to its Cloud Player as well.  Press Release, Updated Amazon Cloud Player Includes New Scan and Match Technology, Free Audio Quality Upgrades, and More, (July 31, 2012),  And, as an attempt to quell music company fears, Microsoft has even touted that its offline reselling can benefit copyright holders of pirated content because of “its ability to ‘register’ such content back into media that generates revenue in the ecosystem.” ’811 Patent, supra note 121, col. 16 ls. 21–22.

3-D Printing Your Way down the Garden Path: 3-D Printers, the Copyrightization of Patents, and a Method for Manufacturers to Avoid the Entertainment Industry’s Fate

3-D Printing Your Way down the Garden Path: 3-D Printers, the Copyrightization of Patents, and a Method for Manufacturers to Avoid the Entertainment Industry’s Fate
Joseph C. Storch* A pdf version of this article may be downloaded here.   “3-D printing…has the potential to revolutionize the way we make almost everything.”
–President Barack Obama, 2013 State of the Union (Feb. 12, 2013).


In the next few years, three-dimensional printers, long a whisper of futurists and fantasy of technology columnists,[1] will begin showing up in homes all over the country. Over the course of time, they may become as ubiquitous as paper printers. The constructive possibilities for such printers are endless: fixing broken toys and home goods, modeling out rooms and additions, designing personalized jewelry for loved ones, and possibilities beyond this author’s imagination.[2] But concomitant with such advances for individuals is a risk for manufacturers: once individuals can “print” physical goods at home, perhaps with designs they acquire online, will they still purchase physical goods in stores? As the technology improves, and 3-D printers become capable of printing multiple types of media (plastic and metal, for instance), in multiple colors and with spaces and design elements built in, then such at-home manufacturing will inevitably compete with mass manufactured goods. While such possibilities may seem far off, it is wise to consider the policy and economic implications long before desktop 3-D printing becomes ubiquitous, so that manufacturing industries and policy makers can plan for the significant economic disruptiveness (although not necessarily destructiveness) of such a shift in technologies. It is this author’s hope that advanced planning and consideration of this issue will allow industry, consumers and policy makers to avoid the inevitable gnashing of teeth and making of accusations that seems to accompany major technological advances with disruptive potential.

A. A Brief History of Reacting to Technological Change

Such reactions to disruptive technology are not as new as modern intellectual property discourse seems to believe. In the late 1700’s, as America was developing as a nascent post-revolution country, across the “pond,” socks and other woolen garments were made in a labor-intensive method by individual cottage workers.[3] The socks were of low quality, itchy, and expensive; the methods of crafting them wildly inefficient. The development of the stocking frame loom by, among others, Richard Arkwright, promised to change all that.[4] With much less effort, socks could be weaved to be uniform, less itchy, and much less expensive. With funding from Jedediah Strutt, Arkwright built a water frame on the River Derwent that could produce socks and other garments in a more efficient and cost-effective manner than local cottage workers.[5] Fearing (correctly) that such progress would cause him to lose his craft, the story is told that Ned Ludd, a weaver from Anstey, England, led a mob that destroyed several stocking frame looms.[6] In the years that followed, similar “luddites” would attempt to damage machines and thus slow down technological progress. Suffice it to say luddites do not succeed. In Ludd’s time and since, initial attempts to squash technological change were slowly overcome by the sheer efficient forces of creative destruction.[7] Industries in the business of developing intellectual property, subject to the protections of copyright law, have devoted significant time and treasure to stopping or slowing the advance of technologies that make it easier to lawfully and (perhaps more often) unlawfully share copyrighted material.[8] They often found themselves complaining bitterly about a new technology and its harm to artists and creators, the industry, and society.[9] Ultimately, technology moves on and, in a line oft stated by attorneys, you can’t put the proverbial toothpaste back in the tube. Efforts to stem the advancement of technologies disruptive to intellectual property ownership have historically served only to delay the inevitable and create bad blood between producers and consumers. There is another path. As we approach a time where the ability to copy and reproduce many physical goods will be subject to the same technological change that has impacted production of pure intellectual property, producers, consumers and policy makers can consider the past examples cited above and the economic factors discussed in this article to determine whether there is a smarter path forward. Thoughtful planning and honest pricing can allow new technologies to develop while preserving the health of businesses that produce tangible goods. This article will discuss the history and purpose of copyright and patent law, tracing the history of technology used to copy creative works and the decision by copyright owners to transition from pursuit of commercial disseminators of copyrighted material to one where they filed lawsuits against consumers who shared protected intellectual property. It will then analyze this decision’s impact on the attitudes of consumers once the fine for violations was internalized as a price, how these litigation and legislative strategies failed to prevent intellectual property sharing, and economic rules of monopolies versus companies that must compete on price and quality. It concludes by drawing lessons from these histories to chart a course forward for producers of tangible goods to avoid future devastating divisiveness between producers and their consumers in the era of ubiquitous 3-D printing.

I. Copyright and Patent Law Exist to Advance Society, Not to Protect Artists

While many believe,[10] and content creators argue vehemently,[11] that copyright and patent protections were created to protect artists and inventors and allow them to fully exploit their work for fame and fortune, a plain reading of the Constitution leads to a different conclusion. Article I, Section 8 of the Constitution empowers Congress to “promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”[12] Courts have traditionally interpreted this clause to mean that the Framers intended primarily to advance knowledge for the public interest, not simply protect artists and inventors.[13] The Supreme Court wrote that “[t]he copyright law, like the patent statutes, makes reward to the owner a secondary consideration”[14] since “[t]he primary objective of copyright is not to reward the labors of authors.”[15] In granting to authors and creators a legal monopoly to copy and reproduce their works, the Supreme Court wrote that, “[t]he monopoly privileges that Congress may authorize are neither unlimited nor primarily designed to provide a special private benefit. Rather, the limited grant is a means by which an important public purpose may be achieved.”[16] That being said, copyright and patent law do involve a balance between the public good and the rights of authors and creators, allowing time to recoup some type of profit, so as to induce this creation.[17] Patents provide a protection to allow for profit making on an invention, since “the costs of duplicating a major new product are only about one-half of the original innovator’s research and development cost, and timely duplication of a major, patented new product is reported to be impossible in only a few industries.”[18] Ultimately, the Framers intended for the law to promote creation for the public good, not for a creator’s unlimited right to earn profit.

II. Three Types of Monopolies Protect From Copying

Producers of tangible and intellectual goods enjoy three types of monopoly. The first is a technological monopoly. If, practically speaking, the cost of producing a good at home is higher than purchasing that same good at a store, few rational people will choose to pay extra money and run afoul of legal and moral penalties to manufacture the good at home.[19] The second is a legal monopoly created by intellectual property law. Awarding certain limited rights to authors and inventors legally excludes others from also creating the same works (with limited exceptions). The final leg of the triad is the moral monopoly. When consumers believe they are inappropriately borrowing or even outright stealing physical or intellectual property, they will often feel a moral-based guilt in doing so.[20] Whether internally or externally based,[21] rooted in religion or created via societal ideals, the idea that one should not steal can be an important factor in preserving a monopoly for creators of tangible and intellectual goods.

III. Intellectual Property’s Lost Technological Monopoly Exposes a Weak Legal Monopoly

For most of this nation’s history, creators of mass market intellectual property maintained a technological monopoly that allowed them to be essentially the sole creator and manufacturer of media upon which one could read, watch, or listen to books, music, films and other creative works. For most Americans, it was far cheaper to purchase a creative work at almost any offered price than it would be to create it at home. That is to say, it was cheaper to purchase the Beatles’ “White Album”[22] from a record store than to obtain a press and forge the record for yourself.[23] In fact, the technological monopoly on music provided by the label owning the master off of which all clear copies could be made was so strong that Congress did not even add copyright protection to sound recordings until three years after said album debuted.[24] It was cheaper to purchase “1984”[25] at a bookstore than to buy a printing press and make yourself a copy.[26] There was commercial-level copyright infringement of books and records,[27] but rarely among consumers.[28] So long as creators and publishers of creative works maintained a technological monopoly, it was easy to maintain the legal and moral monopolies as well. Since one could not practicably manufacture their own version of “For Whom the Bell Tolls”[29] even if they wanted to, it was easy for consumers to say they respected intellectual property law and would not take what they did not own. That is to say, practically speaking one couldn’t violate the legal and moral monopolies even if he or she wanted to, and so there was no need to even imagine the implications of doing so. The technological monopoly was sufficient and virtually all encompassing.

A. A History of Sharing Copyrighted Content:

Though some trace the “beginning of the end” of the technological monopoly on copyrighted content to the deployment of Napster in 1999, the end actually began much earlier, with the advent of audio and video tape and the technology to dub audio and video at home.[30] For the first time, users at home could capture songs from the radio and video from television, and could copy works they owned or obtained and sell or give away those copies. Yet this technology did not tumble the walls of intellectual property law, at least in part because copies usually had poor (and increasingly diminishing) quality,[31] it was time and work-intensive (copying required physical effort and was not instantaneous), required purchase of blank media, and there was no economic reward to be reaped by selling or giving away such tapes (mix tapes for teenage lovers notwithstanding). Such copies were scattered, of poor quality such that they were not a true replacement good and, while cheaper, were not so cheap as to truly disturb profits. While cracks in the walls of copyright law appeared, most users purchased creative works the “old-fashioned way,” in bookstores and record shops. Intellectual property owners historically used litigation and legislation passed by Congress to go after commercial and large scale reproducers of material protected by copyright law,[32] while rarely bringing suit or seeking redress against consumers or end users of illegally copied materials.[33]

B. Napster Shepherds in an Era of Digital Frictionless Sharing

In 1999, Sean Fanning, a student at Northeastern University in Boston, released Napster onto the web.[34] While Napster was not the first forum used to share music through the MP3 format,[35] it quickly became the most popular to date.[36] For the first time in history, the technological monopoly on creation of perfect digital copies[37] of protected work fell; it was not just cheaper, but essentially free, to quickly create a precise duplicate of a creative work, and to share that work with friends or strangers in the next room, a nearby residence hall, or a continent away. While initially much of the illegal sharing of copyrighted content took place at colleges and universities with high-speed Internet connections, in short order, as more homes traded in their dial-up connections for high-speed Internet, the practice became more widespread in society.[38] Further, while the initial impact of file sharing was on music files, movie and television producers felt the sting of digital piracy as more homes signed up for DSL or cable broadband and the transfer time for large files significantly decreased.[39] Around the same time, the technological monopoly fell for textbook makers. From time immemorial, college and university students have purchased required and optional textbooks to accompany their courses. During this period, the price of textbooks was increasing significantly,[40] alongside other rising college costs. Prior to the significant cost reductions of printers and scanners, textbook companies had a technological monopoly. Students could either purchase the book from the college bookstore or another retail environment, or not acquire the books at all. Much to the chagrin of publishers, students developed a thriving formal and informal market for used textbooks, firmly permitted under the First Sale doctrine.[41] Publishers fought these markets with frequent new editions, lowering the value of older (even recent) editions,[42] by including floppy discs, CD-ROMs, DVDs, or one-time-use Internet codes alongside the books for access to additional content, and later by licensing use or rental of some textbooks, rather than outright sale. Although many classes require use of only a small portion of a larger book, publishers sell textbooks whole.[43] In Kirtsaeng v. John Wiley & Sons, Inc.[44] Kirtsaeng, a student at Cornell University and the University of Southern California, realized he could exploit a market inefficiency—although the textbooks for sale in Ithaca or Los Angeles cost a great deal, the same content was available in his home country in international editions of these textbooks, at a steep discount, reflecting different prices that the same publisher charges in different countries.[45] Kirtsaeng’s attempt at international arbitrage was met with hostility by the textbook publishers who filed a suit for violation of their copyright in these works.[46] The Supreme Court ruled in Kirtsaeng’s favor, allowing first sale to apply even for textbooks purchased overseas.[47] While the Kirtsaeng case describes somewhat extreme steps taken to obtain textbooks at a lower price, other college students took a simpler route. While many chose to go without required textbooks due to their cost,[48] with the advent of low cost scanners and printers (which sometimes were included with purchased computers at no additional cost), students could simply break the binding of a book, put the pages through a scanner, and share or print additional copies.[49] In that way, multiple students could split the initial expensive cost of a textbook. Even though their copy would not be as nicely bound, many cost-conscious students felt such a sacrifice was acceptable if it meant significantly cutting the cost of textbooks. As with the music and movie industries, once the technological impediments to reproduction of textbooks fell, the only monopolies protecting such works were the legal and moral monopolies. Students, who had watched the prices of textbooks increase significantly,[50] even as they were forced out of the used market by rapid arrivals of new editions, may have felt fewer moral pangs in copying these books. Once that moral monopoly fell, the legal monopoly of copyright law was not sufficiently strong to prevent students from copying and sharing textbooks.

C. Similarities and Differences of Copyright and Patent Law

Just as copyright law provides a legal monopoly for expressions created and placed in a tangible medium, so too patent law provides protection for new, non-obvious, and useful methods and manufactures. Both regimes create legal monopolies wherein the owner of the creation can determine if, how, when and where the item is distributed as well as the price (if any) charged to access the item. This next section deals with what may be called the “copyrightization” of patent law. Patent law and copyright can be thought of to have traditionally protected different aspects of intellectual property law, the embodiment of an idea and the expression of an idea.[51] When an author obtains a copyright in a work, she or he isn’t protecting the physical embodiment of a book or a record in the store, but the expression of the creative content that is incorporated into that physical book or record, such as the plot, character development and dialog.[52] Conversely, a patent could be obtained on a new type of book format[53] or a new method of displaying text in a book (such as using backlight liquid crystal display), regardless of the content expressed in that book. With 3-D printing, however, the lines between the two forms of intellectual property protection begin to blur. Unlike writings, songs, movies and other works of creativity fixed in a tangible medium, the core of what is protected by copyright law,[54] the design of a tangible product does not have such protection. Small aspects of a physical product may be protected by copyright, such as the writing on the product or its packaging, or software that makes the product run. The name, symbols, logos and slogans of a product may be protected by trademark law.[55] Design patents protect new and non-obvious non-functional aspects of a physical product. Additionally, in some cases, the unique and well-known shape of a product itself may take on protections under the trade dress aspects of trademark law.[56] But the design and functionality of an item are aspects intended to be protected by patent law.[57] In fact, in today’s technological landscape, a single product may have components protected by various patents, expiring at different times, and also protection for the product as a whole.[58] Patent applications are expensive, complicated, and time consuming to create, file and prosecute to issuance, and although patent lawsuits alleging infringement are common, those alleging direct copying are not common.[59] Patent law does not have an administrative process as copyright does following the passage of the Digital Millennium Copyright Act (DMCA).[60]

IV. Using the Legal System to Enforce Copyright Backfired and Set a Price on Violations

When Napster and other file sharing technologies were released and experienced significant uptake, especially in the beginning by college students, the members of the Recording Industry Association of America chose to act in a way that was acceptable under the law but, for the reasons detailed below, was a fundamental error in business judgment. By suing college students and others across the country, the industry certainly brought attention to the issue of file sharing of copyrighted work without consent, but it did so in a way that turned copyright violation from a moral issue into a market issue. Without intending to do so, the industry set a price on violating copyright law, and the price it set was lower than the cost of purchasing material legally. It should be noted that the intention of this article is not to vilify the leadership or members of entertainment industry organizations[61] who made these choices when they came upon forces that were fundamentally changing their business model, and not (in their view) in a positive way. The organizations did not, at that time, have the benefit of the hindsight used in the analysis here, and it would be unfair to expect them to have had that insight at such a turbulent time. Behavioral economists have two theories that amply explain the reaction of entertainment industry members to the distribution of their intellectual property via peer-to-peer protocol: the status quo bias and the endowment effect. The status quo bias explains a phenomenon wherein individuals have a significantly exaggerated preference for the status quo, even if changes they are offered would be beneficial. To adopt a change, therefore, the units of gain in the change must be significantly higher than the units of gain by simply leaving things the way they are.[62] Napster came out at a time that the recording industry was enjoying record profits from compact disc sales.[63] Napster and other peer-to-peer services represented a fundamental shift in the method of providing content to consumers, and it was not immediately apparent to industry leadership how they could monetize this system in as robust a manner as their current sales. Now, with the benefit of hindsight, we can point out steps the industry should have taken: purchasing Napster,[64] launching their own robust competitors, or agreeing to an iTunes style sales format at an earlier stage. They did not, as it is very hard to move away from a success into the wild west of a new system. In a manner similar to the status quo bias, the endowment effect occurs when individuals are unwilling to part with an asset they have invested in, even when it is taking a loss. People will hold onto stocks or homes that are losing money, hoping that they return to positive territory, and will hold them all the way down to zero or very low valuations, rather than selling at a loss.[65] For the recording industry, and slightly later, the movie and television industries, their reference point for the revenue and profit earned by distributing entertainment content was set during a very successful decade for sales.[66] Even as the value of these assets decreased when fewer and fewer consumers purchased content in traditional retail environments, with sliding sales taking profits alongside, it was very difficult for the entertainment industry companies to cut their perceived losses and switch to another method. Just as we are loath to sell a losing stock, hoping that it will come back into positive territory so we can sell it at a profit, so too, industry representatives wished strongly for a return to the heyday of the late 1990’s, and may have assumed that a vigorous campaign of legislative lobbying and lawsuits would return them to these profits. There is disagreement among researchers as to whether or not Napster and other digital sharing have hurt overall content sales in the long run.[67] Ultimately, although sales of physical copies of content continued their decline, sales of digital content have risen significantly and less than a decade after Napster’s debut all music sales hit its highest level ever, 70% of which were legal digital downloads.[68] While it is not helpful to cast blame and aspersions backwards, when the same choices arise for physical goods manufacturers, they will likely possess the same status quo bias and endowment effect that the entertainment industry possesses. The purpose here is to note that we are quickly approaching an inflection point in the ability to reproduce physical items, and to chart a different path wherein those manufacturers can still find success, albeit only if they overcome these natural biases. The latter sections of this article lay out choices the industry can make that will significantly impact its relationship with its customers and its economic path forward.

V. Morals to Markets: A Fine is a Price

To some renown, the music industry unwittingly turned the act of piracy from a moral issue to a market issue by suing college students accused of sharing music in violation of the copyright law and quickly settling those claims. Once the lawsuits turned exchange of copyrighted files over peer-to-peer networks from a moral issue to a market issue, the question was not right or wrong, but simply what is the price? If the price of legal options was higher than the price of violative options, then a market actor would take the economically appropriate route—access content even if it violates the copyright law. In a seminal study of behavior and pricing, Uri Gneezy and Aldo Rustichini took on the classical economics theory that assessing a price will always lower demand.[69] More specifically, the authors wanted to look at the classical deterrence theory, which says that punishment deters “future crimes on the assumption that a higher expected punishment produces lower levels of criminal behavior.”[70] Stated otherwise, “the higher the cost of committing crimes, all else being equal, the lower will be the crime rate.”[71] The authors studied private daycare facilities in Israel that did not charge parents an additional fee for retrieving their children late, but such late retrievals required that an uncompensated teacher stay late to care for the child, and thus caused a guilty feeling among tardy parents.[72] They looked at 10 private facilities, observing them for a period with no treatment to count the number of parents who retrieved a child late.[73] The authors then added a treatment to six randomly chosen centers; a small fine imposed for parents who retrieve a child late, while four centers remained static as controls.[74] The fine was not steep or devastating,[75] 10 New Israel Shekels (NIS)[76] for those at least 10 minutes late, and was assessed per child retrieved late (without regard to how late the parents arrived).[77] The fine was posted on a board that could be seen by all parents[78] and was added to monthly tuition charges paid to the principal, not to the teachers who remained late.[79] Then, after several weeks of treatment, the fine was removed with no further explanation as to why it was removed.[80] Classic deterrence theory would postulate that with the assessment of a fine, the incidence of late retrieval would decrease, and then return to its stasis after the fine was removed. But that is not what occurred. Instead, while the incidents of late retrieval in the control group remained constant, in the treatment group, the “number of occurrences of delay increased steadily in the first 3–4 weeks after the introduction of the fine . . . [and] finally settled, at a level that was higher, and almost twice as large as the initial one.”[81] Just as interesting, when the fine was later removed, the incidents of late retrieval did not return to its initial levels, but remained stable at the higher level attained when the fine was imposed.[82] There are several possible explanations for this phenomenon, which cuts against everything we learn in classical deterrence theory.[83] One explanation is that in the initial weeks, parents felt an unstated push to keep late retrievals rare, since there is an incomplete contract in place—they do not know what will happen if they retrieve their child late too many times. Once the fine is imposed, however, the consequence for late retrieval is certain, albeit worse than the unstated. The parent can make a cost/benefit decision whether to arrive late.[84] In such an explanation, once the fine is removed, the parents still see the fine as the worst possible outcome, and still behave in this manner.[85] A highly theoretical explanation posed in a later paper on the topic is that “there is a unique social norm…that prescribes that individuals should be on time and not late. The introduction of a monetary fine for parents who come late is deemed to reduce the psychological cost arising from the violation of the social norm,[86] and this, in turn, erodes the bite or effectiveness of the social norm against delinquency.”[87] That erosion, therefore, explains why parents increasingly arrive late and why lateness is sustained after the fine is removed.[88] The more compelling explanation, however, is that of a change in social norms from a nonmarket activity (here referred to as moral activity) to a market activity. Gneezy and Rustichini posit that the “introduction of the fine may have changed the perception of the two relevant acts: the parents coming late and the teachers taking care of the children after closing time.”[89] Prior to the addition of the small fine, parents “may have interpreted the action of the teachers . . . as a generous, nonmarket activity” where the teacher is kindly staying late and the parent should not take advantage of that generosity of spirit.[90] The fine changes it from a moral question of not taking advantage of a generous teacher to a simple market transaction. The authors argue that the parents feel justified in late retrievals, reasoning that the “teacher is taking care of the child in much the same way as she did earlier in the day. In fact this activity has a price . . . [and] I can buy this service as much as needed.”[91] While the authors acknowledge that the fee assessed was a minor fee, and believe it “true that a ‘large enough’ fee would eventually reduce the behavior,”[92] they theorize that “[w]hen help is offered for no compensation in a moment of need, accept it with restraint. When a service is offered for a price, buy as much as you find convenient.”[93] This is where they draw their conclusion that “a fine is a price.” Yet even after the fine was removed, parents still retrieved children late. This is because even with the fine removed, the activity remains one of market terms or, as the authors refer to it, “[o]nce a commodity, always a commodity.”[94] In the third period, the activity of late retrieval simply switched from a commodity with a low price to a commodity with a zero price.[95] This is not the only study to find changes in behavior when an action switches from a moral activity to a market activity. Called “motivation crowding,” the effect occurs when external financial incentives or punishments undermine or strengthen an individual’s internal motivations to act in a certain way.[96] That is to say, external factors such as financial payment or cost will “crowd out” the individual’s natural internal compass. Citizen’s willingness to have a “hazardous waste treatment plant in their local neighborhood decreased if monetary compensation was offered,”[97] paying for blood donations reduces willingness to donate blood,[98] and many Norwegian club members who volunteer annually for community service said they would participate less if offered a fee.[99] Intrinsic motivations to pay taxes based on “civic virtue” can be crowded out by extrinsic threats of penalties for noncompliance, and increasing the penalties for tax evasion may crowd out that intrinsic motivation as “people feel they pay their taxes because they have to, rather than because they want to.”[100] One reason that financial or other extrinsic rewards can “crowd out” natural motivation to undergo a task is that an individual’s self-view becomes murky as to whether they are undertaking an “activity to ‘do good’ or to ‘do well.’”[101]

VI. Peer-To-Peer File Sharing: A Lawsuit Settlement Sets a Price

With the advent of peer-to-peer file sharing of copyrighted material, the entertainment industry, which historically had filed suits against commercial and large scale copyright infringers,[102] and which did so in this domain with a series of lawsuits filed against Napster and other peer-to-peer file sharing software providers,[103] for the first time set its sights on consumers of unlicensed copyrighted content, thousands of college students and others who uploaded unlicensed material using peer-to-peer protocols.[104] Yet, even with the threat of lawsuits, downloading activity increased.[105] For young people at that time, the price of accessing a single song was very high, at least as measured in how long one had to work at minimum wage to obtain that song legally. In 1998, at the advent of Napster, compact discs were sold for $12, $15, or even $20 each, and only a few songs were available as singles for individual purchase.[106] In order to listen to a single song, someone making the minimum wage of $5.15 per hour in 1998[107] had to work four hours. Today, by contrast, single songs can be purchased legally on a variety of sites, including iTunes, Amazon, and Wal-Mart for an amount that hovers between one dollar and two dollars (and sometimes less), while the minimum wage is $7.25.[108] Today, one need work mere minutes to earn enough income to cover the price of legally purchasing a song. The first truly accessible, global legal option for obtaining copyrighted material did not arrive until the release of Apple’s iTunes in 2001.[109] In this three year window preceding the availability of legal downloading options, consumers were presented with a binary choice—they could purchase music and other content in the older compact disc or tape format from stores or other retail outlets at a price that had a serious cost in terms of hours worked to obtain the content,[110] or they could access the same content, in the newer and more portable MP3 format and with no out-of-pocket cost, but in a manner that violated copyright law.[111] All consumers wish to be treated fairly in their transactions,[112] and, despite industry statements to the contrary, do not act out of pure self-interest, do not “free ride” as often as they are accused, and will usually act in a pro-social manner.[113] Interpretations of fairness disdain transactions where one party seems to be gouging the other party, especially when compared to the reference price at which one believes they ought to pay.[114] When those meting out a punishment “can make profit by punishing, neither those who observe the punishment nor the punishment recipients view punishment as expressing social norms.”[115] For college students, as Napster and its progeny spread, with no comparable legal offering from the recording industry, the reference price for a single song switched from that required by purchasing a compact disc to, essentially, free. To purchase during that wave was to pay more than the reference price (which millions still did). As the price of legal music rose, however, fewer were willing to pay the even higher prices for legal access when the same content was available free, even if it violated the copyright law.[116] Even worse than simply eschewing legal purchases for accessing content through Napster and other peer-to-peer protocol, economists have found that those who feel they are being mistreated or gouged in a transaction are more willing to punish that unfairness.[117] In fact, feelings of reciprocal punishment for perceived negative behavior are even stronger than feelings of reciprocal reward for perceived positive behavior.[118] The external monetary motivation of the industry lawsuits crowded out the internal incentive to act in an honest way and pay for the content one acquires.[119] “Civic virtue (a particular manifestation of intrinsic motivation)…bolstered if the public laws convey the notion that citizens are to be trusted,”[120] was undermined by the industry’s actions in pursuing lawsuits against individuals. Conversely, when citizens feel that they are not trusted, they react by breaking the law if they expect the cost of doing so to be low.[121] In a study, students who already shared files reported that heavy sanctions led them to believe their behavior was more ethical than moderate sanctions did.[122] Individuals are less likely to steal actual cash than they are to engage in theft of credit or cash value that is not itself hard currency.[123] So, too, those who would never steal a compact disc from a store may be more willing to engage in file sharing of copyrighted content since there is some separation from the physical good or cash value. It is likely that the anonymous nature of file sharing along with its separation from cash transactions may have diffused the moral guard against taking what one does not own.

A. Incentives to Settle for Plaintiffs and Defendants

It is expensive to defend oneself in a copyright infringement case. The Copyright Act uses strict liability, meaning intention to violate is not relevant.[124] According to an American Intellectual Property Association report, defending a copyright claim for an amount in controversy below one million dollars “costs on average $303,000 through the end of discovery, and $521,000 through trial”[125] in addition to the significant statutory violations which can be awarded in lieu of actual damages.[126] This provides a strong incentive for defendants to settle.[127] But there are also strong reasons for plaintiffs to settle these claims. The cost to litigate is expensive, and consumer defendants who are found liable may be essentially judgment proof. In two notable cases that did go to trial, juries assessed verdicts in the hundreds of thousands or millions of dollars against single mother Jammie Thomas-Rassert and Boston University student Joel Tenenbaum.[128] The cases have gone through many appeals and proceedings, but despite all the legal expenses,[129] it does not appear that the recording industries have collected a penny. Further, there was a general public feeling in response to these hefty awards that the amounts were “disproportionate and excessive.”[130] Rather than striking fear into the heart of potential copyright infringers, the high awards led to a backlash against the industry. Settlement for plaintiffs gives surety as to the amount they will expend compared to the revenue they will bring in. Although the civil statutory penalties for violation of the copyright law are set at $750 to $150,000 per infringement,[131] with $30,000 to $150,000 the penalties for willful infringement[132] (alongside the potential for criminal copyright penalties),[133] the industry chose to give potential defendants[134] (quite often college and university students) the opportunity to settle the claims against them for a fee of $3,000 to $4,000.[135] As a further incentive to settle, plaintiffs reportedly doubled the settlement costs for those who delayed in responding or actively challenged the claim against them.[136] Alongside subpoenas that sought the identity of individuals who shared files at the Internet protocol (IP) address observed by an industry contractor’s software, legal representatives for the industry plaintiffs would send colleges and universities pre-litigation settlement letters.[137] Plaintiffs would request that the institutions forward these letters to the individuals who matched the IP addresses caught sharing files. Nothing in the copyright law compelled institutions to so share these settlement offers, but many institutions, afraid that their students could face financial ruin if a jury assessed the statutory penalties against them, and perhaps considering the blowback when such defendants learned they could have, theoretically,[138] bought off their troubles for a fraction of the cost, chose to share the letters with the accused students.[139] Recipients of the letters could go to a Web site, enter a specified code, and settle claims against them for a designated fee.[140] College students (or their parents) were even given the option of paying by credit card. While reportedly over 20,000 settled their cases,[141] there are no precise public statistics of how many settled claims in this matter or who they were. The process and cost associated with settlement certainly became known to the settlers, their friends, and other students through social media, the popular press, and word-of-mouth. Just as in the daycare study, the cost of the fine was, on average, small. Further, just as the daycare fines were paid to the principal, not to the teacher who stayed late, the settlement fines were paid to record companies, and there was a perception among students that the funds were not returned to the artists who created the works.[142] Even though the recording industry stopped filing new lawsuits in December of 2008,[143] the price had been set as it was in the daycare study, and the transaction had been permanently transitioned from a moral activity to a market activity. While the industry probably could not have predicted it, the lawsuit campaign was not a classical economics disincentive to action, but merely the setting of a price. That price was lower than the cost of purchasing content legally, and consumers acted accordingly.

B. With the Market Price Set, Prospect Theory Predicts Risk Taking in Avoiding Loss

In a paper that led to the Nobel Prize in Economics, Daniel Kahneman and the late Amos Tversky laid out a theory of assessing and engaging in risk when in positions of losses and gains.[144] Prospect theory was a deviation from the long-taught expected utility theory and explained how people actually behave in cases of prospects (or gambles).[145] The economists found that survey answers violated expected utility theory—people overweight outcomes they consider certain relative to outcomes they consider probable[146] and “discard events of extremely low probability.”[147] Individuals do not, in fact, weigh all outcomes and then choose without emotion. How questions are framed (as a positive or a negative) significantly impacts how individuals make choices[148] and individuals treat losses of an amount as more painful than a gain of the same amount is pleasurable.[149] When they are in a position of accruing gains, people are risk averse; when they are in a position of suffering loss, people are risk seeking.[150] Given choice between two prospects, both of which are negative, people are willing to take on larger risk to avoid a more painful prospect over a less painful, but more certain, prospect; those same individuals are unwilling to take those risks in choosing between positive prospects.[151] With the price of violating the copyright law set in popular culture at $3,000 to $4,000 dollars, with an extremely rare judgment for a large amount of money, individual users could make an actual or implicit cost/benefit analysis for engaging in violations of the copyright law that left morality and legality out of the equation.[152] They would accurately assess a small likelihood of being caught.[153] Purely based on probability, an individual could assess his or her subjective analysis of the likelihood they would be caught and multiply it by the published rate for being so caught. Such individuals, often young people, may have an overdeveloped sense of invulnerability, which may have further lessened their perceived chance of being caught.[154] When Napster came out, the choice to access a single song was binary—either purchase a compact disc in a store at significant cost, or acquire the song illegally over peer-to-peer file sharing, but with no out-of-pocket cost. That retail cost was certain. The cost of a lawsuit or settlement for peer-to-peer file sharing, incredibly small, would, according to prospect theory, be disregarded. From an economics standpoint (in this new market activity), the choice is clear. Even years later when iTunes arrived, it was still a choice between a gamble of a potential fine that is so small and unlikely that it might be disregarded entirely, and a sure ninety-nine cent cost for a song. For instance, even acknowledging that individuals have difficulty with precision in making small calculations,[155] if a student at a college of 20,000 students saw an e-mail from the technology office saying that five students were caught illegally uploading files and had to pay settlements/fines of $3,000 each, they could do a little subconscious math[156] to determine their average chance of being caught is roughly .00025, or too small to even measure. Due to coherent arbitrariness in our assessments, while we are able to perceive changes in valuations or comparisons between two choices of value or risk in an orderly manner, we are very poor assessors of chance of an event occurring or value of an item without available anchors to help us make that assessment.[157] If one multiplied that very small chance of being caught against the cost of settling a claim with the industry, they would result in a fee of seventy five cents,[158] less even than the cost of purchasing the same song on iTunes, when that service arrived in 2001. As stated earlier, however, students may have looked at that news announcement and concluded that those caught file sharing were not smart enough to do so without being caught. In such a case, they may have concluded that the chance of being caught approached zero, making the calculated potential cost of a $3,000 penalty also close to zero. For such individuals, with the legal and moral questions already cast aside by the published price on violating the rules and the technological problems solved by peer-to-peer technologies that allowed for easy and increasingly anonymous sharing of files, even the economic disincentive would not have been present. Like the Israeli daycare parents, a fine was assessed and then, in all practicality, removed. The result was an activity that was classified by users as market, but with no out-of-pocket cost associated with the activity. Further, when the penalty calculation is comparatively small, and the perceived chance of being caught is exceptionally low, individuals may take pride in avoiding being caught, and look down on those caught. Those who study accidents and road mileage could probably, given enough data, pinpoint the financial cost to the economy and society of each mile driven over the speed limit. By measuring the increased risk of an accident for each mile-per-hour over the speed limit, multiplying that by the average cost of such an accident, and by the estimate that speeding is involved in about one third of all accidents,[159] we can arrive at a projected cost for each mile driven over the speed limit, X. We can then add X to a calculation of the average final cost of a speeding ticket (after plea bargaining), multiplied by the percentage chance that the marginal additional mile would cause a police officer to pull into traffic to pull a driver over, Y and come up with Z, an average cost for each mile-per-hour over the speed limit that one drives. That number, however, would be so small as to be incalculable and, thus, in all practicality, irrelevant for most people. Drivers do not do this calculation.[160] They do not consider the long-term moral cost or the potential economic damages of speeding when they depress the accelerator. Instead, drivers operate based upon recent road conditions and experience with the police. When a driver sees a police car on the side of the road, he or she slows down. As the police car fades into the rearview mirror, the speedometer slowly creeps up again.[161] When drivers are pulled over, that ignominious feeling that creeps over one as a police officer slowly approaches the vehicle is not a feeling of shame over violating the law, or a feeling of immorality at having, through increased speed, needlessly risked the lives and well-being of themselves, their passengers and their fellow travelers. Rather it is simply a worry over how much this ticket will cost and whether accompanying points will result in raised insurance premiums. By establishing a regime of fines for speeding, and robust plea bargaining for lesser financial penalties, municipalities converted a moral matter to a market transaction; in setting a price on speeding, societies changed the calculus from a concern about violating the law or a set of moral standards to a simple economic calculation. In addition to the lawsuit campaign turning a moral activity into an economic activity by setting a price on violating copyright law through peer-to-peer file sharing, researchers found that the sanctions could raise significant anti-copyright feelings[162] among the group of consumers who are both likely to purchase the products legally and likely to engage in peer-to-peer file sharing. Specifically, the stronger the sanction and likelihood of the sanction coming to pass, the higher the aversion to the policy of enforcement,[163] and the higher the expectation for continued downloading,[164] especially when compared with the lower anti-copyright impact of moderate sanctions. When technological changes offer those faced with sanctions the opportunity to resume downloading with less fear of sanction, those who faced the most severe sanctions indicate they would download more than those who faced moderate sanctions.[165] The fact that only a few were sanctioned lead to a sense that they were “singled out” for punishment.[166] While they probably could not have predicted it at the time, and may still believe that the lawsuits had a positive impact,[167] ultimately, the lawsuit campaign against consumers by the Recording Industry Association of America and later the Motion Picture Association of America,[168] failed to decrease file sharing,[169] bring in new revenue for artists or bring positive attention to the record companies.[170] Just as the driver speeds up as the police car fades into the background, users of peer-to-peer file sharing services, cognizant that a price has been set upon their illegal actions, may become more tempted to violate the law as the memory of those who were punished fades into the past. While a user of a peer-to-peer file sharing service may think twice about opening the program in the hours or even days after a report of a major fine assessed against a fellow user, as memory of that fine fades into the distance, the economic calculus will shift, the perceived penalty will decline and, with no moral or legal hesitancy remaining, the user will choose to share the files if the economic advantage seems to outweigh the cost.

VII. Using the Legislative System to Crack Down on Copyright Violations

Another tactic used by the entertainment industry to attempt to stem the tide of peer-to-peer sharing of copyrighted material was to seek assistance from Congress and various state legislatures. While it would be fair to say that Congress was eager to respond to the lobbying entrees of the industry,[171] and quick to pass civil[172] and criminal laws,[173] often drafted by industry representatives,[174] and meant to impede improper sharing of copyrighted material,[175] it is not clear that such lobbying and legislation served the industry’s long-term interests. Some would argue that the legislative results, and the one-sided manner in which they came about, caused consumers to question whether Congress was acting as a fair dealer. In some cases, it led to open revolt against further legislation. Some scholars and consumers take the view that in recent decades, copyright moved away from its traditional role as a cradle of creativity to a regime of protecting producers and distributors at the expense of creators and consumers.[176]

A. Interest Group Politics Historically Carried the Day on Intellectual Property Changes

The response to peer-to-peer file sharing by content producers and distributors is a classic example of special interest group politics.[177] While opposition to changes in copyright law is diffused,[178] and may be held slightly by a large population, a small group with passionate beliefs in favor of stricter laws, especially a group with access to campaign donations,[179] a story that impresses Congress,[180] and celebrity testimony, can carry the day.[181] To accomplish their goals, intellectual property owners used impassioned testimony, including from famous celebrities, artists and musicians, and also used statistics and reports to prove their points to members of Congress. Unfortunately, not all of the statistics used in defense of stricter civil and criminal penalties for violations of copyright law have been completely accurate—conclusions have been overstated[182] and data has been based upon guesses or press releases.[183] The statistics and reports worked, however, and were accepted by Congress with little questioning or dissent.[184] While for decades these tactics worked with little or no opposition, the feeling by the electorate and consumers that industry can enact any law it likes regardless of the consequences has a dispiriting impact on their views of that industry.[185] Citizens are willing to comply with laws they view as legitimate and aligned with their values,[186] even if they disagree with the law[187] or compliance goes against their self-interest, and such feelings of legitimacy are a better predictor of compliance than are deterrent actions.[188] Of the two methods that are used to shape behavior, incentives and deterrence,[189] “coercion rarely succeeds in forcing compliance with laws that significantly depart from shared societal values”[190] and can even cause a backlash against such laws.[191] Further, on top of the perceived fairness of the laws themselves, citizens “perceptions of how they are treated by the authorities strongly affect their evaluation of authorities and laws, and their willingness to cooperate with them.”[192] Legislative dominance by a small interested group, seeking legislation that others would not consider pro-social, has led some to develop an intense anti-copyright culture,[193] or at least to question the legitimacy of heavy-handed punishment of file sharing.[194]

B. Diffuse Opposition Solidifies and Strengthens Through the Internet and Social Media

The Internet has had an interesting impact on interest group politics. In addition to the impact of traditional news and interest groups on the Internet, individuals have organized themselves into new and more finely grained interest groups that can challenge traditional organizations.[195] Those interest groups did not limit their discourse and activity to the online environment; they also and to great effect pursued “their interests in traditional regulatory forums.”[196] Unlike the run up to the Digital Millennium Copyright Act (DMCA) and other copyright laws, the response to two pieces of legislation meant to add additional protections against online copying of protected material as well as physical counterfeiting of goods was vigorous and well organized. The House version, the Stop Online Piracy Act (SOPA)[197] and the Senate version, the Protect IP Act (PIPA)[198] had differences, but at base they both sought to provide the Federal government and intellectual property holders with the ability to administratively shut down Web sites and online purveyors of products infringing intellectual property protections. The proposed laws gathered momentum and co-sponsors, with significant support[199] and lobbying from the entertainment industry.[200] But industry’s push for the relief sought in SOPA and PIPA was unsuccessful. Technology companies that opposed the legislation, who are themselves quite a powerful lobby,[201] joined with advocacy groups and ordinary citizens,[202] to vigorously oppose the legislation. Scholars breathlessly (and perhaps with some stretching) claimed the bill would violate everything from the First Amendment[203] to human rights,[204] and thousands of Web sites, including Wikipedia,[205] Google,[206] and Facebook[207] either were blacked out[208] or included messages of opposition to the bills. While individual consumers and organizations interested in the issue may have little or no clout alone, when aggregated through the organizing power of the Internet and social media, their opinions cause Congress to take notice.[209] Members of Congress withdrew support,[210] and neither SOPA, nor PIPA, came up for a vote.

VIII. More People Violating Copyright Law Leads More People to Violate Copyright Law

Another tack that industry representatives took (understandably) in trying to raise the profile of the problem of peer-to-peer file sharing was to state (and sometimes overstate)[211] the percentage of people, particularly college-aged, who shared music and movie files in violation of copyright law. The “principle of social proof” states that “we determine what is correct by finding out what other people think is correct.”[212] An individual’s relationship to their reference group is important in setting their course of actions. The perceived prevalence of tax evasion leads people to evade their taxes,[213] violating the law when they believe that “everyone is doing so.” Further, threats of significant punishment may lead individuals to feel that such punishment must mean law breaking is more widespread than it is.[214] Similarly, when the entertainment industry publicized and asked Congress to require that colleges and universities publicize information about file sharing and the prevalence of such actions, rather than reducing the number of file sharers or causing potential sharers to think twice, it may have left users feeling that they are not alone, “everyone is doing it,”[215] and therefore, the harm would be diminished.[216] In fact, students sampled in a 2004 study believed file sharing to be widespread.[217] “The greater the number of people who find any idea correct, the more a given individual will perceive the idea to be correct.”[218] Scholar Robert Cialdini tells the story of how, after the invention of the super market shopping cart, no one would use the cart until the proprietor hired actors to walk around with carts; seeing others use the carts led people to use the carts themselves, until the actors were no longer needed.[219] Similarly, with peer-to-peer file sharing, as consumers saw others using the technology, and especially when the industry, through its lawsuit campaign, turned the activity from a moral question to a market question, those who saw their friends use the technology with no consequences saw it as more and more normalized.[220] In turn, they would then model this behavior for other friends and family members, as the practice spread.[221] As users become more comfortable with an action, newly possible with the fall of a technological monopoly, thinking that such an action, even if ostensibly illegal, is the moral norm, combined with an extremely low legal cost to taking such an action in the cost-benefit analysis, will result in diminished moral resistance. This is especially the case since people are “inclined to construe facts in ways that align with their own preconceptions.”[222] The impact of social norms on such decision making is, in many cases, a stronger “determinant[] of behavior than formal sanctions.”[223] In such a case, all three legs of the intellectual property monopoly as deterrence triangle—technological, legal and moral—fall and there is little friction against taking such an action. While each individual action has but a minor effect on the market as a whole, the collective action engendered by such reasoning can be devastating to companies or industries that previously maintained a rock-solid grasp on all three monopolies.

IX. A Technological Problem with a Technological Solution?

The mass-market entertainment industry has generally viewed the issue of peer-to-peer file sharing of copyrighted content as a technological problem that could be ameliorated with legal and technological solutions.[224] The industry has, at times, worked with colleges and universities,[225] commercial Internet service providers,[226] and the Federal government in an attempt to limit file sharing via technological means. Yet experience shows that, like the carnival game whack-a-mole, each time a source of improperly shared content is removed from the Internet, several rise in its place.[227] Blocking technology can be overcome through encryption of files; new technology to decrypt such files then begets even more advanced encryption technology. Attempts at technological solutions thus result in an arms race between industry and file sharers.[228] Even worse, the industry can only seek to disrupt copyright violations that it can see and that it has jurisdiction over. But it does not have practical jurisdiction over all users (even if it has legal jurisdiction):
• Users who are overseas in countries with lax intellectual property laws still have access to the same content and can often share files in the same manner as if they were stateside. • Anonymizing software can hide or spoof an IP address, making it difficult to determine location and identity. • It is exceedingly difficult to capture downloading of files. Almost all of the transfers that the industry found and acted upon have been uploads or sharing of files on peer-to-peer or bit torrent protocols. • There are many sites available wherein individuals can access content over streaming protocols such as YouTube, equally in violation of the spirit and likely the letter of copyright laws, but in such situations, industry is unable to stop the streaming, and it is unclear whether it could prove the necessary factors to act against those who stream. Even if it could, the industry would ignite a firestorm of controversy if it chose to do so.
What that industry has not come to realize, and what the physical goods industries may want to pay attention to, is that the issue of sharing files in violation of intellectual property laws is not a legal[229] or technological issue; it is a behavioral issue and an opportunity for a change in business practices. As long as the behavioral aspects are minimized in favor of a rush to newer technology to block the latest iteration of sharing or streaming files, little or no progress will be made towards shifting to a culture of respect for intellectual property. As argued above, when the technological monopoly for an intellectual or tangible good falls, the legal monopoly is insufficient to alone protect the monopoly. This is not a new concept, but has simply been placed in more stark relief by the almost unlimited power of an individual to improperly share a piece of someone else’s intellectual property with users the world over. Never before the last decade-and-a-half has the rate of intellectual property law violations been so severe, but this is a difference of degree, not of kind, with historical practice. Technological solutions lack the discerning judgment of a human, especially in cases of license or fair use of material, and so lead to false positive claims of infringement. False positives occur when technological searches for intellectual property violations find not only actual violations, but also actions that software believes are violative, but are actually legal.[230] This could be because the use is licensed,[231] or is fair use (for instance a transformative use, parody, or an educational fair use[232]), or is otherwise not a violation of copyright law.[233] False positives are an inevitable side effect of automatic search and enforcement technologies,[234] such as those used to search for music, movie, and literature copyright violations, with automatic cease and desist letters or DMCA takedown notices issued alongside.[235] Such false positives enact a significant cost on society, as they dissuade individuals from engaging in proper use, potentially chilling creativity,[236] and are expensive and complicated to fight,[237] even for those making absolutely legitimate and lawful use of content.[238] Like the lawsuits against consumers and aggressive legislative actions to strengthen copyright violation penalties, false positives “imperil the legitimate property interests of rights holders by diminishing public respect for, and adherence to, copyright law.”[239] Inasmuch as sharing files in violation of the copyright law is primarily a behavioral and economic problem, not a technological one, it can only be resolved through behavioral and economic solutions. Just as automated processes resulted in false positives in copyright notifications and takedowns, the same or similar automated processes may catch and deter legal use and sharing of 3-D printing files. As 3-D printing becomes more prevalent, manufacturers of tangible goods should be extremely cautious before using automated processes to discover and take action against patent violators, lest the false positives squelch appropriate use and make enemies of potential and actual consumers of their products.

X. Pricing Monopoly and Market Goods

Prior to the loss of a technological monopoly, a manufacturer can feel secure using monopoly pricing methods to distribute their product. Once the technological monopoly falls, however, to retain sales, manufacturers should switch to an imperfect market pricing model[240] for their product. To the extent that 3-D printers can make a precise copy of their product, manufacturers can utilize a bifurcated sales model wherein they charge one price to purchase the item in a retail environment, and charge a much lower price to access a computer application that can be used to print a precise version of the same product on a home 3-D printer. Classical economists recognized monopolies as less efficient than market systems and of having the effect of keeping the market under stocked with desired goods.[241] Monopolies occur when either one company provides all of a certain good or, as more relevant here, where there are no close substitutes to a good. Economists identify three classes of “barriers to entry” that help to facilitate control of a market by one firm or a small number of firms. Those barriers include “natural barriers, such as economies of scale;[242] actions on the part of firms that create barriers to entry;[243] [and] governmentally created barriers.”[244] These classic barriers match up well with the monopolies discussed earlier. The governmentally created barriers are principally the constitutional and other legal protections of copyright and patent, and the natural barriers include the inability to technically replicate an item for a price that compares to the retail cost of manufactured goods. As stated, this article is not discussing pure monopolies (such as a local utility company), but monopolistic competition markets wherein various companies make similar products that are not perfect replacements,[245] but each individual product within the class maintains monopolistic protections due to governmental barrier, such as afforded by copyright and patent law. The advantage of a monopoly is the ability to use monopoly pricing, which, short of regulation, is almost always more profitable than market pricing. While the price cannot be set so high as to scare off customers, a monopoly firm can charge up to the price allowed by the demand curve of individuals seeking that good.[246] The consumer surplus that exists in a perfect market intersection of the demand and supply curve is reduced significantly in a monopoly, as much of the consumer surplus is transferred to the monopoly producer surplus,[247] and the amount not transferred to the producer surplus is simply deadweight loss.[248] The benefit to consumers of this good relative to the price paid, therefore, is significantly reduced in a monopoly regime. The price of production may also be less than perfectly efficient. Whether a firm has a natural monopoly, or one that results from governmental protections (such as copyright or patent law protection), since that firm does not have to worry about competition and keeping costs low, it will often produce in a less efficient manner.[249] Economists call this “x-inefficiency.”[250] This results in higher cost to consumers (and less consumer surplus), but without the concomitant rise in producer surplus that would occur without the inefficiency. At the same time, economists believe that such producers are less innovative, and less likely to develop new technologies and means to make current products at lower cost.[251] One of the mistakes that the recording industry made when Napster and other file sharing sites allowed users to share copyrighted content without paying was to raise their prices to compensate for the loss.[252] This may have temporarily stabilized profits, but ignored the demand curve and resulted in a regime where individuals who would have legally paid price X were unwilling to pay a rate higher than X, and either went without or acquired the content illegally.[253] This, of course, led to further increases in prices to stabilize profits, and further flight from the legal content market, forming a sort of death spiral (or at least a grievous injury spiral) for the entertainment companies. The entertainment industry would have been better served by addressing the market factors and switching themselves psychologically from a monopoly system to an imperfect market system. As discussed below, producers of tangible goods, when inevitably faced with some of the same concerns, should strike a different path.

XI. Taking the Lessons of the Recording Industry to Heart for Tangible Goods

Like copyright law violations prior to the late 1990’s, patent law has traditionally been battled out in litigation between large corporations, or between an inventor and another firm that infringed the patent in manufacturing a product, but not against end users or consumers who use infringing products.[254] That began to change in recent years as companies that (sometimes dubiously) hold patents for technologies used by millions every day, sent letters requesting settlements to end users and consumers. For manufacturers and end users of 3-D printers, the question of patent infringement becomes increasingly complicated. In order for a patentee to recover they must prove that the defendant either directly or indirectly infringed the claims of the patent.[255] The most obvious vulnerability for end users comes from a patentee’s claim of direct infringement. Conversely, while manufacturers of 3-D printers likely avoid the question of direct infringement entirely, they remain vulnerable to attacks on indirect infringement grounds.[256] Within the realm of indirect infringement, the patentee can show that the defendant engaged in either induced infringement or contributory infringement.[257] Turning first to the question of end users, a patentee can bring a suit for direct infringement against any person that “makes, uses, offers to sell, or sells any patented invention within the United States” without the authority of the patentee.[258] The most obvious liability for end users of 3-D printers comes from the “makes” and “uses” prongs, given the functionality of most 3-D printers.[259] In its current form, patent law provides no exception for individual end users and, unlike copyright law, does not allow for a fair use defense by the infringer.[260] Turning to the manufacturer side, contributory infringement occurs when a party sells or offers to sell “a component of a patented machine . . . constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article . . . suitable for substantial noninfringing use.”[261] According to the Federal Circuit, a finding of contributory infringement requires the patentee to show, by substantial evidence: direct infringement; accused infringer’s knowledge of the patent; that the component has no substantial noninfringing uses; and that the component is a material part of the invention.[262] Under a theory of contributory infringement, a patentee could claim that a 3-D printer manufacturer sells the printer while knowing that the end user will use the 3-D printer to make, use, or sell a patented device.[263] While contributory infringement is likely not the optimal litigation strategy for patentees, given the requirement that the device shall have no substantial noninfringing uses, the issue has yet to be conclusively addressed. Induced infringement occurs when a manufacturer “actively and knowingly aid[s] and abet[s] another’s direct infringement.”[264] These cases most commonly arise when a manufacturer creates a product that infringes an existing patent, and then instructs the end user on how to infringe the patent. For example, in Global-Tech Appliances v. SEB S.A., Global-Tech, through its subsidiary, copied a patented deep fryer, manufactured infringing copies, and then sold them to third-party distributors in the U.S.[265] While that case turned on 35 U.S.C. § 271(b)’s scienter requirement, the underlying factual background offers insight into how manufacturers can induce unknowing users to infringe a valid patent.[266] Traditionally, patentees have favored induced and contributory infringement as a way to target deep pocket defendants. Such suits also avoid negative media coverage of suing average citizens who unwittingly use a patented device or method. However, that trend has changed in recent years, as so-called patent trolls have targeted easily intimidated end users. The term patent troll[267] is often applied to inventors who do not manufacture a product but seek to prosecute their patent. That term is sometimes unfairly used against small inventors who obtain a patent and later approach a company that is clearly infringing on that patent, only to be told by the company that it will cost millions to sue the company for infringement and that the company will stretch the litigation out for years.[268] Often such claims will be against a company that manufactures a product that violates the patent, under a doctrine known as inducement to infringe. Inducement to infringe allows a patent holder to sue the manufacturer and avoid pursuit of the end users who are actually using the product in violation of the patent. While those inventors have valid inducement claims against these large corporations, other companies are taking the unfortunate route of pursuing for direct infringement the end users who (unknowingly) purchased a product that violates a patent. In 1996, a company called Personal Audio applied for a patent on a concept that is similar to what today is known as podcasting.[269] The priority date patent predated actual podcasting, and even predates iTunes and the iPod. While the company never created a device for podcasting, they have recently sent letters to for-profit podcasters asking for a settlement fee to avoid litigation.[270] The letters do not specify a price but are an invitation to begin negotiations to avoid litigation.[271] Ultimately, Personal Audio’s patent represents an emblematic case for patent trolls. The patent is incredibly broad, holds a priority date long before the patented invention had actually been put into practice, and attacks an already developed industry. Perhaps even more interestingly, Innovative Wireless Solutions sued Starbucks, Marriott, and other hotel and restaurant chains for allowing patrons to use wireless Internet at their locations, allegedly infringing a series of patents protecting “information network access apparatus and methods for communicating information packets via telephone lines.”[272] These are not manufacturers infringing in their manufacturing of a product, but end users utilizing a common product in the marketplace.[273] Pursuing end users for direct infringement allows patent holders to avoid the deep pockets and sterling defense teams of the corporations that induce infringement, but it comes at the cost of making enemies out of the end users who purchase and use common products. While the market for intellectual property is large and valuable, the market for physical goods is much larger and more valuable.[274] On the legislative front, it is certainly within the zone of imagination for manufacturers to push for an expansion of individual patent violation definitions, similar to the expansions that the entertainment industry sought and achieved in copyright law, or to push for administrative programs similar to the DMCA or increased penalties for individual patent violations. To date, the market for tangible goods has not yet followed the path of the market for more virtual forms of intellectual property. It is cheaper for an individual to buy essentially any toaster sold in any store whether brick-and-mortar or online, than to manufacture a toaster.[275] The same goes for sneakers, beer bottles, staplers, and almost any other tangible good we can think of. There have always been, and continue to be, craftspeople who can create tangible goods of the same or better quality than those available in the mass market, but such craftspeople usually do not threaten the technological monopoly of mass manufacturers, regardless of whether they infringe on the mass marketers’ patent rights. The copyrightization of patent law arrives when these physical goods are reduced to the same ones and zeros of computer code that have vexed intellectual property producers for the last decade and a half when, like an MP3 music file or a copied textbook, a consumer can easily and cheaply scan and print a physical item. Traditionally, music lovers would purchase a record, tape, or compact disc whose form patent law could protect and whose content was protected by copyright law. Once users started to share digital files of those same songs (and other content), there was no need to utilize those patent-protected media and the only question was whether and how this ran afoul of copyright law. In a future day when one can print the parts of a toaster (or even eventually an entire working toaster) on a 3-D printer, the toaster, as it was, will be reduced to simple ones and zeros just like a song, and patent protections look and act more like copyright protections. While the muddying of waters between copyright and patent may not be such a new idea,[276] the arrival of 3-D printers will bring the concept to the fore and represent a major shift in the protection regimes for intellectual property. Now that 3-D printers are likely entering a period of rapid decrease in price paralleled by increase in quality, it is time to consider the future of tangible goods, the technological, legal and moral monopolies that protect those who design and manufacture these goods, and whether the market for tangible goods will follow the market for intangible intellectual property. It is probably just as difficult for a sneaker or hair dryer manufacturer to imagine that their market share will be diminished by individuals printing such items at home, as it would have been for a record company twenty years ago to imagine that a score of years in the future, individuals could choose to purchase music on a compact disc, or as a digital download without ever visiting a music store, or could simply make an exact copy of a song file owned by a friend or a confederate anywhere on earth. The biggest, and arguably most permanent, error that the tangible goods industries can make when addressing those who share patented designs with others who can print them on 3-D printers, would be to treat this as a legal problem rather than a market or business problem,[277] and to use the civil litigation and legislative process to seek redress. To use litigation against consumers is to risk simply establishing a price for violations of intellectual property law in 3-D printers. Just as with entertainment and literature, those few who are sued and are not otherwise judgment proof will have to pay dearly, or will settle for reasonable albeit large sums. The danger is not with them, it is with those who learn of them. They will either camouflage their sharing of such designs, or calculate their likelihood of being caught (and therein the practical average price for violating the law). For example, consider an item that costs $100 at a retail store but can be printed for $10 in material. If the home printer estimates he or she has a one percent chance of being caught and sued, and if such a suit results in a $2,000 settlement, it makes economic sense to violate the law and print the item at home with a purloined design. Printing at home in this scenario averages out to a $30 real cost[278] over many tens of thousands of users, while the retail price is more than three times as much. Lest the reader believe that the solution therefore is to raise the penalty so high that it causes users to recalculate this decision, research shows that when “enforcement reaches levels that are perceived as normatively excessive, this can have the inadvertent effect of moving behavior in the opposite direction from that intended by the law.”[279] A fine or price that works to deter at one level, may not work better, or even as well, at a higher level.[280] Such tactics will only lead to the poor relationship with consumers that the entertainment industry faced, and to a higher value on anonymizing and other masking software that can protect uploaders and downloaders from being caught. A higher price is still a price, and when we move from a moral relationship to a market relationship, the parties will still behave in the manner appropriate to that relationship. One solution is to bifurcate the pricing structure. One of the mistakes the entertainment industry made when Napster debuted (and was then shut down by court order, with various other peer-to-peer protocols rising in its wake) was to lag in filling the vacuum. If the industry had immediately launched an easy to use and search method for obtaining MP3 files, users may have flocked to it. Instead, as detailed earlier, years passed with poor, restrictive services and half measures before Apple in 2001 corralled the industry to offer songs through iTunes. Manufacturers of tangible goods should embrace the opportunity 3-D printing provides to offer print at home designs that are equivalent to items available in stores, but at much lower prices. While the release online of a product design which allows a product to be successfully printed at home on a 3-D printer spells the end of monopoly pricing for that product, it does not mean that all economic benefit to the rights holder is lost. Many industries engage in third degree price discrimination[281] wherein different groups of purchasers are identified and different prices are charged to the members of each group. Examples include student or senior citizen discounts (all members of one group pay a lower price than others) and different airline ticket prices charged to tourists and business travelers.[282] Manufacturers can use these time tested price discrimination techniques to advance a bifurcated pricing scheme wherein one price is charged in stores, and a different price is charged for access to an application or Web service allowing consumers to print the product at home. The higher price (although not as high as in monopoly pricing regimes) in stores can justify the overhead, transportation, and sales costs of maintaining the product in a retail environment. The significantly lower print at home price reflects cost savings in creation, shipping, storage and sale. In fact, home printing may increase sales by making retail products available to those living far from stores. Companies can sell licenses to digital files for printing individually or can adopt a Netflix style model where users can subscribe to unlimited access to a brand’s designs.[283] Take as an example Lego bricks. Lego currently holds no patent on its standard bricks and blocks[284] Small companies and hobbyists use 3-D printers to fabricate Lego style pieces and accessories that Lego will not manufacture, either because they will not sell well or, as in the case of modern weaponry, due to company policy.[285] Lego maintains an online service, called the Lego Digital Designer CAD program, wherein users can upload custom designs that Lego manufactures and ships to the user, just like any other Lego set.[286] It is not hard to imagine a world where Lego and similar companies extend these programs to allow users to print at home on 3-D printers. These items can carry the trademarks of the company, be accessible, searchable and customizable, and have appropriate safety and reliability built into the designs.[287] Lego may be able to further price discriminate by charging one price in stores, a second price to print an individual design, and a third price to subscribe to unlimited printing of Lego designs. Bifurcated pricing opens up new possibilities, and breaks the cycle[288] of binary choice for consumers between purchasing legal, but expensive goods in stores and obtaining illegal, but free, goods in instantaneous digital form.[289] Although the entertainment industry makes a credible complaint that “it is impossible to compete with free,” there have actually been several documented cases of artists who have successfully competed with those who offered their work for free in violation of copyright law.[290] Of course, individual examples are insufficient to declare a trend.[291] Yet there are studies showing that the availability of content for purchase can decrease file sharing, and the unavailability of legal content for purchase can result in increased peer-to-peer sharing, in violation of copyright law.[292] If given the opportunity, rational consumers will purchase digital content that is appropriately priced, free of viruses, and of high quality. With physical products, consumers will consider printable designs that they know will work and are virus free, if those designs are priced appropriately.

A. Manufacturers Can Hang Together, or Hang Separately

It should be noted that users may be inclined to paint industries with a broad brush. In the music industry lawsuits, although suits only derived from a limited number of entertainment companies, many users adopted a “plague [on both your] houses”[293] attitude that led to economic damage for companies that participated in the lawsuits, as well as those who did not.[294] Producers of tangible goods should likewise understand that a series of lawsuits filed by one or a few manufacturers in a class may lead to an “us versus them” feeling against all members of a product class, and a concomitant loss of sales both for those producers who file suits, and those who do not. Much as the designs must be priced appropriately, pursuit of serial infringers must be judicious and considered. However, to paraphrase Benjamin Franklin, in adopting the regime ascribed here, if all manufacturers do not hang together, they will all hang separately.[295]

XII. A Moral Solution When Technological and Legal Monopolies Fail

Whether it is months, years or decades down the line, at some point for almost all physical goods, the technological monopoly will be broken by inexpensive 3-D printers that will allow individuals to easily print the item at home. At first, printing such an item at home will be more expensive than purchasing it in stores and may be mainly the province of hobbyists and early adopters. Eventually, however, the price and ease of access of printing that particular item will fall so that it will be on par with, and then may fall below, the price of purchasing the item in a store. There is good news, however, that may help makers of physical goods avoid the (at best uncertain and at worst financially crippling) fate of the music and movie industries. When the technological monopoly falls, it is unwise to try to salvage market share by exploiting the legal system to uphold the legal monopoly. Companies should instead adjust the price of their goods to aggressively compete against the cost of power, time and raw material needed to print the item at home. Concurrently, companies should aggressively work to ensure that users have a positive view of the firm, since the moral monopoly will be the lone standing reason for individuals to choose to purchase goods in the traditional manner. Different companies will hit this mark at different times. Single medium items with no moving parts (as in the Lego bricks referenced earlier) will be the first and easiest to manufacture at home. Complex goods that use multiple materials, complex structure, moving parts, and skilled soldering of electronics will take much longer to develop at home printable alternatives. Once each product passes the point where it becomes as possible to manufacture that class of good at home as in the factory, the question will shift from a physical question to one that is solely about the intellectual property aspects of the good. Such intellectual property designs of goods can ostensibly be shared via peer-to-peer or bit torrent protocols just as easily as one can now share songs, books, or movies. Once the technological monopoly falls, the accompanying legal monopoly provides little relief (and can actually be a hindrance) in protecting market share, and makers of tangible goods will have to depend on moral values to maintain their business. For consumers to feel a moral reason for continuing to purchase from the traditional manufacturer, the manufacturers will have to engage in business practices that consumers find laudatory, lest they feel it is actually in their best interests to print at home in defiance of intellectual property law, and starve the company of business. For instance, reports of mistreatment of workers in factories currently lead to boycotts or negative articles, Facebook pages calling for change, or word-of-mouth discussions,[296] but if a consumer wants the specific phone, shirts or pair of sneakers made only or primarily by that company, they do not have a choice to acquire it elsewhere. That is to say, consumers who disapprove of a company now have a binary choice: stand on principal and eschew the good, or hold your nose while purchasing the item. In a world of 3-D printers, as the technology advances to make printing of more and more items possible in the home, consumers will be left with a third choice, one they may find highly desirable. If the consumer wants to have a certain physical good, but does not want to support a corporation because of an actual or perceived view that the company abuses workers or the environment, gouges shoppers on prices for the product, or otherwise acts in an anti-social manner, the consumer may choose to print that item at home. Further, they may even justify violating intellectual property laws in improperly obtaining the design to print at home, if they believe that doing so is striking a blow against a company whose actions they detest. Therefore, the reputations of such companies can play a greater role in whether consumers will choose to purchase items in the traditional fashion, through bifurcated print at home offerings, or will instead improperly obtain the design to items and print those items at home with no remuneration to manufacturers and inventors. With the increasing use of social media and the ability of even small journalistic groups and private citizens to become modern muckrakers, it will become incumbent on firms to act pro-socially. Users will often be able to tell the difference between real moral imperative and whitewashing of moral imperative. This transparency may lead to improvements in corporate culture. The company in question may sacrifice a lot of hard-earned goodwill if users learn of illegal working conditions or unethical conduct. In order to prevail on customers to keep the company in high regard, and to keep purchasing the economically appropriately priced goods so as to keep the workers employed and the company doing good work, the company will have to walk the walk of corporate responsibility, and not simply talk the talk. Frankly, this may not just be good for the bottom line, but may represent a new and positive era in the relationships between consumers and producers, workers and employers.

XIII. An Alternative Thesis[297]

There is, of course, a possibility that widespread use of 3-D printers will remain the stuff of science fiction. When photo printers became available with the advent of digital photography, many happy consumers snapped them up,[298] only to find that the photos printed on a home photo printer were never quite the quality of those published at commercial facilities. Further, having to keep purchasing ink and paper, combined with the utility efficiency and declining prices of brick-and-mortar and online photo printers, meant that printing slightly lower quality photos at home was not exactly less expensive either. Sales of home printers fell.[299] The same may happen with 3-D printers. It is possible that these may remain in the domain of hobbyists and, while they may eventually print consumer goods at low cost, they may never be quite as good as those manufactured by traditional producers. If so, the creators of tangible goods will have dodged a significant bullet. Yet one of the things that aided retail and Internet photo printers with preserving market share after widespread sales of lower quality home photo printers was their significant reduction in price with accompanying increase in quality, options for printing, and speed from order to delivery[300] (at many retail businesses,[301] consumers can print high quality photos at low cost just seconds after inputting data, and online services offer extensive customization options at lower prices[302]). To that end, market rules will still apply to tangible goods when 3-D printers arrive in homes. Depending on quality of manufacturing the 3-D printers, the devices may produce products that are the same quality as manufactured goods, or they may be of slightly lower quality. If they are, a price comparison to manufactured goods will still be important, as many users would accept a deeply discounted inferior product to the precisely manufactured, but more expensive, product available from manufacturers. After all, home photo printers may not be of the same quality as commercial photo printers, but they are still available for sale at electronics and home goods stores.[303] Of course, the history of home printers has not yet run its course.[304] It may be that the quality versus price for these printers simply has not yet made it worth the cost. As the quality continues to increase and the price continues to decrease, depending upon the market offerings of retail stores for print-on-demand photos, there may yet come a time when it is cheaper and more efficient to print photos at home, and where the quality of such photos rivals those printed in a retail store.


Creators of tangible goods would do well to study lessons learned by the entertainment industry, and the difficulties it faced with consumers reacting to the litigation and legislative strategies utilized to fight copyright violations through peer-to-peer protocols. When the inevitable occurs and individuals begin to use 3-D printers to fabricate items protected by patent, manufacturers should not engage in a litigation strategy of suing individual consumers or a legislative strategy of seeking to increase fines or criminal penalties for such violations. Rather, the path forward is through good business practices and engagement with consumers. Manufacturers should acknowledge their loss of a technical monopoly, and the concomitant loss of legal monopoly protection that practically accompanies such a paradigm shift. In acknowledging this change, manufacturers should adjust retail prices of affected goods so as to compete with home 3-D printers, and should bifurcate their offerings into more expensive retail items offered in stores, and less expensive digital applications that allow consumers to pay a reasonable cost to print the item at home, safely and accurately. This way consumers will not resort to seeking zero cost plans to print these items through peer-to-peer protocols. Competing in the market is the way to retain market share. Lobbying and lawsuits is the way to manufacture divisiveness with the very consumers that purchase these items. “Those who cannot [learn from] the past are condemned to repeat it.”[305] Manufacturers of tangible goods should learn the lessons detailed above, so as not to repeat the mistakes.

* Joseph Storch is an Associate Counsel in the State University of New York’s Office of General Counsel and the Chair of the Student Affairs Practice Group. He concentrates his practice and research on intellectual property issues faced by higher education institutions, and on student affairs and the First Amendment. He is a graduate of the State University of New York at Oswego, summa cum laude, where he served as Vice President of the Student Association, and of Cornell Law School where he served as Chancellor of the Moot Court Board. The author wishes to thank the following individuals for substantive comments on earlier drafts: Larry Edelman, David Liebschutz, Naomi Storch, Will Versfelt, Heidi Wachs, and Stephen Weinberg. The views represented in this article are those of the author and do not necessarily represent the views of the State University of New York.
[1] See Chris Anderson, Makers: The New Industrial Revolution 8–9, 58–59 (2012); Clive Thompson, We Need a Fixer (Not Just a Maker) Movement, Wired (June 18, 2013, 6:30 AM),
[2] For a well-written discussion of the technical elements of 3-D printing, potential market plans for utilizing the technology, and some of the potential technological and economic difficulties, see Anderson, supra note 1, at 89–98.
[3] Andy Kessler, How We Got Here 29-30 (2004); Anderson, supra note 1, at 48–51.
[4] Kessler, supra note 3, at 30–31.
[5] Id. at 31.
[6] Id. Although Kessler’s book tells the story as fact, others believe that the story of Ned Ludd is apocryphal. In the following years, those who were attempting to slow technology by destroying machines paid homage to Ludd as luddites. Whether the story is factual or apocryphal, the point is the same—for many, many years, those who stand to lose business through the creative destruction caused by new technology will often take action to block that technology, even temporarily. Sometimes that effort is through violence, sometimes through legislative action and lobbying, and sometimes through the judicial process.
[7] Economist Joseph Schumpeter coined the term “creative destruction” to define the process of new industries destroying old ones as they grow which, despite the destruction of the older, and often very important, industries, is actually a long-term gain for the economy and society as a whole. Joseph Schumpeter, Capitalism, Socialism, and Democracy (1942).
[8] Copyright scholar William Patry discusses the artificial scarcity created by gatekeepers defined by intellectual property law, such scarcity creating monopoly value for those who own the intellectual property rights. William Patry, How to Fix Copyright, 23, 3841 (2011).
[9] See Mark A. Lemley, Is the Sky Falling on the Content Industries, 9 J. on Telecomm. & High Tech. L. 125, 125–32 (2011); Donald P. Harris, The New Prohibition: A Look at the Copyright Wars Through the Lens of Alcohol Prohibition, 80 Tenn. L. Rev. 101, 157 (2012); Peter J. Alexander, Peer-to-Peer File Sharing: The Case of the Music Recording Industry, 20 Rev. Indus. Org. 151, 154 (2002); Peter S. Menell, Envisioning Copyright Law’s Digital Future, 46 N.Y.L. Sch. L. Rev. 63, 99, 101–03 (2003). The articles lay out how the dire predictions of waste laid to whole industries by dint of new technologies never came to pass.
[10] N. Gregory Mankiw, Principles of Microeconomics, 313 (2009).
[11] Patry, supra note 8, at 8–41.
[12] U.S. Const. art. I § 8.
[13] The author is grateful here to the American Council on Education and the briefs of its General Counsel Ada Meloy in the cases of Cambridge University Press v. Becker and The Authors Guild, Inc. v. Hathitrust which the author came upon in the course of research and which do an excellent job of collecting cases and analysis on the framework of Constitutional intellectual property law. See Brief for the Higher Education Associations as Amicus Curiae, Authors Guild, Inc. v. Hathitrust, 2013 WL 603193 (S.D.N.Y. 2013), on appeal; Brief for American Council on Education et al. as Amicus Curiae, Cambridge University Press v. Becker, 863 F.Supp.2d 1190 (N.D.Ga. 2013), on appeal. For an exploration of the benefits of sharing information in patents with society (as opposed to keeping the idea entirely secret) so that others can build on that idea, and the application of this ideal to the open-source movement, see Anderson, supra note 1, at 108–10.
[14] United States v. Paramount Pictures, Inc., 334 U.S. 131, 158 (1948).
[15] Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 349 (1991).
[16] Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417, 429 (1984).
[17] Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156 (1975). It is noted that there are other strong factors affecting creation outside of pecuniary gain, namely the approval of others for a useful invention or artistic work, fame, the need to create, the satisfaction of desired social norms, and the ability to influence. Studies have shown that these non-financial factors often outweigh the financial incentive to create or invent. See William Hubbard, Inventing Norms, 44 Conn. L. Rev. 369, 373–75, 378–88, 400–02 (2011).
[18] William Boyes & Michael Melvin, Microeconomics 286 (2002).
[19] Calling it a technological monopoly is not to say that it is not technologically possible to copy an item, but to say that the economics of doing so provides practical protection as few would choose to make such a copy.
[20] Individuals like to look at themselves as moral and honest, and feel a “warm glow” from pro-social activities. This self-identity as an honest person is as important as a good reputation to others. Stephan Meier, A Survey of Economic Theories and Field Evidence on Pro-Social Behavior, in Economics and Psychology: A Promising New Cross-Disciplinary Field 54-55, 60-61 (Bruno S. Frey & Alois Stutzer eds., 2007); see also Bruno S. Frey & Reto Jegen, Motivation Crowding Theory, 15 J. Econ. Surveys 589-591 (2001); see generally Uri Gneezy, Stephan Meier, and Pedro Rey-Biel, When and Why Incentives (Don’t) Work to Modify Behavior, 25 J. Econ. Persp. 191, 194 (2011).
[21] Individuals’ identities as a pro-social or anti-social person can derive from their own actions and perceptions of those actions, the actions and perceptions of others, the way they view the actions of others, and their background, schooling and type of employment. George A. Akerlof & Rachel E. Kranton, Economics and Identity, 115 Q.J. Econ. 717, 720-27 (2000).
[22] The Beatles, The Beatles (The White Album) (EMI 1968).
[23] Krzysztof Bebenek, Strong Wills, Weak Locks: Consumer Expectations and the DMCA Anticircumvention Regime, 26 Berkeley Tech. L. J. 1457, 1470–71 (2011).
[24] Sound Recording Act of 1971, P.L. 92-140 (1971); Menell, supra note 10, at 105–06, 131–32.
[25] George Orwell, Nineteen Eighty-Four: A Novel (1949).
[26] Menell, supra note 9, at 105–06.
[27] Danwill David Schwender, Reducing Unauthorized Digital Downloading of Music By Obtaining Voluntary Compliance with Copyright Law Through the Removal of Corporate Power in the Recording Industry, 34 T. Jefferson L. Rev. 225, 235–36 (2012).
[28] See Menell, supra note 9, at 66.
[29] Ernest Hemingway, For Whom the Bell Tolls (1940).
[30] Schwender, supra note 27, at 235–37.
[31] Menell, supra note 9, at 105–06.
[32] Prior to the Internet, it was incredibly burdensome and expensive to go after end users, not to mention the difficulty locating infringement of copyrighted works. It was far more efficient to seek redress from major copiers of works farther up the economic food chain. Intellectual property scholar Jane Ginsburg opined that,
Copyright owners have traditionally avoided targeting end users of copyrighted works. This is in part because pursuing the ultimate consumer is costly and unpopular. But the primary reason has been because end users did not copy works of authorship—or if they did copy, the reproduction was insignificant and rarely the subject of widespread further dissemination. Rather, the entities creating and disseminating copies (or public performances or displays) were intermediaries between the creators and the consumers: for example, publishers, motion picture producers, and producers of phonograms. Infringements, rather than being spread throughout the user population, were concentrated higher up the chain of distribution of works. Pursuing the intermediary therefore offered the most effective way to enforce copyright interests. By contrast, in cyberspace individuals will often commit the unauthorized acts, both for private consumption and for further dissemination to other individuals.
Jane C. Ginsburg, Putting Cars on the “Information Superhighway”: Authors, Exploiters, and Copyright in Cyberspace, 95 Colum. L. Rev. 1466, 1488 (1995); see also Ben Depoorter & Sven Vanneste, Norms and Enforcement: The Case Against Copyright Litigation, 84 Or. L. Rev. 1127, 1131–32 (2005).
[33] Bebenek, supra note 23, at 1470–71; Ben Depoorter and Robert Kirk Walker, Copyright False Positives, 89 Notre Dame L. Rev. 319, 327, 339 (2013); Ben Depoorter, Francesco Parisi & Sven Vanneste, Problems with the Enforcement of Copyright Law: Is There a Social Norm Backlash?, 12 Int. J. Econ. Bus., 361 (2005); Ben Depoorter, Alain Van Hiel & Sven Vanneste, Copyright Backlash, 84 S. Cal. L. Rev. 1251, 1264 (2011); Menell, supra note 9, at 159; Schwender, supra note 27, at 264.
[34] Steve Knopper, Appetite for Self-Destruction 113–49 (2009); Kal Raustiala and Christopher Sprigman, The Knockoff Economy 21618 (2012).
[35] MP3 is short for “Motion Picture Experts Group-Layer 3,” a powerful method to compress audio while maintaining most of the sound. Alexander, supra note 9, at 153; Knopper, supra note 34, at 115–21.
[36] Napster’s adoption was the fastest software adoption ever to that point. Alejandro Zentner, Measuring the Effect of File Sharing on Music Purchases, 49 J.L. & Econ. 63 (2006).
[37] Patry, supra note 8, at 39; Menell, supra note 9 at 114–17.
[38] Within five years of Napster’s release, the numbers of downloaders were more spread across the population with 27% of Americans between 30 and 49 and 12% of Americans over 55 reporting that they engaged in file sharing. Yuval Feldman & Janice Nadler, The Law and Norms of File Sharing, 43 San Diego L. Rev. 577, 582–83 (2006). “Internet penetration…increased from 16 percent in 1997 to 47 percent in 2000. And broadband connection…stood in early 2003 at 40 percent of connected households.” Rafael Rob & Joel Waldfogel, Piracy on the High C’s: Music Downloading, Sales Displacement, and Social Welfare in a Sample of College Students, 49 J.L. & Econ. 29, 32–33 (2006). See Joseph Storch & Heidi Wachs, A Legal Matter: Peer-To-Peer File Sharing, The Digital Millennium Copyright Act, and the Higher Education Opportunity Act: How Congress and the Entertainment Industry Missed an Opportunity to Stem Copyright Infringement, 74 Alb. L. Rev. 313, 345–46 (2011).
[39] See Storch & Wachs, supra note 38, at 345–46.
[40] According to a Government Accountability Office survey, textbook prices increased by 82 percent in the 10 years between 2003 and 2013. Danya Perez-Hernandez, Open Textbooks Could Help Students Financially and Academically, The Chronicle of Higher Education (Jan. 28, 2014),
[41] The First Sale Doctrine is an aspect of copyright law that provides non-owners of a right with the opportunity to sell (and not retain) a copyrighted work that they own. An owner of a tangible copy of a work does not hold a copyright in that work, but he or she may sell or give away that copy of the work and not violate the law. The First Sale Doctrine does not, however, allow the owner of a single legal copy of a tangible work to make a subsequent copy of that work and give away the copy. To do so violates the copyright owner’s exclusive rights to make copies. Used bookstores, used textbooks, and garage sale transfers of old VHS tapes are all completely legal under the First Sale Doctrine. The Doctrine does not cover photocopies, or files shared using P2P software, as the sharer retains a copy.
[42] Molly Redden, 7 in 10 Students Have Skipped Buying a Textbook Because of Its Cost, Survey Finds, The Chronicle of Higher Education (Aug. 23, 2011),; see also Make Textbooks Affordable, Student PIRGs, (last visited Apr. 9, 2014).
[43] Joseph Storch, Needed: A Single Source for Textbooks, The Chronicle of Higher Education (Feb. 6, 2009),
[44] Kirtsaeng v. John Wiley & Sons, Inc., 133 S. Ct. 1351 (2013).
[45] The publishing companies engage in price discrimination based on geography, offering the same content at different prices to audiences with different willingness to pay. The publisher cannot actually charge different prices to different individuals based on their wealth and interest in the book, so it engages in third degree price discrimination by charging different rates in different countries. See supra text accompanying notes 281 & 282 for a discussion of third degree price discrimination. Wiley would include a statement in the international editions of its textbooks that they may not be removed from certain countries without permission and that to do so violates the law. Kirtsaeng, 133 S. Ct. at 1356.
[46] The District Court and the Second Circuit ruled in opposite directions and the Supreme Court reviewed the case. The case hinged on the Supreme Court’s interpretation of the “First Sale Doctrine.”
[47] Kirtsaeng, 133 S. Ct. at 1358. The Court looked at the phrase “lawfully made under this title” of the first sale doctrine and determined that lawfully made did not exclude works that are made outside of the United States. The Court found that the language of 17 U.S.C. §109(a), when read in the context of the common law development of the first sale doctrine, favored a reading that was non-geographical, for reasons both linguistic and practical. Id. at 1358–64. Read in the way that Wiley desired, the Court believed that the statute would significantly impinge on scholarship and research as well as the used market for books and other creative works. Id. at 1364–1367.
[48] Hernandez, supra note 40; Marc Parry, Students Get Savvier About Textbook Buying, The Chronicle of Higher Education (Jan. 37, 2013),
[49] Randall Stross, First It Was Song Downloads. Now It’s Organic Chemistry, N.Y. Times (JulySeet 1458, 1463-64. 3,0149gs/wiredcampus/open-textbooks-could-help-students-financially-and-academic-oints; will change citation 27, 2008),; John Timmer, Campus Copyright Battle Moves to Textbook Torrents, ARS Technica (July 1, 2008), The Huffington Post even posted a “how to guide” for students who wish to scan and share textbooks. Luke Turcotte, How to Digitize Your Textbooks, The Huffington Post (Sep. 19, 2010),
[50] See Sabri Ben-Achour, Rise of the Digital College Textbook, Marketplace (Feb. 26, 2014), (“Publishers dealt with the fact that they only make money the first year a new textbook edition is out by raising prices. Students then bought fewer textbooks. Then, publishers raised prices again. ‘Some prices are astronomical,’ says [Columbia Economics Professor] Mishkin. ‘My book sells for $225. That’s just a lot of money.’”).
[51] Richard Watt describes the distinction using a clear phrase, writing that “[p]atents protect application of ideas, and copyrights protect expression of ideas.” Richard Watt, A Unifying Theory of Copyrights and Patents, 12 Int. J. Econ. Bus. 389–02, 390 (Nov. 2005).
[52] The wording of the statute, discussing reproductions in “copies” or “phonorecords” as in 17 U.S.C. § 106 can cause confusion, but the purpose of copyright isn’t to protect the physical medium itself, but the content therein.
[53] For instance, an e-reader such as the Amazon Kindle.
[54] 17 U.S.C. § 101 (2006).
[55] 15 U.S.C. § 1127 (2006).
[56] 15 U.S.C. § 1125(a) (2006).
[57] The patent law makes it a violation of the law if one, “without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.” 35 U.S.C. § 271 (2006).
[58] Ben Depoorter, The Several Lives of Mickey Mouse: The Expanding Boundaries of Intellectual Property Law, 9 Va. J.L. & Tech. 4, 42 (2004).
[59] See generally Christopher A. Cotropia & Mark A. Lemley, Copying in Patent Law, 87 N.C. L. Rev. 1421 (2009).
[60] U.S. Const. art. I § 8; 35 U.S.C. § 35 (2006) et seq.; see especially 35 U.S.C. § 271 (2006).
[61] Through other research projects, this author has come to know decision makers in the entertainment industry organizations who, among others, made the decision to use the legislative process to expand the rights of copyright holders and increase the penalties for violation of the copyright law and/or who made the decision to pursue civil lawsuits against peer-to-peer file sharers. Many in the anti-copyright movement discussed below, or in the “copyleft” tar such individuals with a broad brush as evil or anti-consumer, but this author believes that charge is wrong and oversimplified.
[62] See Colin F. Camerer, Prospect Theory in the Wild: Evidence from the Field, in Colin Camerer et al. eds., Advances in Behavioral Economics 154 (2003).
[63] Knopper, supra note 34, at 40–65, 81–104; Raustiala, supra note 34 at 215–16.
[64] Record company negotiations to purchase Napster and turn it in to a legal service, ongoing alongside the lawsuits, did not result in a sale until it was too late to create a useful model. See Knopper, supra note 34 at 138–48; See also Menell, supra note 9, at 171 (entertainment industry failure to develop new online business models); Raustiala, supra note 34, at 218–19 (arguing that the major labels should have purchased Napster and built on the Napster model).
[65] See Camerer, supra note 62, at 148–51; Daniel Kahneman & Amos Tversky, Choices, Values, and Frames, 39 Am. Psychologist 341, 348 (1984).
[66] See Knopper, supra note 34, at 40–65, 81–104; Raustiala, supra note 34, at 214–16.
[67] Menell, supra note 9 at 101–03; Alexander, supra note 9 at 155–57; Rob and Waldfogel, supra note 38, at 29–33, 53–60 (showing through survey analysis that “one downloaded album reduces music purchases by roughly one-fifth of an album,” finding that respondents downloaded music that they valued less than the music they purchased, and finding that “downloading reduces per capita expenditures by individuals . . . from $126 to $101 per capita”); Zentner, supra note 36, at 66, 85–86 (finding that downloads reduce the probability that a user will purchase music by 30 percent).
[68] Lemley, supra note 9, at 131, citing Ken Barnes, Music Sales Boom, but Albums Fizzle, USA Today, Jan. 2, 2009, at 6D.
[69] Uri Gneezy & Aldo Rustichini, A Fine is a Price, 29 J. Legal Stud. 1 (2000). Further, the “standard theory of optimal deterrence argues that when the probability of detecting norm violators is low, the severity of the punishment should be high.” Erte Xiao, Profit-Seeking Punishment Corrupts Norm Obedience, 77 Games & Econ. Behav. 321, 322 (2013).
[70] Gneezy & Rustichini, supra note 69, at 2.
[71] Chung-cheng Lin & C.C. Yang, Fine Enough or Don’t Fine at All, 59 J. Behav. & Org. 195 (2006).
[72] Gneezy & Rustichini, supra note 69.
[73] Id. at 3–4.
[74] Id. at 2–4.
[75] The authors add some useful comparisons to show the relative pain caused by such a fine. The authors called the fine “relatively small but not insignificant” and, as a comparison, wrote that at the time of the article, “the fine for illegal parking is NIS 75; the fine for driving through a red light is NIS 1,000 plus penalties; the fine for not collecting the droppings of a dog is NIS 360 . . . . [A] baby-sitter earns between NIS 15 and NIS 20 per hour[, and t]he average gross salary per month in Israel at the time of the study was NIS 5,595 . . . . ” Id. at 5.
[76] Depending on exchange rates, 10 NIS ranges between two and three U.S. dollars.
[77] Gneezy & Rustichini, supra note 69, at 4–5.
[78] Id.
[79] Id. at 5.
[80] Id.
[81] Id. at 7.
[82] Id. at 8.
[83] Frey & Jegen, supra note 20, at 590–91.
[84] In that explanation, the social norms are the same, “but parents have now reason to believe that a fine is the worst that can happen.” Gneezy & Rustichini, supra note 69, at 10.
[85] Id. at 11.
[86] A social norm is defined as “a behavioral regularity; that is…based on a socially shared belief of how one ought to behave; which triggers…the enforcement of the prescribed behavior by informal social sanctions.” Ernst Fehr & Simon Gachter, Fairness and Retaliation: The Economics of Reciprocity, 14 J. Econ. Persp. 159, 166 (2000).
[87] Lin & Yang, supra note 71, at 197.
[88] Id.
[89] Gneezy & Rustichini, supra note 69, at 13.
[90] Id. at 13–14.
[91] Id. at 14.
[92] Id. at 15.
[93] Id. at 14.
[94] Id. at 14, 16; see also Lin & Yang, supra note 71, at 196.
[95] Gneezy & Rustichini, supra note 69, at 14.
[96] Frey & Jegen, supra note 20, at 589–95; Kristina Shampanier, Nina Mazar and Dan Ariely, Zero as a Special Price: The True Value of Free Products, 26 Marketing Science 742, 743 (2007).
[97] Kjell Arne Brekke, Snorre Kverndokk and Karine Nyborg, An Economic Model of Moral Motivation, 87 J. Pub. Econ. 1967, 1968 (2003) (emphasis supplied).
[98] Frey & Jegen, supra note 20, at 589.
[99] Brekke, Kverndokk and Nyborg, supra note 97, at 1968, 1981.
[100] Joel Slemrod, Cheating Ourselves: The Economics of Tax Evasion, 21 J. Econ. Persp. 25, 39 (2007).
[101] Gneezy, Meier, and Rey-Biel, supra note 20, at 201–02; Meier, supra note 20, at 68–71.
[102] Depoorter, Parisi and Vanneste, supra note 33, at 361; Depoorter and Vanneste, supra note 32, at 1131-1132.
[103] For analysis of the various cases, including those against, Aimster, Grokster, and others, see Storch & Wachs, supra note 38, at 316–19; Menell, supra note 9, at 143–152; Depoorter, Van Hiel and Vanneste, supra note 33, at 1258–59; Irina D. Manta, The Puzzle of Criminal Sanctions for Intellectual Property Infringement, 24 Harv. J.L. & Tech. 469, 502–03 (2011); Harris, supra note 9, at 129–30; Ben Depoorter, Technology and Uncertainty: The Shaping Effect on Copyright Law, 157 U. Pa. L. Rev. 1831, 1832–33 (2009).
[104] See Storch & Wachs, supra note 38, at 319–23; Depoorter & Vanneste, supra note 32, at 1132–34; Depoorter, Parisi and Vanneste, supra note 33, at 361; Depoorter, Van Hiel and Vanneste, supra note 33, at 1259–63; Schwender, supra note 27, at 249–51.
[105] Depoorter & Vanneste, supra note 32, at 1134; Depoorter, Parisi and Vanneste, supra note 33, at 361; Depoorter, Technology and Uncertainty, supra note 103, at 1833, 157 U. Pa. L. Rev. 1831, 1833 (2009); Harris, supra note 9, at 145–47.
[106] Knopper, supra note 34, at 81, 105-107; Raustiala, supra note 34 at 229–30.
[107] Changes in Basic Minimum Wages in Non-Farm Employment Under State Law: Selected Years 1968 to 2010, U.S. Dept. Lab.,
[108] Id.
[109] Apple Introduces iTunes—World’s Best and Easiest to Use Jukebox Software, Apple (Jan. 9, 2001),
[110] This led to a sense of anger at the recording companies, especially when tied with the perception that dollars spent went to the recording companies, not the artists. See Feldman & Nadler, supra note 38, at 587.
[111] In a section entitled “The Fallacy of Enforcement,” Patry argues that if demand is created to access an item in an online environment, the best way to prevent access of that content through unauthorized means is to “flood the market with authorized goods.” If they are unable to access content legally, at least some consumers will still seek to access that content in any way they are able, including through methods outside of what is allowed under intellectual property law. Patry, supra note 8, at 256–62.
[112] Daniel Kahneman, Jack L. Knetsch and Richard Thaler, Fairness as a Constraint on Profit Seeking: Entitlements in the Market, 76 Am. Econ. Rev. 728 (1986).
[113] Meier, supra note 20, at 51.
[114] Kahneman, Knetsch and Thaler, supra note 112, at 729–33.
[115] Xiao, supra note 69, at 323. That is to say, the impact of punishment is “significantly diminished…when the punishment becomes a source of revenue for enforcers.” Id., at 332.
[116] Storch & Wachs, supra note 38, at 349.
[117] Kahneman, Knetsch & Thaler, supra note 112 at 736–37; Meier, supra note 20, at 56–57; Xiao, supra note 69, at 332.
[118] Fehr & Gachter, supra note 86, at 162–63.
[119] See Frey & Jegen, supra note 20, at 590.
[120] Id. at 604–05.
[121] Id.
[122] Depoorter & Vanneste, supra note 32, at 1152–54.
[123] College students will take cans of Coke left in refrigerators, but will not take dollar bills left alongside, and are less willing to cheat on a standardized problem set if the reward is cash even over a token that can immediately be exchanged for cash. Dan Ariely, The (Honest) Truth About Dishonesty 32–34, 84 (2012).
[124] 17 U.S.C. § 501(a) (2012). Ciolino and Donelon wrote that,
Federal copyright law sets forth a seemingly straightforward standard for copyright infringement: ‘[a]nyone who violates any of the exclusive rights of the copyright owner is liable for copyright infringement.’ By branding as an infringer ‘anyone’ who infringes a copyright, the Copyright Act casts a wide net that ensnares infringers of all different stripes. Indeed, the Act treats all infringers alike—from the most innocent to the most nefarious. In copyright’s strict liability scheme, the infringer’s faultlessness or culpability is of anomalously little relevance.
Dane Ciolino & Erin Donelon, Questioning Strict Liability in Copyright, 54 Rutgers L. Rev. 351, 351 (2002); see also Steven Hetcher, The Immorality of Strict Liability in Copyright, 17 Marq. Intell. Prop. L. Rev. 1 (2013).
[125] Depoorter & Walker, supra note 33, at 343.
[126] Statutory damages range from $750 to $150,000. 17 U.S.C. § 504 (2012).
[127] Depoorter & Walker, supra note 33, at 35557.
[128] See Sony BMG Music Entm’t v. Tenenbaum, No. 07cv11446-NG, 2009 U.S. Dist. LEXIS 115734 (D. Mass. Dec. 7, 2009); Capitol Records, Inc. v. Thomas-Rasset, No. 06-CV-01497 (MJD/LIB), 2009 WL 2030495 (D. Minn. June 18, 2009); Storch & Wachs, supra note 38, at 320, 321–23; Harris, supra note 9, at 137–38; See also David Kravets, Jury in RIAA Trial Slaps $2 Million Fine on Jammie Thomas, Wired (June 18, 2009, 6:57 PM), 2-million-fine-on-jammie-thomas; David Kravets, RIAA Jury Finds Minnesota Woman Liable for Piracy, Awards $222,000, Wired (Oct. 4, 2007, 2:34 PM),
[129] See infra note 171.
[130] Depoorter, Van Hiel & Vanneste, supra note 33, at 1265.
[131] 17 U.S.C. § 504 (2012).
[132] Id.
[133] Unlike for patent infringement, the United States Code includes potential criminal sanctions for copyright violations. Manta, supra note 103, at 470–85, 488 (recounting the history, increasing severity, and utilization of criminal sanctions for copyright violations).
[134] Service of these letters on college campuses (and through them college students) often occurred prior to serving students with notice of actual live litigation, which is why the letters were called pre-litigation settlement letters. See Storch & Wachs, supra note 38.
[135] Depoorter, Van Hiel & Vanneste, supra note 33, at 1260; Harris, supra note 9, at 137–38.
[136] Nate Anderson, RIAA Doubles Settlement Cost for Students Fighting Subpoenas, Ars Technica (June 12, 2008),
[137] See Storch & Wachs, supra note 38, at 320, 326–29.
[138] While it would make future litigation less likely for the specific violation referenced in the claim, the letter was specific that settlement did not bar the industry from future legal action for this or other copyright violations.
[139] See id.
[140] See Mitch Bainwol & Cary Sherman, Explaining the Crackdown on Student Downloading, Inside Higher Ed (Mar. 15, 2007),; Storch & Wachs, supra note 38, at 320–21; Bobby Cummings, RIAA Offers Settlements to College Students for File Sharing, N.Y. Times, Mar. 2, 2007.
[141] Depoorter, Van Hiel & Vanneste, supra note 33, at 1254–55.
[142] David Kravets, File Sharing Lawsuits at a Crossroads, After 5 Years of RIAA Litigation, Wired (Sep. 4, 2008),; Peter Lauria, Infringement!, N.Y. Post (Feb. 27, 2008), (describing efforts by artists to obtain some of the lawsuit settlement money); J.R. Raphael, RIAA’s New Piracy Plan Poses a New Set of Problems, Washington Post (Dec. 20, 2008),; Schwender, supra note 27, at 234 (noting perception of peer-to-peer file sharing users that musicians are not profiting from record sales).
[143] Sarah McBride & Ethan Smith, Music Industry to Abandon Mass Suits, Wall St. J. (Dec. 19, 2008),; Storch & Wachs, supra note 38, at 321; Jonathan M. Barnett, What’s So Bad About Stealing, 4 J. Tort L. 1, 3 (2011).
[144] Daniel Kahneman & Amos Tversky, Prospect Theory: An Analysis of Decision Under Risk, 47 Econometrica 263 (1979).
[145] This theory assumes that rational individuals faced with a choice calculate the expected utility of each choice and then choose the one with highest utility, without emotion, and that such analyses are not impacted by other factors.
[146] Kahneman & Tversky, Prospect Theory, supra note 144, at 265.
[147] Id. at 282-83, 285. See also Kahneman & Tversky, Choices, supra note 65, at 341, 345 (1984).
[148] Kahneman & Tversky, Prospect Theory, supra note 144, at 273; Kahneman & Tversky, Choices, supra note 65, at 343–44, 346, 349.
[149] Kahneman & Tversky, Prospect Theory, supra note 144, at 279.
[150] Id. at 268; Kahneman & Tversky, Choices, supra note 65, at 342–43.
[151] Kahneman & Tversky, Prospect Theory, supra note 144, at 268–69; Kahneman & Tversky, Choices, supra note 65, at 342–43.
[152] Depoorter & Vanneste, supra note 32, at 1136–37. Similarly, in tax compliance,
taxpayers decide whether and how much to evade taxes in the same way they would approach any risky decision or gamble—by maximizing expected utility—and are influenced by possible legal penalties in just the same way they are influenced by any other contingent cost. Optimal tax evasion depends on the chance of getting caught and penalized, the size of the penalty for evasion, and the individual’s degree of risk aversion.
Slemrod, supra note 100, at 35–36.
[153] Depoorter & Vanneste, supra note 32, at 1127–28; Depoorter, Van Hiel & Vanneste, supra note 33, at 1255. In a study of willingness to cheat on standardized problem sets and everyday market interactions, Dan Ariely found that those who cheated did so equally, regardless of whether the experiment administrator was visibly blind (and could not detect the cheating) or not, suggesting that in cheating, probability of being caught is not a substantial influence on whether to act. Ariely, supra note 123, at 2127.
[154] See generally Patrick L. Hill et al., Subjective Invulnerability, Risk Behavior, and Adjustment in Early Adolescence, 32 J. Early Adolescence 489 (2012); Anthony P. Kontos, Perceived Risk, Risk Taking, Estimation of Ability and Injury Among Adolescent Sport Participants, 29 J. Pediatr. Psychol. 447 (2004).
[155] See Kahneman & Tversky, Prospect Theory, supra note 144, at 282–83, 285; Amos Tversky & Daniel Kahneman, Judgment Under Uncertainty: Heuristics and Biases, 185 Science 1124 (1974).
[156] 5/20,000 = 0.00025.
[157] See generally Dan Ariely, George Lowenstein & Drazen Prelec, “Coherent Arbitrariness”: Stable Demand Curves without Stable Preferences, 118 Q. J. Econ., 73, 74 (2003). That is to say, initial valuations of a wide range of items and experiences are arbitrary, even for those with experience in an area; relative valuations of a similar item or a change to the initial item after learning the initial valuation are more orderly.
[158] 0.00025 x $3,000 = $0.75.
[159] See e.g. Traffic Safety Facts, U.S. Dept. of Transp. (May 2012),
[160] See Feldman & Nadler, supra note 38, at 579.
[161] Indeed this is consistent with economists’ studies of coherent arbitrariness in criminal deterrence. While an individual has great difficulty determining their probability of being caught committing a certain crime, when there is a change in enforcement, that change has a short-term deterrent effect, but little or no measurable long-term impact in reducing crime. In the same way, passing a police car has a short-term deterrent effect, but as the car fades, the determined probability of being caught speeding fades back to its stasis level. See Ariely, Lowenstein & Prelec, supra note 157, at 100–01.
[162] Depoorter & Vanneste, supra note 32, at 1127, 1129, 1140–41; Harris, supra note 9, at 142–43.
[163] The Supreme Court wrote that, the “very breadth of the software’s use may well draw the public directly into the debate over copyright policy…. and the indications are that the ease of copying songs or movies using software like Grokster’s and Napster’s is fostering disdain for copyright protection” Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913, 929 (2005); see also Depoorter, Van Hiel & Vanneste, supra note 33, at 1272–82, 1284; Depoorter & Vanneste, supra note 32, at 1149.
[164] Depoorter & Vanneste, supra note 32, at 1146, 48.
[165] Depoorter, Van Hiel & Vanneste, supra note 33 at 1272–82, 1284; Depoorter and Vanneste, supra note 32 at 1154–56.
[166] “[I]f the rate of apprehension is low, elevated sanctions become more salient because they may create the perception that a few individuals are being singled out.” Depoorter, Van Hiel & Vanneste, supra note 33, at 1287. Professor Harris writes similarly:
Judging from the lawsuits filed by the RIAA, the majority of which were against college students, enforcement against filesharing may also cut across class or culture lines, which would undermine views on the legitimacy of filesharing laws…. selective enforcement doomed this regulatory scheme…. while millions of individuals engaged in unauthorized filesharing, the RIAA brought suit against a small proportion of these individuals. There is an anti-democratic and anti-rule-of-law feel to a legal regime in which some individuals are harshly punished for behavior that most individuals engage in with impunity.
Harris, supra note 9, at 138. See also Schwender, supra note 27, at 281–82.
[167] In announcing that the Recording Industry Association of America was ending its litigation campaign against end users, Mitch Bainwol, the Chair of the RIAA stated that although they were trying a new approach, the litigation had succeeded in raising public awareness of illegal file sharing and added that he believed online copyright infringement would have been worse without the lawsuit campaign. McBride & Smith, supra note 143. See also Depoorter, Van Hiel & Vanneste, supra note 33, at 1271 (addressing the industry’s belief in the effectiveness of the lawsuits against end users); Schwender, supra note 27, at 251–52 (discussing RIAA publications that claimed the lawsuit campaign more than doubled awareness of copyright law and that the lawsuits led to the large increase in digital sales of music); Zentner, supra note 36, at 71, 87–88.
[168] Depoorter & Vanneste, supra note 32, at 1133–34.
[169] Harris, supra note 9, at 104; Depoorter, Van Hiel & Vanneste, supra note 33, at 1263; Schwender, supra note 27, at 271–72.
[170] See Patry, supra note 8, at 179; Depoorter, Van Hiel & Vanneste, supra note 33, at 1290; Feldman & Nadler, supra note 38, at 589–90. One activist noted that the lawsuits cost tens of millions in legal and investigative fees annually to recover a few hundred thousand dollars in settlements each year. Ray Beckerman, Ha ha ha ha ha. RIAA Paid Its Lawyers More Than $16,000,000 in 2008 to Recover Only $391,000!!!, Recording Industry vs The People (July 13, 2010),
[171] Harris, supra note 9, at 130–33. Further, Patry tells an interesting history of the 1999 amendment to the work for hire element of the copyright law. The work for hire doctrine allows companies, employers or other principals to hire a creator or artist as an agent, pay the creator for the work, but maintain in the principal all copyright rights. The agent gets a payment, but retains no rights. This is handy for companies that seek to have photographers take pictures for marketing copy, or hire artwork creators for advertising campaigns. In 1999, Congress amended the law to add sound recordings as a work for hire category. This particular amendment to the copyright law was not to address end users accessing content outside of copyright, but to change the relationship between musical artists and performers and the recording companies who signed them to record deals (and not in a way that benefited the artists). Patry comments on the law as follows:
The purpose of the 1999 amendments was to deny performers and their estates the right to terminate old contracts. This denial would occur because if performers were considered to be employees of the record label, they would not have any copyright interest at all: the right to terminate old contracts is limited to authors. The seriousness of this effort to strip performers of status as authors is seen in a recent court decision holding that classic albums by Bob Marley were works for hire of Island Records and thus owned 100 percent by the label. According to the court, Marley was a mere employee of Island Records, acting under the label’s supervision and direction, and possessing no authorship interest at all. To believe this is to believe pigs can fly.
Patry, supra note 8, at 171–72, citing Fifty-Six Hope Road Music Ltd. V. UMG Recordings, Inc., 2010 WL 3564258 (S.D.N.Y. Sep. 10, 2010). Artists and performers were very upset at the change, which could cost them significantly in long-term ownership and control of their music, and which was passed by Congress without debate, hearings or markup. In fact, Patry reports, the amendment
was snuck through at the request of the Recording Industry Association of America (RIAA)…. placed in an unrelated bill on satellite retransmission of copyrighted works, at the very end of the Congress, without a bill having been introduced, and without hearings. The House Judiciary Committee staffer who snuck the provision in was shortly thereafter hired by [the] RIAA for a very well-paying position.
Patry, supra note 8, at 172; see also Depoorter, Van Hiel & Vanneste, supra note 33, at 1290.
[172] Depoorter, Several Lives, supra note 58, at 35-37; Schwender, supra note 27, at 238-39; see also Menell, supra note 9, at 129–38 (comprehensively tracing the modern history of copyright law expansions); Storch & Wachs, supra note 38, at 347–50 (discussing the process of passage of legislation requiring colleges to take actions to protect against file sharing).
[173] Manta, supra note 103, at 511–12; Menell, supra note 9, at 133, 161–62.
[174] Harris, supra note 9, at 132, 144 (analyzing changes to copyright law and noting that “[m]embers of Congress openly recognized their lack of expertise in copyright and as a result, delegated to industry representatives the task of drafting substantive statutory provisions”); Schwender, supra note 27, at 280–81.
[175] A study by Richard Posner and William Landes found that there has been more legislative activity in the realm of copyright law, than any other aspect of intellectual property. Depoorter, Technology and Uncertainty, supra note 103, at 1856-57, citing William M. Landes & Richard A. Posner, The Political Economy of Intellectual Property Law 2–3 (2004). See also Harris, supra note 9, at 104–05; Further, “[m]ore pages of copyright law have been added to the U.S. Code [in the 1990’s] than in the prior 200 years of the republic.” Menell, supra note 9, at 65.
[176] See Patry, supra note 8, at 8–41; Depoorter, Several Lives, supra note 58, at 16; Depoorter & Walker, supra note 33, at 346.
[177] See Charles Wheelan, Naked Economics 72–73, 137–48 (2002); see generally Lawrence Lessig, Remix: Making Art and Commerce Thrive in the Hybrid Economy (2008); Patry, supra note 8; See also Depoorter, Several Lives, supra note 58 at 18; Depoorter, Technology and Uncertainty, supra note 103, at 1857–59; Aaron Burstein, Will Thomas DeVries, & Peter S. Menell, The Rise of Internet Interest Group Politics, 19 Berkeley Tech L. J. 1, 6–7 (2004); Harris, supra note 9, at 134–35.
[178] The average citizen may have opinions about intellectual property, even strongly held ones, but when they go into the voting booth in elections, other issues often come to the fore. Patry, supra note 8, at 138.
[179] Depoorter, Several Lives, supra note 58, at 19; Harris, supra note 9, at 134-35.
[180] Patry, supra note 8, at 13-41, 137-38.
[181] See Depoorter, Several Lives, supra note 58, at 18.
[182] Id. at 37–38.
[183] Patry, supra note 8, at 62–63, 13738; Kenneth C. Green, Views: The Movie Industry’s 200% Error, Inside Higher Ed (Jan. 29, 2008),
[184] Patry, supra note 8, at 63, 137–38.
[185] Depoorter & Walker, supra note 33, at 346; Bebenek, supra note 23, at 1458; Harris, supra note 9, at 138.
[186] Patry, supra note 8, at 164–72; Depoorter, Van Hiel & Vanneste, supra note 33, at 1267–72; Harris, supra note 9, at 105–06; Schwender, supra note 27, at 232–33; Depoorter & Vanneste, supra note 32, at 1131–40.
[187] Patry, supra note 8, at 166.
[188] See Depoorter, Parisi & Vanneste, supra note 33, at 362–63; Daniel Houser et al., When Punishment Fails: Research on Sanctions, Intentions and Non-Cooperation, 62 Games & Econ. Behav. 509, 512, 522–23 (2008).
[189] See Patry, supra note 8 at 164–72 (citing Tom Tyler, Why People Obey the Law (1990, 2006) and Tom Tyler, Compliance with Intellectual Property Law: A Psychological Perspective, 29 N.Y.U. J. Int’l L. & Pol. 219 (1997)); see generally Harris, supra note 9, at 121–26.
[190] Patry, supra note 8, at 165. Patry believes that the current copyright legal regime fits this bill and concentrates on coercion to address behavior, even when those whose behavior is modified do not always agree with the copyright law in question.
[191] Depoorter, Van Hiel & Vanneste, supra note 33, at 1257; see also Clive Thompson, Technology Wants to Be Free, Wired, Dec. 2013, at 66-68 (describing popular efforts to change the law regarding phone unlocking and the movement’s impact on the White House and Congress).
[192] Frey & Jegen, supra note 20, at 606; see also Depoorter, Van Hiel & Vanneste, supra note 33 at 1256 (“If individuals perceive enforcement as excessive, this may reinforce or even strengthen a belief that the legal regime is not legitimate or that a legal rule is unjust”); Slemrod, supra note 100 at 39 (“tax evaluation decisions may depend on perceptions of the fairness of the tax system. If, the argument goes, perceived tax equity strengthens the social norm against evasion, then evasion becomes more costly in terms of bad conscience [if not caught] or bad reputation [if caught]”).
[193] Depoorter, Technology and Uncertainty, supra note 103, at 1853–54; Depoorter, Parisi & Vanneste, supra note 33, at 367. For international survey results on the backlash against copyright enforcement, see Patry, supra note 8, at 173–76.
[194] Depoorter, Parisi & Vanneste, supra note 33, at 362–63; Depoorter, Van Hiel & Vanneste, supra note 33, at 1264–72.
[195] See Nicco Mele, The End of Big: How the Internet Makes David the New Goliath (2013).
[196] Burstein, DeVries & Menell, supra note 177, at 6–7.
[197] Stop Online Piracy Act, H.R. 3261, 112th Cong. (2011).
[198] Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act of 2011, PROTECT IP Act of 2011, S.B. 968 (2011).
[199] See Greg Sandoval, Hollywood’s SOPA Testimony Links Job Loss to Piracy, CNet (Nov. 16, 2011),
[200] See Stephen Totilo, Gaming Industry Spent As Much As $190,000 Pushing for Senate Version of SOPA Last Spring and Summer, Kotaku (Jan. 16, 2012),; Ben Dimiero, How Much Did Media Companies Spend Lobbying On SOPA And PIPA?, Media Matters (Feb. 3, 2012),; David Goldman, Millions in SOPA Lobbying Bucks Gone to Waste, CNN Money (Jan. 27, 2012),
[201] Depoorter, Several Lives, supra note 58, at 19. Professor Jonathan Barnett postulates that “firms that sell goods and services that facilitate the uncompensated use of creative goods—hardware manufacturers or internet intermediaries (e.g. Google/YouTube)—promote and endorse” norms that he considers “inverted” in that they “immunize or even encourage and glamorize borrowing practices.” Their reason, he argues, “is simple: increased opportunities for theft lower the price of content available to users and increase demand for the theft technologies by which to obtain, consume and disseminate that content.” Barnett, supra note 143, at 24–25, 28; Burstein, DeVries, & Menell, supra note 177, at 14–15. For an interesting analysis of the difficult disagreements between technology firms and IP producers, see Menell, supra note 9, at 164–168, 195.
[202] Edward J. Black, Internet Users, Free Speech Experts, Petition Against SOPA, Huff. Post (Dec. 13, 2011),
[203] David Carr, The Danger of an Attack on Piracy Online, N.Y. Times (Jan. 1, 2012),
[204] Trevor Timm, Proposed Copyright Bill Threatens Whistleblowing and Human Rights, Electronic Frontier Foundation (Nov. 2, 2011),
[205] Wikipedia SOPA Initiative (Feb. 24, 2012),
[206] Ryan Germick, SOPA/PIPA Image Blackout (Jan. 18, 2012),
[207] Brett Molina, Facebook CEO speaks out against SOPA, PIPA, USA Today (Jan. 18, 2012),
[208] The blackouts were an interesting form of corporate protest that represented the Internet companies’ belief that the Acts would stifle their ability to do business and, perhaps moreso, empower private corporations to squelch Internet speech that might be protected, alongside actions that violate the law.
[209] Jenna Wortham, With Twitter, Blackouts and Demonstrations, Web Flexes Its Muscle, N.Y. Times (Jan. 18, 2012),; Depoorter, Several Lives, supra note 58, at 19; Depoorter, Technology and Uncertainty, supra note 103, at 1865–66; Barnett, supra note 143, at 26–27.
[210] Timothy B. Lee, Under Voter Pressure, Members of Congress Backpedal (Hard) on SOPA, ArsTechnica (Jan. 13, 2012),; Grant Gross, SOPA Author to Remove ISP Blocking Provision, Computer World (Jan. 13, 2012),
[211] Patry, supra note 8, at 62–63, 137138; Green, supra note 183.
[212] Robert B. Cialdini, Influence: Science and Practice 99 (5th ed. 2009). Visitors to a forest where the disappearance of petrified wood threatens the future of the forest stole five times more wood when a sign used social proof by recounting that many past visitors had stolen petrified wood (thus harming the park) than when a simple sign asked visitors to please not remove petrified wood; in fact, the social proof sign resulted in more stolen wood than no sign at all. Yes!: 50 Scientifically Proven Ways to Be Persuasive 20–25 (2008).
[213] Fehr & Gachter, supra note 86, at 167; Lin and Yang, supra note 71, at 196, (citing S.M. Sheffrin and R.K. Triest, Can Brute Deterrence Backfire? Perceptions and Attitudes in Taxpayer Compliance, in Alan J. Auerbach et al. ed., Why People Pay Taxes: Tax Compliance and Enforcement (1992); Meier, supra note 20, at 58–60; Frey and Jegen, supra note 20, at 589, 605-06; Depoorter, Technology and Uncertainty, supra note 103, at 1852. Notably, tax evasion is heterogeneous, meaning that “within any group defined by income, age, or other demographic category, there are some who evade, some who do not, and even some who overstate tax liability.” Slemrod, supra note 100, at 30–31. Tax evasion is spread across the populace, but perceptions may not be equal to that actual distribution. Even more interesting is the observation that based on the extremely low chance of being audited, and the general tolerance for risk among the citizenry, tax evasion is significantly lower than it would be calculated to be. Slemrod, supra note 100, at 38–39. This may reflect intrinsic motivation to pay taxes that is outside of the extrinsic impact of potential penalties.
[214] Feldman & Nadler, supra note 38, at 593.
[215] Social norms have a significant impact on behavior. Knowing and believing the feelings and beliefs of others can have positive or negative social impacts and encourage or discourage appropriate behavior. Fehr & Gachter, supra note 86, at 167–168. In a study, researchers found that litigation did not deter file sharing as, “[i]n general, students believe that others will continue to download regardless of the enforcement policy . . . [they believe that as to other students from whom they may take social cues] nothing will stop their peers from downloading. Depoorter, Parisi & Vanneste, supra note 33, at 367; Schwender, supra note 27, at 265.
[216] See generally Depoorter, Parisi & Vanneste, supra note 33, at 363.
[217] Feldman and Nadler, supra note 38, at 611.
[218] Cialdini, supra note 212, at 108–09.
[219] Id. at 10910 (2009).
[220] See Ariely, supra note 123, at 195–210 (discussing the influence of peers on willingness to cheat).
[221] Ironically, a great example of social proof arose in the nineteenth century when opera singers and managers would hire outsourced employees to applaud appreciatively at shows, in the hope that paying customers would join in on the cheerful response. As the practice grew and branched out, opera singers and managers could request specialty cheering, such as an audience member who could weep on cue, someone who would yell “encore,” and even a specialist who possessed an infectious laugh. Cialdini, supra note 212, at 132.
[222] Depoorter, Technology and Uncertainty, supra note 103, at 1851.
[223] Depoorter & Vanneste, supra note 32, at 1139.
[224] Bainwol & Sherman, supra note 140.
[225] See generally Storch & Wachs, supra note 38; Depoorter, Van Hiel & Vanneste, supra note 33, at 1260.
[226] Joan Cheverie, Copyright Alert System Goes Into Effect, EDUCAUSE (Feb. 26, 2013),; Anne Flaherty, Music, Movie Industry to Warn Copyright Infringers, Law Technology News (Mar. 12, 2013),
[227] Lemley, supra note 9, at 132; Depoorter, Van Hiel & Vanneste, supra note 33 at 1258–59; Alexander, supra note 9, at 157–58.
[228] Depoorter, Technology and Uncertainty, supra note 103, at 1855; Depoorter, Several Lives, supra note 58, at 30–31.
[229] Patry, supra note 8, at 141–45.
[230] Depoorter & Walker, supra note 33, at 32021.
[231] Depoorter & Walker tell the story of the “Hugo Awards” ceremony, an awards ceremony to honor achievement in science fiction. The awards ceremony was streamed on, and was playing licensed clips and programming for nominated television shows. During author Neil Gaiman’s acceptance speech for his award for Doctor Who, an automated software robot disrupted the stream and took the awards ceremony off the air. This was an automatic takedown of specifically licensed and authorized use of clips, which may have been fair use even if not specifically licensed, resulting in removing the official stream of the award ceremony, which was the only live broadcast of the awards. Depoorter & Walker, supra note 33, at 33435.
[232] After an Australian record label threatened to sue copyright scholar Lawrence Lessig over amateur dance videos set to a clip from the Phoenix song Lisztomania that Lessig used in an online lecture, and sought to have YouTube remove the clip, Professor Lessig decided instead to sue the record label. Nick DeSantis, Harvard Professor’s Online Lecture Prompts Fight With Record Company, Chronicle of Higher Education (Aug. 27, 2013), According to a declaration the record label filed in court, they had a single employee use YouTube’s automatic content takedown process and, when Lessig challenged that takedown claiming fair use, that same employee threatened to sue Lessig, apparently without ever actually reviewing the lecture video in question. Corynne McSherry, Lawrence Lessig Settles Fair Use Lawsuit Over Phoenix Music Snippets, Electronic Frontier Foundation (Feb. 27, 2014), Perhaps feeling that it picked a fight with the wrong defendant, a renowned copyright scholar who obtained the assistance of the law firm Jones Day and the Electronic Frontier Foundation, the label settled, agreeing that the lecture made fair use of the song and pledging to amend its policies so that human review is required prior to issuing a takedown. Id.
[233] Depoorter & Walker, supra note 33, at 32021; Depoorter, Several Lives, supra note 58, at 30–31. For detailed answers to frequently asked questions about the DMCA and content removal, see Joseph Storch, Heidi Wachs & Kent Wada, FAQ for DMCA Designated Agents at Higher Education Institutions, EDUCAUSE Institute of Computer Policy and Law (Apr. 2011),
[234] For a substantive criticism of the role of automatic algorithms and problems that ensue when algorithms replace important human decision making, see Evgeny Morozov, To Save Everything, Click Here 140–80 (2013).
[235] Depoorter & Walker, supra note 33, at 32023, 326–27.
[236] Depoorter & Vanneste, supra note 32, at 1148; Depoorter, Technology and Uncertainty, supra note 103, at 1859–60; Manta, supra note 103, at 502–16; Harris, supra note 9, at 127.
[237] Depoorter & Walker, supra note 33, at 338.
[238] Id. at 320–22.
[239] Id. at 327.
[240] File sharing in violation of intellectual property law will not actually change the system to a perfect market system where the price charged will be where supply meets demand, as the legal producer of the good will always maintain some advantages over violative producers, notably the moral imperative to purchase legal items, the knowledge that an item purchased legally is safer and more reliable than one otherwise obtained, the fact that not every consumer has access to the technology to retrieve copies, and the goodwill from the legal producers’ marketing efforts. Therefore, this article refers to the system as an imperfect market pricing model. A similar shift occurs when a product, such as a drug or medical device, protected by patent loses that protection. Others enter the marketplace and the model shifts from monopoly to market, albeit with significant advantages for the original manufacturer. Mankiw, supra note 10, at 345–61.
[241] Thomas Sowell, On Classical Economics 13-14 (2006); Boyes and Melvin, supra note 18, at 249.
[242] For instance, utilities often have economy of scale advantages in addition to government-authorized monopolies. While not impossible, even if a company receives permission to operate in an area, it is extremely expensive to lay cable or phone wiring in an area to offer service.
[243] For instance, Coca-Cola expends significant effort to keep the exact formula for its flagship soda a secret. Leon Stafford, Coke Hides Its Secret Formula in Plain Sight in World of Coca-Cola Move, Atlanta Journal-Constitution (Dec. 8, 2011),; Ira Glass et al., Original Recipe, This American Life (Feb. 11, 2011),
[244] Boyes & Melvin, supra note 18, at 237.
[245] Mankiw, supra note 10, at 345–61.
[246] See generally Boyes & Melvin, supra note 18, at 245.
[247] Id. at 249–50.
[248] Id. at 251.
[249] Id. at 252.
[250] Id. at 252.
[251] Id. at 252–53.
[252] See Storch & Wachs, supra note 38, at 348-49, citing Ashlee Vance, Music Sales Rise Despite RIAA‘s Best Efforts, REG. (U.K.) (Oct. 21, 2004)
[253] See Storch & Wachs, supra note 38, at 349.
[254] For example, Apple and Samsung have spent millions of dollars in legal fees litigating patent disputes over the iPhone and Galaxy cell phones. See Dimitra Kessenides, When Apple and Samsung Fight, the Lawyers Win, Bloomberg Businessweek (Dec. 9, 2013) While each company has sued and countersued the other, neither has sued customers using their rival’s phone, even though it is those customers who are directly infringing the patent.
[255] Infringement is also possible through the doctrine of equivalents, but that doctrine is of limited utility in this context. See generally Warner-Jenkinson Co., Inc. v. Hilton Davis Chem. Co., 520 U.S. 17, 24 (1997).
[256] As explained below, one must “make[], use, offer[] to sell, or sell” a patented invention in order to face liability for direct infringement under 35 U.S.C. 271(a).
[257] 35 U.S.C. § 271(b) & (c).
[258] 35 U.S.C. § 271(a).
[259] While it is certainly possible that an end user might choose to sell his or her 3-D printed patented creations this is a smaller subset of the overall users of 3-D printers and therefore less likely to face liability.
[260] However, patent law does allow an infringer to raise defenses of “noninfringement,” “experimental use,” and “repair” to name a few.
[261] 35 U.S.C. § 271(c) (2006).
[262] Fujitsu Inc. v. Netgear Inc., 620 F.3d 1321, 1326 (Fed. Cir. 2010).
[263] See Davis Doherty, Downloading Infringement: Patent Law As A Roadblock to the 3d Printing Revolution, 26 Harv. J.L. & Tech. 353, 361 (2012).
[264] 35 U.S.C. § 271(b). Induced infringement is not limited to manufacturers but rather can also apply to instances where a party instructs its users on how to infringe a patent. See C.R. Bard, Inc. v. Advanced Cardiovascular Sys., Inc., 911 F.2d 670, 675 (Fed. Cir. 1990).
[265] Global-Tech Appliances, Inc. v. SEB S.A., 131 S.Ct. 2060, 2064 (2011).
[266] See id.
[267] See Randall R. Radar et al., Make Patent Trolls Pay in Court, N.Y. Times, June 4, 2013, at A25, available at Patents are not the only area where individuals and corporations will rent seek for revenue without actually seeking to protect rights. There are also owners of valid copyrights in works that bring enforcement actions not to protect their rights or recoup damages, but simply as a primary or secondary revenue stream. Depoorter and Walker, supra note 33, at 34445, citing James DeBriyn, Shedding Light on Copyright Trolls: An Analysis of Mass Copyright Litigation in the Age of Statutory Damages, 19 UCLA Ent. L. Rev. 79, 79 (2012). Xiao’s study shows that the “expression function [of punishment or a fine] is significantly diminished…when the punishment becomes a source of revenue for enforcers.” Xiao, supra note 69, at 332.
[268] One example is Robert Kearns, an engineer who was blind in one eye and severely bothered by the constant back and forth of windshield wipers. He invented an intermittent windshield wiper, took out a patent, and built a factory to fulfill orders from the car manufacturers. Those manufacturers broke off contact and simply developed their own intermittent windshield wipers. Kearns engaged in costly litigation (financially and emotionally) with deep pocketed car companies and eventually won or settled for millions of dollars from Ford and Chrysler. See Anderson, supra note 1, at 120–22.
[269] U.S. Patent No. 8,112,504 (filed Mar. 4, 2009). In fact, the ‘504 patent issued from a divisional application and therefore retained the priority date of the original application, filed in 1996. Cf. MPEP (9th ed. Rev. Mar. 2014) § 201.06; MPEP (8th ed. Rev. Aug. 2012) § 201.11. The invention contained in the ‘504 patent was originally claimed in the 1996 patent application but the patent examiner declared a division because the patent application contained more than one patentable invention.
[270] Ira Glass et al., When Patents Attack… Part Two!, This American Life, (last visited March 30, 2014),
[271] See id. However, Personal Audio has initiated several suits against prominent podcasters in the Eastern District of Texas alleging infringement of the ‘504 patent. See Complaint, Pers. Audio, L.L.C. v. Ace Broad. Network, L.L.C., No. 2:13-cv-00014 (E.D. Tex. Jan. 1, 2013).
[272] David McAfee, Starbucks, Marriot Sued in WiFi Hotspot Patent Blitz, Law360 (Apr. 24, 2013, 5:14 PM),
[273] To its credit, the White House has taken notice of these types of patent lawsuits, and included protecting “off-the-shelf use by consumers and businesses” of such products in its White House Task Force on High-Tech Patent Issues. Exec. Office of the President, Patent Assertion and U.S. Innovation 5-7 (2013). Attorneys general have also joined in the effort. See Erin E. Harrison, GCs and AGs Join Hands to Tackle Patent Litigation, Inside Counsel, Jan. 2014.
[274] See Anderson, supra note 1, at 9 (comparing a $20 trillion dollar digital economy with a $130 trillion dollar economy of “real stuff”).
[275] In fact, author Thomas Thwaites spent about nine months and quite a bit of money attempting to build from scratch a toaster that would cost about $6.00 (US) in an English retail store. Although his tale is interesting, and certainly entertaining, readers of his book would probably surmise that it is not, currently, less expensive to manufacture one’s own toaster than it is to purchase one. See Thomas Thwaites, The Toaster Project: Or a Heroic Attempt to Build a Simple Electric Appliance from Scratch (2011).
[276] See Watt, supra note 51, at 389–402, 391 (“[the need for new definitions outside of the clear separation of copyright and patent] is not a recent development. As early as 1930 Justice Learned Hand stated ‘Nobody has ever been able to fix that boundary [between ‘ideas’ and ‘expression’] and nobody ever can,’” citing Nichols v. Universal Pictures Corp., 45 F.2d 119, 121 (2d Cir. 1930)).
[277] Patry, supra note 8, at 141–42.
[278] $2,000 x 0.01 = $20 plus $10 in material = $30 total averaged cost.
[279] As detailed earlier, legitimacy of a legal regime is crucial to having citizens follow the rules set by the regime. Excessive penalties above the normative opinion of fairness for a violation can lessen the legitimacy of any legal regime. Depoorter, Van Hiel and Vanneste, supra note 33, at 1255–56, 1270.
[280] Patry, supra note 8, at 173–76.
[281] For an explanation of price discrimination, see Mankiw, supra note 10, at 326–31.
[282] Airplanes will sell tickets for less money to price conscious tourists than to expense-account utilizing business persons. They do this by discounting early purchases and those who stay over on a Saturday night (which are attractive to tourists), while charging more for last-minute purchases and short stays (which is acceptable to businesspeople). By doing so, airlines can separate the two groups and charge group members different prices.
[283] For a description of Netflix and other subscription models used by the entertainment industry, see Raustiala, supra note 34, at 229–32.
[284] David C. Robertson and Bill Breen, Brick By Brick: How LEGO Rewrote the Rules of Innovation and Conquered the Global Toy Industry 6–7, 42 (2013); See also Jamie Condliffe, Lego Was First Patented 55 Years Ago Today, Gizmodo (Jan. 28, 2013, 5:24 AM), (noting that LEGO bricks were patented over 55 years ago on January 28, 1958, patents which have, therefore, long expired).
[285] See Anderson, supra note 1, at 192–96. Lego as a company policy will sell futuristic and fantastical weapons, and ancient weapons such as swords, but will not sell modern guns, grenades or other weapons.
[286] Id. at 214.
[287] Lego does not pursue hobbyists who create Lego accessories “as long as they don’t violate Lego’s trademarks and include cautions about keeping pointy or easy-to-swallow toys away from young children. Indeed, Lego has even issued informal guidance on using the best plastics that are non-toxic and including holes in parts that could be a choking hazard, to allow for air passage.” Id. at 194. The company could extend such protections to the items that users can print on home 3-D printers.
[288] See text accompanying footnotes 89– 101, 112– 115, and 119– 123, supra.
[289] If there is demand for an item, but there are no legal alternatives available, at least some consumers will seek to satiate that however they can, even if it is outside of what is allowed by law. See Patry, supra note 8, at 256–62.
[290] Examples cited by Patry include science fiction author Neil Gaiman whose sales rose as his work was pirated, and comedy group Monty Python which released all of their work at no cost on YouTube with a “click to buy” button for fans to purchase content. He tells the story of a period when NBC content was not available legally on iTunes for purchase correlating with a significant rise in torrent sharing of that same content. Patry, supra note 8, at 157–61. The bands Radiohead and Nine Inch Nails (admittedly, already famous and successful artists) created sensations and brought in revenue by releasing albums free to the Internet and/or peer-to-peer file sharing protocols, relying on donations or other digital downloading opportunities. See generally Lemley, supra note 9, at 125, 127, 134; Schwender, supra note 27, at 296-297. The band Dispatch even used Napster itself to release tracks, growing its audience to where it was playing large concert arenas. Knopper, supra note 34, at 133–34. Raustiala and Sprigman provide additional examples of artists such as Colbie Caillat who built successful and lucrative careers by giving their music away. Raustiala, supra note 34, at 222–27, 230–32.
[291] Chris Anderson devoted an entire text to examples of ways to successfully compete with free or to co-opt free products for significant gain. Chris Anderson, Free: The Future of a Radical Price (2009).
[292] Danaher et al., Understanding Media Markets in the Digital Age: Economics and Methodology, NBER Working Paper Series 12, 622 (2013), Specifically, the authors found that when NBC Universal content was removed from the iTunes store due to a contract dispute, illegal file sharing of that content increased 11%; when ABC content was added to Hulu, there was an approximately 20% drop in illegal file sharing of that content; and when cyberlocker was shut down, revenue from legally accessed digital movies increased by 6–10%.
[293] William Shakespeare, Romeo and Juliet act 3, sc. 1.
[294] Patry, supra note 8, at 160.
[295] “We must all hang together, or assuredly we shall all hang separately.” Benjamin Franklin, at the signing of the Declaration of Independence, July 4, 1776. John Bartlett, Familiar Quotations 361 (10th ed. 1919) available at
[296] See, e.g., Simon Birch, How Activism Forced Nike to Change Its Ethical Game, The Guardian Green Living Blog (July 6, 2012),; Max Nisen, How Nike Solved Its Sweatshop Problem, Bus. Insider (May 9, 2013, 10:00 PM),; Jennifer Lin, Students Target Gap Stores: Protesters on College Campuses Decry Working Conditions Overseas. Gap Says It Combats Sweatshops, (Nov. 12, 1999),; Press Release, ILRF, Workers’ Rights Groups to Protest at Gap Shareholder Meeting (May 20, 2013),; PR Newswire, To Demand Gap and Walmart Join Fire and Safety Agreement Signed by 50 Apparel Companies, Labor Rights Groups Protests at Retailers in Over 30 Cities Saturday, MarketWatch (June 26, 2013),
[297] This thesis was initially postulated by the author’s friend Reuben Ingber, a technologist, Web designer, and podcaster who blogs at
[298] See James Bandler, A New Picture, Wall St. J. (May 19, 2003, 12:01 AM),
[299] See Steve Johnson, Hewlett-Packard Stirs More Concern With Decline in Printing, San Jose Mercury News (Dec. 12, 2009, 4:48 PM),; Melissa Riofrio, Lexmark Exits the Inkjet Market: Are Printers Doomed?, PCWorld (Aug. 28, 2012, 8:32 PM),
[300] See Karen M. Cheung, Digital Camera Market Expected to Rise, While Printer Market Falls, Reviewed.Com (June 29, 2006),
[301] See Press Release, CVS, CVS/pharmacy Adds Camera-Phone Photo Printing (Apr. 28, 2005), available at; Press Release, CVS, CVS/pharmacy Photo Takes Convenience to the Next Level With Express Pick Up (Oct. 22, 2010), available at; Press Release, CVS, Accessing Smartphone Images is Easier Than Ever With a New Image Uploading Option at CVS/pharmacy Photo Centers (Nov. 14, 2012), available at
[302] See Lamont Wood, Is the Market for Personal Printers Dying?, Computerworld (July 31, 2012, 6:00 AM),
[303] See, e.g., Photo Printers, Best Buy, (last visited Mar. 30, 2014).
[304] See, e.g., Carlo Sicoli, Why Printing Photos Could Be Digital’s – and Kodak’s- Future, TheRichest (Feb. 7, 2014),
[305] George Santayana, The Life of Reason: Or, The Phases of Human Progress, Vol. 1, 284 (1906).

License and Registration, Please: Using Copyright “Conditions” to Protect Free/Open Source Software

License and Registration, Please: Using Copyright “Conditions” to Protect Free/Open Source Software
By Victoria Nemiah* A pdf version of this article may be downloaded here.  


There are three types of people who should care about free and open-source software (FOSS[1]): FOSS software developers, the attorneys who help them license their creations, and absolutely everyone else. Why everyone else? While FOSS has historically been billed as “too difficult” for the average consumer to use and “too technical to understand,”[2] it is fast becoming a popular option, even for technophobes, as evidenced by Firefox’s position as the second most popular browser by market share.[3] FOSS has also started to gain a foothold in other areas, from blog publishing platforms to image-editing software. Consumers are catching onto FOSS offerings like OpenOffice, a word-processing and productivity suite; GIMP, an image-editing Photoshop alternative; Linux, a completely open-source operating system; VLC Media Player, a cross-platform multimedia player; and 7-Zip, a file archiver. This Note is primarily targeted towards the first two categories of people: developers and their attorneys. FOSS has been a novel and exciting model for developers. It provides several key advantages over the traditional route for those looking to release software they’ve finished (or even just started) writing: once the source code has been publicly released, other developers who choose to use the software themselves can contribute fixes and improvements back to the project. People have become accustomed to finding free options for most of their computing needs, so no-fee software is likely to gain a foothold in these markets. The project is more likely to survive where outsiders are actively participating in its continued maintenance. Where there is a disagreement on what slate of features or overall design approach to choose, forking[4] can occur. Opening the source code provides the opportunity for volunteer programming support, which can take the place of hiring paid developers (though one blogger notes that choosing to “open” one’s source code is akin to opening a door, and that developers should not assume that volunteers will be waiting on the other side of the door to come in and help with the project[5]). Making a project open source allows for the use of previously released FOSS or open source code snippets within the project. Lastly, releasing a project’s code may be aligned with the developer’s personal convictions that his software should be free and available to all. With so many advantages to making a project open source, it has become an easy choice for many developers. The legal process that follows, however, has not been nearly as simple. As a general matter, the open source model is one that stymies many of contract law’s core tenets, from the “exchange of promises” to the issue of consideration. Further, open source licensing serves as a voluntary renunciation of several rights the copyright system grants to software creators. Lawyers and developers have made many attempts to word a license so as to restrict certain behavior while allowing otherwise unrestricted distribution of the software, but to date there have been few cases on the subject, so much of this wording is untested. In fact, while the first FOSS licenses were created in the late 1980s (with the GPL, MIT License, and BSD license all published between 1988 and 1989[6]), it was not until 2004 that a court issued an opinion regarding the viability of FOSS licenses. In a federal case in the Northern District of Illinois, the court explained the GNU General Public License (“GPL”) as a release of the content into the public domain, with restrictions in place solely because “once the programs are freely released into the public domain, the creators intend for them to stay free.”[7] Fortunately for embracers of FOSS, judicial attitudes towards FOSS have changed significantly since this opinion, and “the court’s comments should be viewed with skepticism.”[8] A few relevant cases in the last five years help to clarify the approach lawyers and others working with licensing language should take. I use these as the backbone of this paper to ensure that their takeaways are fully incorporated into licensors’ approaches. In particular, I highlight the construction of a license provision as either a “condition” or a “covenant,” a designation that will determine what remedies are appropriate, an issue recently brought to light in a non-FOSS case in the Ninth Circuit.[9] Making sure that attorneys understand the state of the law surrounding FOSS licenses is important because a future court decision against a FOSS license has the potential to cripple a burgeoning industry whose community-based development principles depend on protection from commercial exploitation of that openness. Thus, I start in Part II by examining the history of the development of the FOSS community. In Part III, I break down several cases relevant to issues of FOSS licensing, highlighting important conclusions by courts that are buried within the sometimes dense language of the opinions. Finally, in Part IV, I summarize several best practices for lawyers and other license drafters. Additionally, I provide an analysis of legal arguments regarding license violations, based on criteria such as copyright registration and wording of license terms. By doing so, I highlight the importance for developers of taking care to follow all the necessary steps to protect their projects, including harnessing the power of conditions.

I. History of FOSS

A. First Applications of Open Source Licenses

Software developers have been sharing code with each other for as long as software development has been a pursuit, but it was not until at least 1969 that the beginnings of what would become the FOSS movement started to emerge. In 1965, Bell Labs joined forces with the Massachusetts Institute of Technology (MIT) and General Electric (GE) to work on the development of MULTICS (the MULTiplexed Information and Computing Service), which was intended to develop a “dynamic, modular [computer] system capable of supporting hundreds of users.”[10] By 1969, however, Bell Labs, displeased by the project’s lack of advances and continued drain on monetary capital, pulled out of the MULTICS project:[11] Bell Labs “had a million dollars worth of equipment in the attic that was sitting there being played with by three people. It became clear that we were a drag on the computer center’s budget.”[12] This abandonment of the MULTICS project did not quash the interest of the Bell Labs researchers in the construction of such a system, so four of the most heavily involved researchers in the Lab’s participation started to work towards the construction of a different system.[13] One of the four has explained that their motivation in working on this new system was simple; they did not want to give up the computing power they had personally been able to exploit via the MULTICS machine:
We didn’t want to lose the pleasant niche we occupied, because no similar ones were available; even the time-sharing service that would later be offered under GE’s operating system did not exist. What we wanted to preserve was not just a good environment in which to do programming, but a system around which a fellowship could form.[14]
The group lobbied hard for the purchase of a new machine.[15] By 1970, they had put together a pitch based on a proposed new operating system and Bell Labs agreed to purchase a new machine for about $65,000.[16] A year later, they had the machine running their new operating system, which they called UNIX.[17] Due to a consent order signed by AT&T in 1956, Bell Labs could not legally sell any products on the software market, and thus agreed to share UNIX (including its source code) with academic institutions for the price of media.[18] Ken Thompson, one of the original authors of the UNIX system, returned in 1976 to teach UNIX in the Computer Science department at his alma mater, the University of California at Berkeley (UCB).[19] His classes, coupled with further work by students, led to a system called the Berkeley Standard Distribution (BSD), which is considered by some to be UNIX’s first fork.[20] A graduate student named Bill Joy spearheaded the work, and in 1978 the first BSD was released to the public.[21] In his history of BSD, Bruce Montague explains, “UCB made BSD available for the cost of media, under what became known as ‘the BSD license’. A customer purchased Unix from AT&T and then ordered a BSD tape from UCB.”[22] As the cost of this license from AT&T continued to increase, users started to request that Berkeley break out their own code and provide it under terms that did not require concurrent acquisition of an AT&T source license.[23] In 1989, Berkeley responded to these requests by releasing Networking Release 1, the first freely distributable Berkeley code. The terms of the license for this release were liberal:
A licensee could release the code modified or unmodified in source or binary form with no accounting or royalties to Berkeley. The only requirements were that the copyright notices in the source file be left intact and that products that incorporated the code indicate in their documentation that the product contained code from the University of California and its contributors. . . . [A]nyone was free to get a copy from anyone who already had received it. Indeed, several large sites put it up for anonymous ftp shortly after it was released.[24]
This BSD release and accompanying license formed the basis for today’s BSD License, which remains one of the most popular “academic” open source licenses in use.[25] In 1984, a researcher at MIT’s Artificial Intelligence Lab named Richard Stallman quit his job to start writing his own software, determined that unlike UNIX and other fully contained options available at the time, his would be open to all to freely use and modify.[26] Due to drama surrounding the commercialization of a derivative of one of his first programs,[27] Stallman was intent upon ensuring that his newest program, a text editor GNU Emacs, would be perpetually available to the public, and thus decided to use a “copyleft” license that he called the Emacs General Public License.[28] The license’s preamble explains that the software is not in the public domain, but that the restrictions placed on it are “designed to permit everything that a good cooperating citizen would want to do”:[29]
Specifically, we want to make sure that you have the right to give away copies of Emacs, that you receive source code or else can get it if you want it, that you can change Emacs or use pieces of it in new free programs, and that you know you can do these things. . . . To make sure that everyone has such rights, we have to forbid you to deprive anyone else of these rights. For example, if you distribute copies of Emacs, you must give the recipients all the rights that you have. You must make sure that they, too, receive or can get the source code. And you must tell them their rights.[30]
While distributing GNU Emacs, Stallman continued working on building an operating system. The result was a free operating system that was compatible with UNIX, which Stallman named “GNU” (a recursive acronym for “GNU’s Not Unix”).[31] Those developing GNU decided to share it under the principle of “copyleft” touched on above.[32] In an effort to encourage others to follow his lead, Stallman started the Free Software Foundation, a group that now publishes the second version of the GNU GPL, currently the most popular open source software license available.[33]

B. Subsequent Growth of the FOSS Model

Since the creation and success of FOSS like BSD and GNU,[34] such software has gone on to see remarkable success. As mentioned above, many popular software options today are FOSS, from Firefox to WordPress. Contributions to FOSS have grown exponentially over the last fifteen to twenty years, as shown in a chart by researchers Amit Deshpande & Dirk Riehle:[35]
Contributions to FOSS
One of the many forks[36] of Linux, the commercial venture RedHat, saw its revenues grow by 25% in 2012, finally crossing the $1 billion mark at the end of its fiscal year on February 29 of that year, which made it the first FOSS company to reach that point.[37] In the market for web servers, FOSS favorite Apache holds 54.37% of the market share, with its next closest competitor holding only 12.91%.[38] Most promising, however, are reports of the public’s increased acceptance of the FOSS model. A 2010 survey of three hundred large organizations in the public and private sectors found that 50% of respondents are “fully committed to open source in their business”, while another 28% say they are “experimenting with open source and keeping an open mind to using it.”[39]

C. Development of the FOSS Community

Of course, along with any movement espousing such a political message (that software should be fundamentally free) comes spirited debate. Within the FOSS community, this has mainly taken the form of differing definitions of, and terms for, “free” sharing of software. The two terms most often at odds are “free software” and “open source software”, each with different origins and definitions. From this divergence have come the clunkier terms FOSS (free/open source software) and FLOSS (free/libre/open source software). When Richard Stallman decided to take his “copyleft” approach in distributing the projects he worked on, he used the term “free software.” The Free Software Foundation (FSF) defines “free software” as “software that respects users’ freedom and community. Roughly, the users have the freedom to run, copy, distribute, study, change and improve the software. With these freedoms, the users (both individually and collectively) control the program and what it does for them.”[40] Thus, the FSF explains, “you should think of ‘free’ as in ‘free speech,’ not as in ‘free beer’.”[41] Conversely, the Open Source Initiative (OSI) prefers the term “open source software”, and explains that “[o]pen source doesn’t just mean access to the source code.”[42] The OSI requires compliance with ten criteria: free redistribution, distribution of the source code (not simply the compiled software), permission to create derivative works, limited restrictions for the purpose of protecting the original “integrity,” no discrimination against people or groups, no discrimination against fields of endeavor, automatic application of the same license terms to redistributed copies, lack of reference within the license to a specific product, lack of restrictions on other software, and technological neutrality.[43] While the term “free open source software” was first mentioned in a newsgroup in March 1998,[44] the term developed primarily as an option for those who did not wish to pick a side in the battle between the FSF and OSI definitions. In an early use of the term, in 2002 a Google Groups user wrote, “99% of the software on my computer is F/OSS (Free/Open Source Sofware).”[45] The term FLOSS was likewise created by Rishab Aiyer Ghosh in an attempt to “somehow unify ‘Free Software’ and ‘Open Source’ concept into software.”[46] By adding the term “libre,” Ghosh hoped to highlight both the “free” (no cost) and “libre” (free from restrictions) aspects of the software.[47] While those representing developers should be aware of the differences in implications of the various terms, both “FOSS” and “FLOSS” have become umbrella terms that cover many variants of freely shared software.

II. Important FOSS Cases

The field of FOSS law is a bit like an undisturbed minefield: much ground has yet to be covered, so it’s unclear where the problem areas are or how big their scope will be. Thus, the best thing a lawyer or license drafter can do is use an understanding of the existing cases to make sure that their license terms protect the software to the fullest extent possible. One of the most important elements of a secure FOSS license is the phrasing of clauses that restrict the licensee’s behavior. For instance, a FOSS licensor might want to ensure that his licensee follows such FOSS precepts as attribution, sharing alike, and non-discrimination. To enforce a violation of these demands, he may be able to sue under two theories: copyright violation and breach of contract. Since a license is a contract in the traditional sense, a breach of contract claim is easily reached. However, to succeed on a claim of copyright infringement, the licensor must demonstrate either that no license was granted in the first place, or that the license was conditional upon the licensee not undertaking such behavior, and thus that due to a violation of the conditions002C the license effectively did not exist. To make this distinction easier to understand, consider the following scenario.[48] Amy and her family own a house with a large field behind it. Bob wishes to cut through Amy’s field to make his commute to work shorter, so he approaches Amy. She is fine with the proposal, so long as Bob does not engage in any lewd activities in the field that might be visible to her children. She and Bob agree to the following language: “Amy grants Bob the right to traverse Amy’s field whenever he pleases. Bob agrees that he will not engage in any lewd activities while in Amy’s field.” If Bob later streaks through Amy’s field on his way home from the bar one night while Amy’s children watch out the window, Amy may sue him only for breach of contract, because the grant of a right to traverse her field was not made conditional upon Bob conducting himself with decorum, and thus would be considered a covenant. Now consider an identical scenario where the agreement reads as follows: “So long as Bob does not engage in any lewd activities, Amy grants Bob the right to traverse her field whenever Bob pleases.” Here, because Bob was engaging in lewd conduct (nudity) when he tried to traverse Amy’s field, he effectively had no permission to do so; Amy’s grant of permission contained a condition. This was a key distinction in several of the cases discussed below, as well as more nuanced questions about the permitted scope of conditions (e.g., should Amy be allowed to condition Bob’s easement on something irrelevant to the land, like Bob not wearing a hat while crossing her field?).

A. Graham v. James

In the 1998 case of Graham v. James, the Second Circuit dealt with claims of copyright ownership and infringement from both parties and laid out several fundamental principles of contract law as they relate to licenses. In the late 1980s and early 1990s, Richard Graham sold CD-ROMs containing compilations of software programs that were free due to their status as shareware, freeware, or public domain software.[49] In 1991, he got in touch with defendant Larry James, a programmer, to commission a file-retrieval program to go on the discs. Graham described “in general terms” the type of program he wanted.[50] James agreed that in exchange for credit on the final project and a CD-ROM disk drive, he would write a file-retrieval program. Graham included this program in his next release.[51] Soon after, James wrote a new version in C++ (“the C++ version”). This version was an entirely new program, and Graham’s only contributions were communicating the program’s general requirements and collaborating on the organization of the files retrieved by the program. The C++ version also included authorship and copyright notices in James’ own name.[52] When Graham discovered this notice, he removed it and released a new version of the disc.[53] Graham subsequently released several other compilations containing the C++ version. During this period, James also sold his C++ version to another CD-ROM publisher.[54] Graham eventually brought suit against James for this sale of the program, claiming ownership of the C++ version’s copyright under the work-for-hire doctrine and alleging that James’s sale to a publisher constituted an infringement of Graham’s copyright. James counterclaimed that he was the rightful owner of the copyright and that Graham’s inclusion of the program on later compilations (and removal of James’s copyright notice) constituted infringement. He also alleged breach of contract.[55] Since the issue of who owned the copyright needed to be decided before the court could address the copyright infringement claims, the district court looked at each party’s evidence and found that “the parties had orally agreed that James would provide Graham with a file retrieval program written in . . . C++” and that Graham would pay James for each version.[56] The district court granted a preliminary injunction barring James from “publishing, copying, selling, marketing or otherwise disposing of” programs that were substantially similar to the C++ version.[57] However, at trial the district court held that as an independent contractor James owned the copyright to the C++ version, and that Graham’s releases with substantially similar programs infringed this copyright. The court awarded various damages and permanently enjoined Graham from using the program.[58] Graham appealed to the Second Circuit, claiming that he had a license to use the copyrighted work.[59] The court acknowledged that “[u]nder federal law, ‘nonexclusive licenses may . . . be granted orally, or may even be implied from conduct,’”[60] and pointed to the fact that the district court had found an implied license for the amount of Graham’s payments between the two parties. They also expressed concern over the awarded copyright damages, since “a copyright owner who grants a nonexclusive license . . . waives his right to sue the licensee for copyright infringement.”[61] Regarding Graham removing the attribution notice mentioning James, the court noted that the prevailing view under copyright law is that an author who sells or licenses her work “does not have an inherent right to be credited as author of the work,” and explained that when a licensee omits such a notice, it has been held not to be infringing.[62] James claimed that even if there had been a license, it had been rescinded for nonpayment or non-attribution, but the court felt the existence of a license was “essentially uncontested.”[63] Instead, the court found the question at hand to be one of the scope and duration of the license. In situations where the question is simply the scope of a license, the court pointed out that the copyright owner has the burden of proof that the use in question is outside the activity authorized by the license.[64] Ultimately, the court felt the issue of whether Graham had infringed James’s copyright rested on one question: were the payment of royalties and inclusion of a notice “crediting James’s authorship” considered covenants or conditions?[65] First, the court noted that under New York state law, terms of a contract are assumed to be covenants, not conditions.[66] Second, the court pointed to the fact that James tendered a copy of the C++ version to Graham for use before any royalties were paid and that the first version of the compilation with the C++ version was published with proper attribution. Both of these facts were relevant because New York does not treat as conditions those contractual obligations that are to be performed after partial performance by the other party.[67] Presented with these precedents, the Court of Appeals found that the attribution and royalty payment obligations were covenants. James advanced a final argument that even if the obligations were covenants, Graham’s breach of the two covenants had terminated the license.[68] In previous cases, both the Ninth and D.C. Circuits had held that a “material breach” could give rise to a right of rescission: “even if the counterclaims asserted merely constitute a breach of contract, an action for copyright infringement would lie if the breach is so material that it allows the grantor power to recapture the rights granted so that any further use of the work was without authority.”[69] New York law generally allows rescission of a contract where the breach is “material and willful, or, if not willful, so substantial and fundamental as to strongly tend to defeat the object of the parties in making the contract.”[70] However, in order to find that a contract has been rescinded, the non-breaching party (here, James) must have taken some affirmative steps towards rescission.[71] Ultimately, the court held that James had not sufficiently demonstrated that the contract had been successfully rescinded or otherwise terminated and remanded the case for further determination. Graham was notable for a few reasons: first, it highlighted the important distinction between covenants and conditions in both awarding damages and succeeding in a case against a licensee run amok. Second, it laid out the difference between questions of the existence of a license and questions of a license’s scope or duration. Third, it raised questions of whether a failure of attribution could ever constitute a violation of a condition, though there has been speculation that this holding was influenced by the lack of a written instrument.[72] Thus, Graham’s primary lessons were the importance of putting agreements regarding software in writing and of framing important provisions as explicit conditions to the license.

B. Sun v. Microsoft

The case of Sun Microsystems v. Microsoft Corp. posed somewhat similar questions to those in Graham, with one particularly notable change: there was a written agreement. In 1996, Microsoft was looking to license the right to use Sun’s Java programming language in other products that it would create and distribute.[73] Sun[74] originally created Java “so that programmers could write a single program that would work on any operating system,” and was determined to ensure that Microsoft distributed only versions of Java that maintained this cross-platform compatibility.[75] This demand became especially important when, midway through negotiations, talks broadened from use only in Microsoft’s internet browsers and software development tools to a broader license that would allow Microsoft to include Java in its operating systems.[76] Sun’s license agreements with other Java partners required products developed by licensees to pass Sun’s compatibility tests, which Sun termed the JCK (Java Compatibility Kit) test suite.[77] If a product passed the test suite, the licensee was granted the right to display Sun’s “JAVA Compatible” trademark on its product. The terms of Sun’s new agreement with Microsoft were recorded in a “Technology License and Distribution Agreement” (the “TLDA”).[78] The TLDA granted Microsoft the right to a non-exclusive development license to use the source code of Sun’s technology “for the purposes of developing, compiling to binary form and supporting [Microsoft’s own] Products.”[79] In addition, Sun granted Microsoft a non-exclusive distribution license to “make, use, import, reproduce, license, rent, lease, offer to sell, sell or otherwise distribute to end users as part of a Product or an upgrade to a Product, the Technology and Derivative Works thereof in binary form.”[80] In a later clause within the same section, the TLDA placed compatibility requirements on Java-containing commercial distributions by Microsoft.[81] The TLDA likewise required that any Java compiler developed and distributed by Microsoft meet compatibility requirements.[82] On September 30, 1997, Microsoft released the new version of its web browser, Internet Explorer (“IE 4.0”), on its website.[83] Microsoft claimed that IE 4.0 “incorporate[d] and [was] fully compatible with” the required version of Java, and displayed Sun’s “JAVA Compatible” trademark in close proximity to the IE 4.0 logo on both its website and CD-ROM versions. Testing by Sun revealed that IE 4.0 failed to pass the test suite, and on October 7, 1997, Sun notified Microsoft of the failure and requested that they commit to becoming compliant. Microsoft responded, claiming that IE 4.0 fully complied with requirements and that they would therefore continue to use the trademark.[84] Outside testing ultimately confirmed that IE 4.0 did not pass the test suite, a flaw that jeopardized the compatibility of the Java contained within IE 4.0.[85] Sun took the case to court to request multiple forms of relief, starting with a preliminary injunction to stop Microsoft’s supposedly TLDA-violating conduct. In Sun II, the district court granted a preliminary injunction relating to Sun’s copyright infringement and unfair competition claims,[86] and it was this copyright infringement claim that provoked Microsoft’s appeal to the 9th Circuit in Sun III. The 9th Circuit found that the license provisions at issue could be either covenants or conditions.[87] Thus, the court vacated Sun II’s injunction and remanded the case for further determination. In Sun V, the court denied Sun’s request to reinstate the preliminary injunction, holding that Sun had not “definitively established” that it had a case for copyright infringement, rather than breach of contract.[88] However, it was not until Sun VI that the issue of whether the violated license agreement provisions were covenants or conditions (referred to by the court as “license restrictions”) was addressed. Quoting Graham v. James, the court pointed out that a copyright owner who grants a nonexclusive license generally waives his right to sue the licensee for copyright infringement.[89] As in Graham, the court then moved on to principles found in state law regarding the interpretation of contracts. California law requires that in reviewing the intent suggested by the language of the TLDA, the court examine the “four corners of the instrument.”[90] The court held that “[t]he language and structure of the TLDA suggest that the compatibility obligations are separate covenants and not conditions of, or restrictions on, the license grants.”[91] Specifically, the court highlighted the fact that the language actually granting the software license made no reference to meeting compatibility requirements. The court contrasted this with Sun’s use of conditions in the TLDA’s “Trademark License” section, where the grant was limited to goods “that fully meet the certification requirements” and the license was later specified as only applying to versions that passed the JCK test suite.[92] In addition, the court read the remedies section to suggest a scheme where compatibility breaches, rather than immediately triggering a copyright violation, could be remedied within thirty days without penalty. Given these pieces of evidence, the court concluded, “the only reasonable interpretation of the TLDA is that the compatibility provisions of Section 2.6 are independent covenants, rather than limitations on the scope of Microsoft’s pre-termination license.” Thus, the court granted Microsoft’s motion for summary judgment and dismissed Sun’s claim for relief based on the allegation of copyright infringement. Sun VI follows Graham’s precedent, but serves as an important case because it exemplifies the dangers still at hand for a licensor when there is a written agreement. When drafting clauses that grant any rights to the licensee, it is crucial that the sentence or clause containing such a grant include any restrictions that are fundamental to the licensor’s willingness to provide a license. The Sun cases also serve as a warning to those drafting clauses regarding available remedies, particularly when a licensor enters negotiations with a licensee before the terms of a license are agreed upon (as contrasted with situations where software is provided with a pre-attached license). First, drafters should write damages clauses that avoid suggesting either that a violation of a condition (or other important covenant) is insignificant or that such a violation does not qualify as a material breach of the agreement. Additionally, licensors should carefully consider the ways in which licensees might violate the terms of a license agreement before allowing the inclusion of a clause restricting or barring the ability to obtain an injunction against a licensee. Ultimately, the Sun cases serve as a warning to developers and lawyers alike: even the big guys can mess up.

C. Jacobsen v. Katzer

While a 2001 case in the 11th Circuit acknowledged that FOSS licensed under the GPL was not simply released into the public domain,[93] it was not until 2007 that a case progressed far enough[94] to fully discuss the merits of a FOSS license and whether its requirements could constitute conditions. In Jacobsen v. Katzer, plaintiff Robert Jacobsen worked at the Lawrence Berkeley National Laboratory and taught physics as a professor at the University of California, Berkeley.[95] A model train hobbyist, he was a leading member of the “Java Model Railroad Interface” (JMRI) Project, a SourceForge-based community that builds model railroad computer controls.[96] Through contributions by many JMRI participants, the project created an application called DecoderPro that “allows model railroad enthusiasts to use their computers to program the decoder chips that control model trains.”[97] JMRI made DecoderPro available through SourceForge for free, but included a copyright notice and a reference to the included “COPYING” file, which contained the terms of the Artistic License, another popular FOSS license, in each of the package’s files.[98] The defendant, Matthew Katzer, was the CEO and chairman of the board of directors for Kamind Associates, Inc. (KAM), a Portland, Oregon-based software company that developed software for model railroad enthusiasts.[99] KAM offered a competing software product called Decoder Commander, which is also used in the programming of decoder chips.[100] During the development of Decoder Commander, a KAM employee allegedly downloaded “decoder definition files” from DecoderPro and used portions of them in the code for Decoder Commander.[101] The files containing DecoderPro definitions violated the terms of the Artistic License in five ways, neglecting to include “(1) the authors’ names, (2) JMRI copyright notices, (3) references to the COPYING file, (4) an identification of SourceForge or JMRI as the original source of the definition files, and (5) a description of how the files or computer code had been changed from the original source code.”[102] In addition, KAM changed the file names of various DecoderPro files without providing a reference to the original JMRI files or information about where to obtain the original versions.[103] Jacobsen brought suit against Katzer and KAM, alleging that they “fraudulently secured patents for their software and, despite knowing the patents were invalid and unenforceable, sought to enforce the patents and collect patent royalties, and threatened litigation.”[104] In addition to seeking declaratory judgment of the unenforceability and invalidity of the patents and non-infringement of DecoderPro, Jacobsen brought claims against the defendants for antitrust, unfair competition, cybersquatting, libel, copyright infringement, trademark claims under 15 U.S.C. § 1125, and unjust enrichment.[105] While the court threw out many of his other claims, Jacobsen’s claim of copyright infringement and related motion for a preliminary injunction became major issues in the case.[106] In Jacobsen I, the district court for the Northern District of California addressed Jacobsen’s motion for a preliminary injunction enjoining the defendants from “willfully infringing [his] copyrighted material.”[107] The court noted that Jacobsen alleged copyright infringement, arguing that the defendants “without permission or consent, has [sic] made copies, distributed copies to the public, or created derivative works in violation of the exclusive rights.”[108] The court then cited the three relevant provisions of the Artistic License which together state that those with access to the files may make copies, distribute and create derivative works from the software, provided that they give proper credit to the JMRI project: (a) that potential licensees may “make or give away verbatim copies of the source form . . . without restriction provided that [the licensee] duplicate all of the original copyright notices and assorted disclaimers,” (b) that the licensee can distribute the copyrighted work “in a more-or-less customary fashion, plus [have] the right to make reasonable modifications,” and (c) that the licensee may “distribute [the material] in aggregate with other (possibly commercial) programs as part of a larger (possibly commercial) software distribution provided that [the licensee] not advertise [the material] as a product of [his] own.”[109] The court found that the license represented a choice by Jacobsen to distribute the decoder definition files “by granting the public a nonexclusive license to use, distribute, and copy the files.”[110] It noted that the license was subject to several requirements (such as attribution), but held that implicit in a nonexclusive license is “the promise not to sue for copyright infringement.”[111] In a major blow to FOSS goals, the court held that “[t]he condition that the user insert a prominent notice of attribution does not limit the scope of the license.”[112] The court then acknowledged that actions exceeding the scope of the license could still give rise to a copyright infringement claim, but held that in granting rights to “any member of the public” to “use and distribute the [material] in a more-or-less customary fashion, plus the right to make reasonable accommodations,” Jacobsen had made the scope of the nonexclusive license “intentionally broad.”[113] Thus, the court found that Jacobsen only had a case for breach of the Artistic License, not copyright infringement, and denied Jacobsen’s motion for a preliminary injunction.[114] Jacobsen appealed to the Federal Circuit (Jacobsen II). The Federal Circuit considered the history of “public licenses” (“often referred to as ‘open source’ licenses”).[115] It noted that one of the amici curiae, Creative Commons, provided free copyright licenses to allow parties to either release works into the public domain or license certain uses while keeping other rights reserved, and pointed to MIT’s use of a Creative Commons license for their course system, as well as uses of FOSS licenses by Apache, Firefox, and Wikipedia, as evidence that “open source licensing has become a widely used method of creative collaboration that serves to advance the arts and sciences in a manner and at a pace that few could have imagined just a few decades ago.”[116] The court also noted several advantages of FOSS licensing and collaborations, such as faster writing and debugging of programs and lower development costs.[117] While it acknowledged that traditionally copyright holders have sold their copyrighted material “in exchange for money”, the court argued that FOSS licensing’s lack of monetary compensation “should not be presumed to mean that there is no economic consideration.”[118] To support this statement, the court cited the generation of market share, reputational gains, and improvements by outside contributors as gains created by FOSS licensing. The court established that there was no dispute regarding the fact that Jacobsen held the copyright to certain materials throughout the website (a presumption established by his copyright registration), nor that portions of the DecoderPro software’s code were copied, modified, and distributed within Decoder Commander.[119] Given these facts, the court found a prima facie case of copyright infringement, subject to a finding that the defendants were acting outside the scope of the license. The court looked to the language of the Artistic License, which granted rights to copy, modify and distribute the software:
provided that [the user] insert a prominent notice in each changed file stating how and when [the user] changed that file, and provided that [the user] do at least ONE of the following: a) place [the user’s] modifications in the Public Domain or otherwise make them Freely Available . . . . b) use the modified Package only within [the user’s] corporation or organization. c) rename any non-standard executables so the names do not conflict with the standard executables, which must also be provided, and provide a separate manual page for each nonstandard executable that clearly documents how it differs from the Standard Version, or d) make other distribution arrangements with the Copyright Holder.[120]
The court highlighted the covenant–condition distinction, explaining that if the terms were found to be conditions, a claim would lie under copyright, while if they were merely covenants, Jacobsen’s only claim would be for breach of contract. It noted that the district court in Jacobsen I had not acknowledged this distinction, but had clearly been proceeding under the assumption that the terms were contractual covenants.[121] In his brief, Jacobsen argued that the terms should be read as conditions, while Katzer and KAM argued that they were covenants, citing Gilliam v. ABC for the premise that copyright law does not recognize a cause of action for non-economic rights (in the case of Gilliam, moral rights[122]).[123] Ultimately, the Federal Circuit held that the terms were conditions, giving rise to a claim of copyright infringement. First, the court pointed to the fact that the Artistic License stated on its face that it created conditions: “The intent of this document is to state the conditions under which a Package may be copied.”[124] Each grant of a copyright-related right (copying, modifying, and distributing) within the License was also granted “provided that” the conditions were met, and California law generally construes “provided that” as creating a condition. The court also noted the importance of the attribution condition in allowing users of derivative works to backtrack to the original software. Further, the court explained its position on FOSS very clearly, writing that “[c]opyright holders who engage in open source licensing have the right to control the modification and distribution of copyrighted material.”[125]
Copyright licenses are designed to support the right to exclude; money damages alone do not support or enforce that right. The choice to exact consideration in the form of compliance with the open source requirements of disclosure and explanation of changes, rather than as a dollar-denominated fee, is entitled to no less legal recognition. Indeed, because a calculation of damages is inherently speculative, these types of license restrictions might well be rendered meaningless absent the ability to enforce through injunctive relief.[126]
Vacating Jacobsen I (thus denying a preliminary injunction) and remanding the case, the court explained that the Artistic License contained “clear language” creating conditions to protect the copyright holder’s rights and that those terms were enforceable copyright conditions. Jacobsen II serves as a beautifully-written ode to FOSS, clearly laying out the various gains available to a FOSS licensor and demonstrating that where a FOSS licensor takes care to choose a license with sufficiently clear wording of its FOSS conditions, courts are willing to recognize these conditions as restrictions on the license grant.

D. MDY v. Blizzard

The last case of particular relevance to the condition-covenant licensing distinction is one that did not involve FOSS, and perhaps due to that fact threatens to open up a dangerous line of defense for FOSS license violators. In the 2010 case MDY v. Blizzard, the 9th Circuit dealt with license restrictions imposed by a video game manufacturer on players, in a case where game manufacturer Blizzard brought claims of copyright infringement against the creator of an automated game-playing program under theories of contributory and vicarious liability. In 2004, Blizzard Entertainment created World of Warcraft (WoW), a massively multiplayer online role-playing game (MMORPG) in which players interact with a “virtual world” containing other players and interactive experiences, while advancing through the game’s seventy levels.[127] Players role-play as different characters including humans, elves, and dwarves, advancing through the game’s levels by participating in quests and battling monsters.[128] Blizzard requires players to read and accept an End User License Agreement (EULA) and Terms of Use (ToU) on multiple occasions.[129] The EULA pertains to the installed game client itself, and a player must agree to it upon both install and first running the game. The ToU covers the online service, and a player agrees to it both when creating an account and when first connecting to the service. Declaratory judgment plaintiff MDY Industries was a software company run by Michael Donnelly. In 2005, Donnelly developed a software bot called Glider that automated the gameplay of WoW’s early levels, intending it solely for his personal use. Glider did not alter or copy WoW’s game client software in any way, did not allow users to avoid Blizzard’s monthly fees, and was not initially designed to avoid detection by Blizzard.[130] Later in 2005, Donnelly reviewed Blizzard’s EULA and client-server manipulation policy, reached the conclusion that bots were not prohibited under their terms, and began to sell Glider through MDY’s website for $15 to $25 per license.[131] Blizzard soon discovered Glider and in response launched a technology called Warden, which prevented players who used unauthorized third-party software (such as bots) from connecting to the WoW servers. In response, MDY altered Glider to evade detection by Warden, even advertising this alteration on its website.[132] In 2006, after Blizzard threatened to sue, MDY commenced an action for a declaratory judgment that Glider’s files did not violate Blizzard’s copyright on the intellectual property contained in WoW (MDY I).[133] Blizzard counterclaimed against MDY and Donnelly for copyright infringement, asserting that the license it granted players to use the game (and therefore to copy the game to their computer’s RAM) was conditioned upon not using bots, and thus that MDY was contributorily and vicariously liable for the unauthorized “copying” of WoW that occurred when Glider users played the game.[134] In response, MDY argued that when players used Glider, they were simply breaching a contract, not infringing a copyright.[135] The district court cited MAI Systems, Corp. v. Peak Computer, Inc., which held that copying software to RAM qualifies as “copying” under section 106 of the Copyright Act.[136] Thus, the court focused on the threshold issue of whether the “no bots” clauses within the EULA and ToU constituted covenants or conditions. The first paragraph of the EULA stated, “IF YOU DO NOT AGREE TO THE TERMS OF THIS AGREEMENT, YOU ARE NOT PERMITTED TO INSTALL, COPY, OR USE THE GAME.”[137] Later, the EULA granted rights to install and use the game via the following language: “Subject to your agreement to and continuing compliance with this License Agreement, Blizzard hereby grants, and you hereby accept, a limited, non-exclusive license to (a) install the Game Client . . . and (b) use the Game Client . . . . ”[138] Considered “in their entirety,” the district court found that the “subject to” and “limited” language in the EULA and ToU established limitations on the scope of the license.[139] The court pointed to a section governing behavior in interactions between users as an example of Blizzard’s use of independent covenants, pointing out that “[a] single contract clearly can contain both [covenants and conditions].”[140] Ultimately, the court held that Glider users acted outside the scope of this limited license and granted partial summary judgment to Blizzard based on a finding that Glider sales contributorily and vicariously infringed Blizzard’s copyrights.[141] Soon after, MDY appealed to the Ninth Circuit (MDY II). In a deviation from previous cases like Jacobsen, the court looked to Delaware law (as provided for in the EULA and ToU) and found that “[c]onditions precedent are disfavored because they tend to work forfeitures.”[142] Noting that while the contract should be construed according to its terms if unambiguous, the court stated that where conflicting interpretations are possible, equity construes ambiguous provisions as covenants rather than conditions.[143] Given these standards of interpretation, the court found the bot and third-party software prohibitions to be covenants rather than copyright-enforceable conditions.[144] Specifically, the court claimed, “we have held that the potential for infringement exists only where the licensee’s action (1) exceeds the license’s scope (2) in a manner that implicates one of the licensor’s exclusive statutory rights.”[145] While the court believed a derivative works ban was grounded in copyright, it felt that the anti-bot provision was not, and thus that the provision was a covenant. The court justified its decision by claiming that were it to hold otherwise, a software copyright holder could designate “any disfavored conduct during software use” as copyright infringement, citing RAM copies made during this conduct as a violation of the rights holder’s exclusive right to copy. Ultimately, the court believed that for a term to be a condition whose violation would give rise to a claim of copyright infringement, there needed to be a “nexus between the condition and the licensor’s exclusive rights of copyright.” As a result, the Ninth Circuit reversed the district court’s grant of summary judgment for Blizzard and vacated a related permanent injunction.[146] The impact of MDY on FOSS licenses has yet to be fully felt: of the fourteen cases to cite the decision since it came down, none have dealt with a FOSS license or other similarly uncompensated license. Thus, it remains to be seen whether a court in the Ninth Circuit, following the precedent set by MDY, would uphold a FOSS license’s attribution clause (the type of clause at issue in Graham), since it does not “implicate[] one of the licensor’s exclusive [copyright] rights.”[147] Since the Copyright Act grants only the rights to reproduce the work, prepare derivative works, distribute copies, perform the work publicly, and display the work publicly,[148] it remains to be seen whether any of the common FOSS requirements of distribution of derivative works’ source code, application of an identical license to derivative works, notation of changes between the original and derivative works, and nondiscrimination would be held unenforceable.

III. Drafting and Arguing for FOSS Licenses

A. First Considerations

Before reaching the covenant–condition distinction, a licensor must take an important first step: copyright registration. 17 U.S.C. § 411 reads, “no civil action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made.”[149] Further, while a copyright owner can technically bring an action for copyright infringement at any time after registration (regardless of how long after publication the registration happens), § 412(2) limits the availability of certain copyright remedies to those works whose registration “is made within three months after the first publication of the work.”[150] While some jurisdictions allow the application for the copyright to satisfy § 411, most jurisdictions require full completion of registration before a suit can be brought.[151] Where a creator wishes to file suit and needs to first complete an expedited registration, the applicable fee can be several hundred dollars more than the usual fee.[152] Thus, prompt registration of a software program’s copyright is crucial. The rewards for having previously registered a work’s copyright are important for the FOSS community. Under the copyright statute, the available remedies for copyright infringement are injunctions,[153] impoundment and destruction of illegal copies,[154] damages and profits (including statutory damages),[155] and costs and attorney’s fees.[156] Of course, under a breach of contract theory, injunctions and monetary damages may be available, but there are two important advantages to requesting remedies under a copyright infringement theory. First, a category of copyright-only remedies becomes available. Assuming timely registration, a rights holder can, at any time during trial, opt to seek statutory damages—an award of “not less than $750 or more than $30,000 as the court considers just” (but up to $150,000 for willful violations)—in lieu of actual damages.[157] In a situation where actual damages are speculative or otherwise difficult to calculate (as is often the case with FOSS infringements), statutory damages provide a mechanism for a rights holder to dispatch with the expensive process of proving damages, instead receiving what the court views to be a “just” sum. The copyright-only remedies category also includes recovery of costs and attorney’s fees under § 505. Second, copyright registration invokes a slightly different approach towards injunctions. Where a plaintiff has demonstrated a likelihood of success on the merits, courts have historically relied on a judicially created presumption of irreparable harm, rather than undertaking an analysis to consider whether the plaintiff has demonstrated a likelihood of such harm.[158] However, in the 2010 case eBay v. MercExchange, the Supreme Court held that courts should not rely on this presumption and should instead utilize the traditional four-factor test for injunctions.[159] This would seem to suggest that the injunctions available under a copyright theory had been made commensurate with those under a breach-of-contract theory, especially since both the Second and Ninth Circuits have affirmed eBay’s holding.[160] However, the Federal Circuit—the first circuit to address eBay’s holding (in Jacobsen, no less)—“declined to invoke eBay‘s standards, and instead applied the Ninth Circuit’s pre-eBay presumption of irreparable harm,” the same presumption later overturned by the Ninth Circuit itself.[161] Likewise, many district courts have continued to apply the presumption.[162] Since courts are clear that the “granting of an injunction to restrain a breach of contract rests largely in the sound discretion of the court,”[163] even post-eBay copyright-based injunction requests may be looked at more favorably than ones for breach of contract, and thus still provide advantages for a rights holder.

B. Best Practices

In a perfect world, FOSS licenses and their publication would be so well handled as to avoid review by courts in the first place. Following best practices can provide enough clarity to avoid infringement by confused licensees and can also strengthen the licensor’s position if he ends up in court nonetheless. Before licensing his software, a FOSS developer’s first step should be to register his copyright. As touched on above, this registration process can open the doors to vastly preferable remedies, such as statutory damages. Beyond the actual availability of statutory damages, their existence as a possibility can keep a licensor out of court in the first place: a licensee who is aware that statutory damages are available may be more willing to negotiate a settlement. Since the advent of the Copyright Office’s Electronic Copyright Office (eCO) system, registering a copyright has become a relatively simple process. A developer must simply go online to access the application form,[164] complete its fields, and pay a $35 basic application fee.[165] Second, any developer or lawyer working on a FOSS license should be careful that the license’s language properly defines important provisions of the license as conditions. For instance, references to an attribution requirement or “share-alike” policy for derivative works should be included within the granting sentence, introduced by conditional language such as “provided that” or “on the condition that.” In addition, suggestive words like “limited” should be used in describing the license, as courts have shown a belief that such language hints at a license’s conditional restrictions.[166] Finally, any conditions should be explicitly referred to as “conditions.” Third, license drafters should keep in mind the possibility of rescission. Drafters may opt to include some type of termination clause (as in the Sun-Microsoft license) or may otherwise mention the licensor’s ability to rescind or terminate the license upon material breach. Outside of this, a licensor should, as a safety measure, send notice of license termination where he believes the licensee has materially breached the contract, since this will make copyright remedies available if the court finds the violated term is a covenant and holds that the violation is “material.” Lastly, developers may wish to provide prominent notice to their users that the software is licensed under a FOSS scheme, explaining the purpose and breadth of requirements such as attribution and sharing alike. By doing so, licensors make it clear that the FOSS content is not in the public domain and thus alert users who intended to borrow code, thereby inadvertently violating the license, that such behavior is not condoned. Through careful attention to the act of licensing FOSS, a developer and his attorney can drastically reduce the risk of misuse and resulting damages to the software’s FOSS goals.

C. Arguing a License Violation

When a licensee has misused FOSS software, especially where the scope of the license is unclear, it is important to understand the categories that FOSS violations can fall into as well as the licensor’s strongest available arguments. A preliminary distinction can be made between cases where there is some form of license and cases where there is none. In FOSS cases, the software is generally distributed with a pre-attached license for all users, which means that the category of cases involving no license is largely irrelevant. Thus, I will only consider approaches for cases where some semblance of a license is involved. The first path a FOSS owner can take is to argue that while there is a license, the licensee has violated a condition of that license, and thus is liable for copyright infringement, not simply breach of contract. A simple example would be a license whose grant of rights read, “Licensor grants licensee a limited license to distribute the work provided that the licensee distributes the work with all attributions and notices intact.” Here, if a licensee distributed the work with attribution to the licensor stripped away, the licensor could argue that he had never provided a license for such conduct. Essentially, the licensor would argue that the licensee had acted outside the scope of the license, and was therefore liable for copyright infringement.[167] If a court holds a FOSS license term to be a covenant due to a reading of either the language of the license or the limitations of MDY, a licensor can argue that the licensee’s breach constituted a “material breach.” In many jurisdictions, such a breach could give the licensor the ability to rescind the contract.[168] If a licensor can establish rescission of the contract, the license is essentially stripped away, re-exposing the licensee to copyright liability. However, to succeed in making a claim of rescission, the licensor must have undertaken an “affirmative act” to indicate rescission, such as “transmitting a notice of termination.”[169] Thus, it is important that a licensor attempt to notify a licensee of termination where the licensor believes there has been a material breach. When a licensor cannot succeed in arguing that a condition was violated or that rescission resulted from a material breach, the licensor’s options are more limited. Without the ability to reach the copyright remedies available to a rights holder whose copyright was infringed, a licensor must resort to a breach of contract claim. This means that in order to collect any monetary damages, he will need to establish his actual damages and/or any profits reaped by the defendant. However, where irreparable harm can be demonstrated, injunctions may still be available, thus making such a claim useful in certain situations.


Lawyers as a group are not known for their tech savvy or rapid embrace of emerging technologies. In an interview regarding law firms’ adoption of online tools for lawyers and firms, a partner at the Boston firm Foley & Lardner joked that “law firms must innovate to finally move into the 20th century.”[170] For every lawyer who cannot find the ‘any’ key, however, there is a lawyer working with software developers, crafting the licenses for tomorrow’s killer apps. It is this latter category of attorneys who must make sure that they understand the ‘covenant versus condition’ distinction, because the next time this issue comes to bear, it might be more than model trains or a video game at stake.
* Victoria is a 2014 J.D. candidate at NYU School of Law. Her professional interests are in the fields of software licensing and software-as-a-service agreements for Web 2.0 companies. She received a B.A. in Sociology from Boston University in 2011. She would like to thank Christopher Sprigman, the JIPEL Editorial Staff, and her family for their help throughout the editing process.
[1] There are a myriad of terms used to refer to software that has any of the qualities of being made collaboratively, being shared freely, or being shared pursuant to a promise to “share alike” (to use an identical license on derivative works). Since this paper is not meant to address the intricacies or politics of the software community’s preferences for different terminology (though I do cover the issue briefly in Part II.C.., I choose to refer to these forms of software simply as “FOSS”, for both clarity and space’s sake. I would include in my “FOSS” umbrella software termed “free software”, “open source software”, “free/open source software” (“FOSS”), or “free/libre/open-source software” (“FLOSS”), and I invite the reader to impose upon my use of the term any definition that helps make the paper relevant to his or her projects.
[2] Matt Kohut, Lenovo’s Worldwide Competitive Analyst, argued, “Linux, even if you’ve got a great distribution and you can argue which one is better or not, still requires a lot more hands-on than somebody who is using Windows . . . . You have to know how to decompile codes and upload data, stuff that the average person, well, they just want a computer.” John Pospisil, Lenovo analyst: Linux on netbooks is doomed, Tech.Blorge (Apr. 21, 2009),
[3] Top Browser Share Trend: June, 2010 to April, 2011, NetMarketShare, (last visited Feb. 28, 2014).
[4] See generally Fork (software development), Wikipedia, (last visited Feb. 13, 2014).
[5] Eric Wilhelm, Open Source Benefits for Developers,, (last visited Feb. 28, 2014).
[6] Gottfried Hofmann et al., A Dual Model of Open Source License Growth 2 (2013), available at
[7] Computer Associates Int’l v. Quest Software, Inc., 333 F. Supp. 2d 688, 698 (N.D. Ill. 2004). The court refers to GPL’s requirement that subsequent derivative works based on a GPL-licensed program must then themselves be GPL-licensed.
[8] Heather J. Meeker, Open Source and the Age of Enforcement, 4 Hastings Sci. & Tech. L.J. 267, 270 (2012).
[9] MDY Indus., LLC v. Blizzard Entm’t, Inc., 629 F.3d 928 (9th Cir. 2010).
[10] Gordon M. Brown, Unix: An Oral History, Princeton U., (last visited Feb. 28, 2014).
[11] Id.
[12] Brown, supra note 10.
[13] Id.
[14] Dennis M. Ritchie, The Evolution of the Unix Time-sharing System, Bell Laboratories, (last visited Feb. 28, 2014).
[15] Brown, supra note 10.
[16] Ritchie, supra note 14.
[17] Id. The name “UNIX” was (an altered spelling of “UNICS”, which was a pun on MULTICS). Id.
[18] Bruce Montague, Unix from a BSD Licensing Perspective, FreeBSD, (last visited Mar. 21, 2014).
[19] Id. See also UNIX/Linux History, Digital-Domain, (last visited Feb. 28, 2014).
[20] See sources cited supra note 19. See generally Wikipedia, supra note 4 (for an explanation on forking).
[21] Peter H. Salus, A Quarter Century of UNIX 142 (1994).
[22] Montague, supra note 18.
[23] Marshall Kirk McKusick, Twenty Years of Berkeley Unix, in Open Sources: Voices from the Open Source Revolution 21, 25 (Chris DiBona & Sam Ockman eds., 1999).
[24] Id.
[25] Bennett M. Sigmond, Free/open Source Software Licensing-Too Big to Ignore, Colo. Law., Dec. 2005, at 89, 90.
[26] Richard Stallman, The GNU Project,, thegnuproject.html (last visited Feb. 28, 2014).
[27] Stallman’s legal battle with James Gosling, creator of a C-based version of Stallman’s Emacs program, is a highly entertaining read. It is detailed in an article by Li-Cheng Tai, and vivified by comments given by Stallman at a lecture in Sweden. Li-Cheng Tai, The History of the GPL, FREE-SOFT.ORG (July 4, 2001),; Richard Stallman, RMS Lecture at KTH (Sweden), 30 October 1986, GNU.ORG, (last visited Feb. 28, 2014).
[28] Tai, supra note 27.
[29] Emacs General Public License,, (last visited Feb. 28, 2014).
[30] Id.
[31] Stallman, supra note 26.
[32] 1 GNU’s Bulletin, no. 5, June 1988,
[33] Sigmond, supra note 25 at 90.
[34] GNU has gone on to become one of the two contributions that make up the Linux operating system.
[35] Amit Deshpande & Dirk Riehle, The Total Growth of Open Source, in Open Source Development, Communities and Quality 197, 202 (Barbara Russo et al. eds., 2008).
[36] See Linux Distribution, Wikipedia, (for a beautiful graphic illustration of the various forked distributions of Linux) (last visited Feb. 17, 2014).
[37] Charles Babcock, Red Hat: First $1 Billion Open Source Company, InformationWeek (Mar. 29, 2012, 9:49 AM),
[38] May 2013 Web Server Survey, NetCraft (May 3, 2013),
[39] Investment in Open Source Software Set to Rise, Accenture Survey Finds, Accenture (Aug. 5, 2010),
[40] The Free Software Definition, GNU (Feb. 28, 2013),
[41] Id.
[42] The Open Source Definition, Open Source Initiative, (last visited Mar. 21, 2014).
[43] Id.
[44] History, Free Open Source Software (last updated Sept. 14, 2012),
[45] Heikki Orsila, using m$ products is supporting them, Google Groups (Feb. 18. 2002, 6:37 AM),!msg/ VQzhmaguGUo.
[46] Ricardo García Fernández, Floss Developers, Un año con el Máster de Software Libre en la URJC (Oct. 24, 2012),
[47] Frederick Noronha, Book Review: Free/Open Source Software: Network Infrastructure and Security by Gaurab Raj Upadhyaya, Free Software Magazine (Aug. 16, 2007),
[48] Given the intricacies of modern property law, we will assume for the purposes of this example that such a property-based contract would behave identically to a license agreement for intellectual property.
[49] Graham v. James, 144 F.3d 229, 232–33 (2d Cir. 1998).
[50] Id. at 233.
[51] Id.
[52] Id.
[53] Id. at 234.
[54] Id.
[55] Graham, 144 F.3d 229 at 234.
[56] Id. at 233.
[57] Id. at 234.
[58] Id.
[59] Id. at 235.
[60] Id. (quoting 3 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 10.03[A][7], at 10–43); see also I.A.E., Inc. v. Shaver, 74 F.3d 768, 775–76 (7th Cir. 1996).
[61] Graham, 144 F.3d at 236.
[62] Id.
[63] Id.
[64] Id.
[65] Id. at 237.
[66] Id.; see also Grand Union Co. v. Cord Meyer Dev. Co., 761 F.2d 141, 147 (2d Cir. 1985) (“In the absence of more compelling evidence that the parties intended to create a condition, the negotiation provision must be construed as a promise or covenant.”).
[67] 22 N.Y. Jur.2d Contracts § 265 (1996); see also Jacob Maxwell, Inc. v. Veeck, 110 F.3d 749, 754 (11th Cir. 1997) (holding that royalty payments and author attribution were covenants because “[the song’s composer] expressly granted [the licensee] permission to play the song before payment was tendered or recognition received”).
[68] Graham, 144 F.3d at 237.
[69] Costello Publ’g Co. v. Rotelle, 670 F.2d 1035, 1045 (D.C. Cir. 1981); see also Rano v. Sipa Press, Inc., 987 F.2d 580, 586 (9th Cir. 1993).
[70] Callanan v. Powers, 92 N.E. 747, 752 (N.Y. 1910).
[71] 22A N.Y. Jur.2d Contracts § 497 (1996) (“The failure of a party to perform his part of a contract does not per se rescind it. The other party must manifest his intention to rescind within a reasonable time.”).
[72] Evan Brown, Open Source Software and the Covenant-Condition Dichotomy, Internetcases (Feb. 20, 2009), (“It is difficult to ascertain how the licensor in Graham would have, in reality, viewed the use of his software without a copyright notice as being authorized (and therefore within the scope of the license). Perhaps the most plausible explanation for the contrary holding in Graham was the absence of a written agreement, and a presumption arising under New York law that the parties intend a covenant and not a condition.”).
[73] Sun Microsystems, Inc. v. Microsoft Corp., 81 F. Supp. 2d 1026, 1028 (N.D. Cal. 2000) [hereinafter Sun V].
[74] In 2010, Sun Microsystems was acquired by Oracle Corporation, another large computer technology corporation, who continued to market Sun’s software portfolio. Oracle and Sun Microsystems, Oracle, (last visited May 22, 2013).
[75] Sun Microsystems, Inc. v. Microsoft Corp., 188 F.3d 1115, 1118 (9th Cir. 1999) [hereinafter Sun III].
[76] Sun Microsystems, Inc. v. Microsoft Corp., 21 F. Supp. 2d 1109, 1113 (N.D. Cal. 1998) [hereinafter Sun II], vacated, 188 F.3d 1115 (9th Cir. 1999), reinstated, 87 F. Supp. 2d 992 (N.D. Cal. 2000).
[77] Sun Microsystems, Inc. v. Microsoft Corp., 999 F. Supp. 1301, 1303 (N.D. Cal. 1998) [hereinafter Sun I].
[78] Sun V, 81 F. Supp. 2d at 1027.
[79] Id. at 1028 (quoting TLDA § 2.1(a)).
[80] Id. (quoting TLDA § 2.2(a)(iii)).
[81] Id. (quoting TLDA § 2.6(a)(vi)).
[82] Id. (TLDA § 2.6(b)(iv) reads “[A]ny new version of a Product that includes the Java Language compilation function that Licensee makes commercially available to the public after the most recent Compatibility Date shall include a mode which a Tool Customer may use to permit such Product to pass the Java Language Test Suite that accompanied the Significant Upgrade.”).
[83] Sun I, 999 F. Supp. 1301, 1305 (N.D. Cal. 1998).
[84] Id.
[85] Id.
[86] Sun II, 21 F. Supp. 2d 1109, 1127–28 (N.D. Cal. 1998)
[87] Sun III, 188 F.3d 1115, 1119–24 (9th Cir. 1999).
[88] Sun V, 81 F. Supp. 2d 1026, 1033 (N.D. Cal. 2000).
[89] Sun Microsystems, Inc. v. Microsoft Corp., No. C 97-20884RMWPVT, 2000 WL 33223397, at *3 (N.D. Cal. May 8, 2000) [hereinafter Sun VI].
[90] Machado v. S. Pac. Transp. Co., 284 Cal. Rptr. 560, 562 (Ct. App. 1991).
[91] Sun VI, 2000 WL 33223397, at *3.
[92] Id.
[93] Planetary Motion, Inc. v. Techsplosion, Inc., 261 F.3d 1188, 1198 (11th Cir. 2001) (“That the Software had been distributed pursuant to a GNU General Public License does not defeat trademark ownership, nor does this in any way compel a finding that [plaintiff] abandoned his rights in trademark. Appellants misconstrue the function of a GNU General Public License. Software distributed pursuant to such a license is not necessarily ceded to the public domain and the licensor purports to retain ownership rights, which may or may not include rights to a mark.”).
[94] Around the same time, the Software Freedom Law Center filed the first of several suits challenging violations of the “share-alike” provision of the GPL (mandating that the source code for derivative works be released) in regards to the FOSS product BusyBox. On Behalf of BusyBox Developers, SFLC Files First Ever U.S. GPL Violation Lawsuit, Software Freedom Law Center (Sept. 20, 2007), However, most of these suits were eventually settled. Of the four relevant decisions available on the Westlaw legal research service, none discuss the terms of the GPL.
[95] Jacobsen v. Katzer, No. C 06-01905 JSW, 2007 WL 2358628, at *1 (N.D. Cal. Aug. 17, 2007) [hereinafter Jacobsen I], vacated in part, 535 F.3d 1373 (Fed. Cir. 2008).
[96] What is JMRI?, JMRI, (last visited Mar. 21, 2014). Sourceforge is a website that provides software developers a place to collaborate on development, and offers both developers and companies a place to distribute their software. About, SourceForge, (last visited Mar. 21, 2014).
[97] Jacobsen v. Katzer, 535 F.3d 1373, 1376 (Fed. Cir. 2008) [hereinafter Jacobsen II].
[98] Id.
[99] Jacobsen I, 2007 WL 2358628, at *1.
[100] Jacobsen II, 535 F.3d at 1376.
[101] Id.
[102] Id.
[103] Id. at 1376–77.
[104] Jacobsen I, 2007 WL 2358628, at *1.
[105] Id.
[106] Jacobsen II, 535 F.3d at 1373.
[107] Jacobsen I, 2007 WL 2358628, at *5.
[108] Id. at *6 (quoting Amended Complaint at ¶ 100).
[109] Id. (quoting Amended Complaint at ¶ 100 and Suppl. Jacobsen Del. at ¶ 2, Ex. A).
[110] Id.
[111] Id.
[112] Jacobsen I, 2007 WL 2358628, at *7.
[113] Id.
[114] Id. Note that unlike infringement of a copyright, a breach of contract creates no presumption of irreparable harm.
[115] Jacobsen II, 535 F.3d 1373, 1378 (Fed. Cir. 2008).
[116] Id.
[117] Id. at 1378–79.
[118] Id. at 1379.
[119] Id.
[120] Jacobsen II, 535 F.3d at 1380 (emphasis added).
[121] Id.
[122] Gilliam v. Am. Broad. Cos., Inc., 538 F.2d 14, 24 (2d Cir. 1976) (“American copyright law, as presently written, does not recognize moral rights or provide a cause of action for their violation, since the law seeks to vindicate the economic, rather than the personal, rights of authors.”).
[123] Jacobsen II, 535 F.3d at 1381.
[124] Id.
[125] Id.
[126] Id. at 1381–82.
[127] MDY Indus., LLC v. Blizzard Entm’t, Inc., 629 F.3d 928, 934 (9th Cir. 2010) [hereinafter MDY II].
[128] Id. at 935.
[129] Id.
[130] Id.
[131] Id. at 936.
[132] Id.
[133] MDY II, 629 F.3d at 937.
[134] MDY Indus., LLC v. Blizzard Entm’t, Inc., No. CV-06-2555-PHX-DGC, 2008 WL 2757357, at *3 (D. Ariz. July 14, 2008) [hereinafter MDY I].
[135] Id.
[136] Id. (citing MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511, 518–19 (9th Cir. 1993)).
[137] Id. at *4.
[138] Id. (emphasis added).
[139] Id. at *6.
[140] Id.
[141] MDY II, 629 F.3d at 937.
[142] Id. at 939 (citing AES P.R., L.P. v. Alstom Power, Inc., 429 F.Supp.2d 713, 717 (D. Del. 2006)).
[143] Id.
[144] Id. at 940.
[145] Id. (emphasis added).
[146] Id. at 941–42.
[147] Id. at 940.
[148] 17 U.S.C. § 106.
[149] 17 U.S.C. § 411.
[150] § 412(2).
[151] 5 Patry on Copyright § 17:78 (2013) (“Then Solicitor General Elena Kagan found, and every court of appeals to address the issue, as well as over 100 district courts, has held that actual registration, not mere application, is required to satisfy section 411(a), with the exception of the Fifth and the Ninth Circuit which have held that it is sufficient if the Copyright Office receives the application, deposit, and fees. District courts in the District of Columbia have also split on the issue, with most requiring actual registration.”).
[152] United States Copyright Office, Circular 4: Copyright Office Fees,, (“The fee for expedited searches is $445 an hour.”).
[153] 17 U.S.C. § 502.
[154] § 503.
[155] § 504.
[156] § 505.
[157] § 504(c)(1)–(2).
[158] Erin V. Klewin, Reconciling Federal Circuit Choice of Law with Ebay v. MercExchange’s Abrogation of the Presumption of Irreparable Harm in Copyright Preliminary Injunctions, 80 Fordham L. Rev. 2113, 2115 (2012).
[159] Id. at 2116.
[160] Salinger v. Colting, 607 F.3d 68 (2d Cir. 2010); Perfect 10, Inc. v. Google, Inc., 653 F.3d 976 (9th Cir. 2011).
[161] Klewin, supra note 158.
[162] 6 Patry on Copyright § 22:44 n.14 (2013) (citing cases in North Carolina, Oregon, New York, and California).
[163] 43A C.J.S. Injunctions § 152 (2013).
[164] The Electronic Copyright Office (eCO) form is available at Instructions for submitting a paper application are also available at
[165] United States Copyright Office, Fees,,
[166] See, e.g., MDY I, No. CV-06-2555-PHX-DGC, 2008 WL 2757357 at *4 (D. Ariz. July 14, 2008) (“The title—‘Grant of Limited Use License’—makes clear that the license is limited, as does the later reference to a ‘limited, non-exclusive license.’”)
[167] Note, however, that in a situation where the condition involves attribution (as in the above example), the defendant could argue that such language could only be read as a covenant under MDY, since attribution doesn’t “implicate a statutory right.”
[168] See sources cited supra note 69.
[169] Jay Dratler, Jr., Licensing of Intellectual Property § 1.06[1] at 1–50.13 (2003).
[170] Scott Kirsner, Start-ups Take on Tough Customers: Lawyers, Boston Globe (Sep. 1, 2013),

Using Copyright to Combat Revenge Porn

Using Copyright to Combat Revenge Porn
By Amanda Levendowski* A pdf version of this article may be downloaded here.  
“Revenge is a kind of wild justice, which the more a man’s nature runs to, the more ought law to weed it out.” – Sir Francis Bacon, from Essays Civil and Moral


At twenty-five, Hunter Moore started the website IsAnyoneUp, where Moore posted sexually explicit photographs of the young women he met at parties.[1] But after a few months, Moore dramatically changed his business model: he began allowing anyone to submit sexually explicit images to the website.[2] Soon after, IsAnyoneUp hit more than 500 million page views and Moore netted more than $13,000 a month in advertising revenue and hired a lawyer, public relations consultant, server administrator, and two security specialists.[3] By twenty-seven, Moore—the “most hated person on the Internet”[4] —was indicted for identity theft and conspiring to hack into e-mail accounts to obtain nude photographs to feature on his website.[5] IsAnyoneUp featured more than nude images: Moore often included information about the individuals whose images were posted on the site, including full names, social media accounts, and other personal, identifying information.[6] Any person who shares intimate images with a partner is Schrdinger’s victim: according to one survey, one in ten former partners threaten to post sexually explicit images of their exes online and an estimated sixty percent of those follow through.[7] The victims featured on revenge porn websites frequently receive solicitations over social media, lose their jobs, or live in fear that friends, lovers or employers will discover the images.[8] The images hosted by websites like IsAnyoneUp are often referred to as “revenge porn.” Defining revenge porn, however, is difficult – journalists and activists, lawyers and pundits have used the term revenge porn to refer to all manner of non-consensual pornography, including images captured without a victim’s knowledge,[9] images of a victim’s face transposed on a sexually explicit body,[10] hacked images,[11] and images uploaded by jaded ex-lovers.[12] This paper defines revenge porn in terms of its content, not distribution: Revenge porn refers to sexually explicit images that are publicly shared online without the consent of the pictured individual.[13] Victims’ attempts to use harassment, stalking and privacy laws to punish uploaders and remove images are often met with apathy from local police.[14] Additionally, tort law is ill equipped to address the problem of revenge porn. Because websites are afforded a great deal of legal protection under Section 230 of the Communications Decency Act, which protects interactive service providers (“ISPs”) from liability for user-generated content, tort actions against the websites that traffic in revenge porn are unlikely to succeed.[15] To further complicate matters, victims are not looking solely for injunctive relief, civil penalties, or monetary damages, which are the remedies available under tort law. Instead, victims’ primary goal is to have the images removed as quickly as possible, with the tort remedies coming into play as threats for non-compliance with an order to remove the images in question. Of the states with legislation expressly applicable to revenge porn, none provide such a radical remedy.[16] Some activists argue that there are only two possible solutions: amend Section 230 to create liability for ISPs or pass new laws with hefty penalties for revenge porn uploaders and traffickers.[17] However, there is already a federal law that provides all of these remedies: copyright law. Copyright establishes a uniform method for revenge porn victims to remove their images, target websites that refuse to comply with takedown notices and, in some cases, receive monetary damages. A survey of 864 revenge porn victims revealed that more than eighty percent of revenge porn images are “selfies,” meaning that the author and the subject are the same.[18] For this portion of victims, copyright law can be used to combat revenge porn. While not a perfect solution, copyright requires no amendments to Section 230, no reinterpretation of settled doctrine, no abridgment of free speech rights and no new criminal laws.[19] Thus, it is the most efficient and predictable means of protecting victims of revenge porn. In Part I, I examine how Section 230 protects revenge porn traffickers, like IsAnyoneUp, from liability. Part II discusses why harassment, stalking and privacy laws are often inadequate means of fighting revenge porn. In Part III, I explain why existing and proposed legislation presents problems for both victims and free speech. Finally, Part IV outlines why copyright functions as a solution to the revenge porn problem.

I. Legal Protection For Revenge Porn: The Communications Decency Act Section 230

The damage caused by revenge porn is inextricably tied to the nature of the Internet. Once a single, sexually explicit image is posted, the uploader loses control of the image. Victims are often able to identify the original uploader based on whom the original image was shared with,[20] but hiring a lawyer and obtaining an injunction against the uploader does not protect the victim from posted, cached or linked versions of the image on websites.[21] Although uploaders may be subject to tort law for posting the images, Section 230 of the Communications Decency Act (“CDA”) makes it nearly impossible for victims to go after traffickers of revenge porn using the same laws. In the early 1990s, lawyers and young companies were still questioning how to classify online services like message boards and forums, chat rooms and listservs. Were ISPs like digital stores that sold newspapers or like the media companies that published them?[22] If ISPs were more analogous to one than the other, what would that mean for liability? In 1995, the New York Supreme Court answered both questions: ISP Prodigy was more like a publisher because Prodigy exercised some “editorial control” over user-generated content and thus could be held liable for the defamatory statements made by one of its users.[23] To combat the perverse incentive of rewarding ISPs that did not monitor content – and to protect the “vibrant and competitive free market” of the Internet – Congress enacted Section 230,[24] which immunizes ISPs from being held liable for content generated by third parties.[25] ISPs may even engage in some amount of reviewing, editing, withdrawing, postponing or altering content – like Prodigy did, before Section 230 was passed – without sacrificing immunity.[26] The solution to revenge porn is not upsetting the broad protection afforded by Section 230, but rather understanding the limitations that Section 230 places on revenge porn victims’ remedies.

A. Section 230 Shields Revenge Porn Sites From Tort Liability

Although Section 230 broadly protects websites from liability, it does not give ISPs carte blanche to allow any and all content without concern for liability. ISPs are not required to monitor or proactively remove user-generated content, but Section 230 immunity does not extend to violations of child pornography, obscenity,[27] or copyright laws.[28] Similarly, Section 230 immunity does not apply if the ISP is also an “information content provider.”[29] Immunity does not extend to original information or content that an ISP creates or develops. Websites that traffic in revenge porn do not create the content they post – victims or uploaders create the images.[30] When revenge porn websites post user-submitted images, that content is, in the language of Section 230, “information provided by another information content provider.”[31] Because revenge porn websites are not taking on the role of information content providers, Section 230 protection will apply and render nearly any lawsuit against the ISPs for stalking, harassment, defamation, or invasion of privacy dead on arrival. Revenge porn websites may even exercise some discretion over posted images without losing Section 230 protection.[32] In 1997, the Fourth Circuit set the tone for courts’ broad approach to interpreting Section 230.[33] Kenneth Zeran sued America Online (“AOL”) for statements posted by third parties to an AOL bulletin that stated he was selling shirts with tasteless slogans about the Oklahoma City bombings and included his personal telephone number.[34] The court refused to hold AOL held liable as an information service provider, echoing Congress’ findings:
[the] specter of tort liability in an area of such prolific speech would have an obvious chilling effect … Faced with potential liability for each message republished by their services, interactive computer service providers might choose to severely restrict the number and type of messages posted. Congress considered the weight of the speech interests implicated and chose to immunize service providers to avoid any such restrictive effect.[35]
Courts continue to interpret Section 230 to comport with Congress’ policy decision not to chill harmful online speech by immunizing interactive service providers that “serve as intermediaries for other parties’ potentially injurious messages” from tort liability.”[36]

B. Recent Court Decisions Narrowing the Scope of Section 230 Are Anomalous

In Sarah Jones v. Dirty World Entertainment, a Kentucky district court held that Section 230 immunity “may be forfeited if the site owner invites the posting of illegal materials or makes actionable postings itself.”[37] The defendant managed, a website which invites users to submit images – many of which are sexually explicit – and share gossip about individuals featured on the website. Even though did not create the images, the court determined that the website could not use Section 230 as a shield against liability because it “invited and accepted postings” that were alleged to be either libelous per se or invasions of the individuals’ right of privacy.”[38] The court ignored the plain text and history of Section 230 when it later asserted that ISPs lost immunity if they “invite invidious postings, elaborate on them with comments of their own, and call upon others to respond in kind.”[39] In nearly identical pending tort claims against, district courts in Arizona and Missouri declined to hold and its corporate parent liable for comments on the site.[40] Sarah Jones and the en banc Ninth Circuit decision it relied upon, (Fair Housing Council of San Fernando Valley v. remain outliers among Section 230 cases.[41] Some advocates have suggested that Section 230 ought to be amended to better protect victims of revenge porn,[42] whereas others have heralded the interpretation adopted by Sarah Jones as a much-needed limitation on Section 230 protection.[43] But as the Ninth Circuit recognized in perhaps the earliest digital revenge porn case, “the language of the statute that defines and enacts the concerns and aims of Congress; a particular concern does not rewrite the language.”[44] Relying on courts to misinterpret Section 230 to create liability for revenge porn websites is a dangerous way to empower victims. By narrowing the protection of Section 230 to target revenge porn websites, courts and advocates are necessarily narrowing the protection afforded to websites that depend on user-generated content, like Wikipedia, Yelp, and WordPress.[45]

II. Existing Tort Law Is Ill Equipped To Handle Revenge Porn

The experiences of victims of revenge porn – living in fear that their identities will be discovered, concerned with repercussions in both their professional and personal lives, and worrying that the images will reappear – are similar to those of victims of harassment, stalking, and invasion of privacy.[46] Despite this similarity, the remedies that accompany the torts of harassment, stalking, and invasion of privacy are unlikely to provide a meaningful remedy for revenge porn victims. Even if victims are successful in bringing a civil lawsuit against the uploader, Section 230 prevents them from going after the websites that continue to distribute their images.

A. Harassment and Stalking

Harassment laws typically require the aggressor to communicate (or cause communication) with the victim in a way that is likely to cause annoyance or alarm.[47] A single communication can constitute harassment.[48] Although revenge porn websites often frame victims’ images with uploaders’ demeaning or humiliating commentary, those comments are not direct communication with victims any more than a Letter to the Editor about Hillary Clinton is conversing with Ms. Clinton herself. To be found guilty of stalking, an aggressor must intentionally engage in a “course of conduct” that is likely to cause fear of some material harm.[49] Nearly all states interpret “course of conduct” to mean that the behavior is repetitive or ongoing.[50] The harm caused by revenge porn, however, is accomplished through the one-off act of uploading a sexually explicit image.[51] An image’s viral spread only mirrors an ongoing act or repetitive actions –any harm that results (such as the fear of losing one’s job or destroying personal relationships) is caused by the Internet’s magnification of a single act, rather than a course of conduct by the website.[52] More than one third of states’ stalking statutes also require the aggressor to make a “credible threat,”[53] which can almost never be shown without direct contact between the aggressor and the victim.[54] The federal cyberstalking statute takes the “credible threat” requirement one step further, criminalizing only communications that contain a “threat to injure the person of another.”[55] Revenge porn websites often employ aggressive, hyper-sexualized language, including frequent references to rape and assault, to discuss featured individuals.[56] However, courts have interpreted what constitutes a “threat to injure” quite narrowly so as not to encroach on the free speech protections afforded by the First Amendment.[57] In United States v. Baker, a federal district court judge dismissed the government’s claim against a man who corresponded via e-mail with an unidentified Internet acquaintance about brutally raping a female classmate because his conversations were shared fantasies that could not “possibly amount to a true threat.”[58]

B. Privacy Torts

The right to privacy is not rigidly defined, and thus may be more capable of responding to changing technology than codified harassment and stalking laws. The “right to privacy” is covered by four privacy torts, which often overlap: false light, misappropriation, invasion of privacy, and public disclosure of private fact.[59] Frequently, one or more of these privacy torts are alleged in the complaints of lawsuits against revenge porn uploaders and websites.[60]
1. False Light
False light requires that the “publicized matter” is false, in the sense that the publicity attributes false beliefs, characteristics, or conduct to the victim.[61] Non-consensual pornography created through digitally manipulated images of victims is entirely false because the victim never posed for the image. Non-consensual pornography obtained through hacking, may be similarly false if the victim never shared the images with anyone else. False light claims present an interesting riddle for victims of revenge porn who both posed for and consented to sharing the images with at least one other person: is revenge porn “false?” The earliest non-consensual pornography lawsuit[62] involved a Hustler Magazine spread featuring sexual photographs that had been stolen and submitted to the magazine.[63] The Fifth Circuit determined that Hustler falsely represented that the subject of the photographs “consented to the submission and publication [of her photographs] in a coarse and sex-centered magazine.”[64] When presented with a nearly identical case two years later, the Sixth Circuit granted summary judgment in favor of Hustler because the victim was unable to show that the magazine acted with actual malice by deciding to publish the images.[65] It is easy to analogize between the “false light” of indicating that a woman consented to pose for Hustler and the “false light” that she consented to appear on a pornographic website. Because revenge porn derives its appeal from being non-consensual and “false,” victims may be able to convince a court that any website trafficking in revenge porn is per se acting with reckless disregard for the images’ truth. Yet, few courts have grappled with how false light operates in the context of non-consensual pornography and each state’s statutes and governing case law regarding revenge porn differ; thus, facts that may protect a victim in California may fail completely in New York. For victims of revenge porn, false light is a capable fix for the few, not the many.
2. Misappropriation
Misappropriation is the appropriation of a person’s name or likeness by another.[66] Despite the exploitative character of revenge porn, misappropriation only applies when the name or likeness has been used to benefit the appropriator, reputationally, socially, or commercially.[67] Revenge porn serves as a way to humiliate victims, rather than to benefit uploaders, which pushes most victims beyond the bounds of misappropriation protection.[68]
3. Invasion of Privacy and Public Disclosure of Private Fact
To prevail under either an invasion of privacy or public disclosure of private fact theory, victims must show a “reasonable expectation of privacy” in the images.[69] Social norms determine whether the same sexually explicit image is perceived as a courtship ritual or as revenge porn. Despite identical content, the context in which the image is shared differs,[70] a phenomenon that privacy theorist Helen Nissenbaum has termed “contextual integrity.” Nissenbaum has written extensively about contextual integrity, which explains why an employee may feel comfortable sharing details about her personal life with Facebook friends, but outraged if those details were shared with her co-workers;[71] why that same person may readily share her age with her doctor, but feel uneasy if her prospective employer were to ask the same question; and why she may share a sexually explicit selfie with a lover, but feel as if her privacy has been violated if that image were shared with thousands of strangers on the Internet.[72] Contextual integrity emphasizes howinformation is shared, rather than what it reveals. No courts have yet addressed the issue of whether revenge porn victims have a reasonable expectation of privacy in the images they have shared. As the District of Puerto Rico stated, “[a] reasonable person does not protect his private pictures by placing them on an Internet site,” even if those images are unavailable to the general public or protected by passwords.[73] Other courts have followed suit.[74] Victims of revenge porn may find themselves subject to a similarly flawed analysis: a reasonable person does not protect private pictures by sharing them with others via text message, e-mail or other means. Courts may not be prepared to rejigger the privacy torts to reflect that context determines the extent to which an expectation of privacy is reasonable.

III. Overbroad Revenge Porn Legislation Threatens Free Speech

Although many civil and criminal laws apply to revenge porn,[75] some scholars argue that using those laws is often hindered by disinterested law enforcement, and suggest that new criminal legislation is necessary to protect victims.[76] If police and prosecutors are reluctant to acknowledge that the activities of revenge porn uploaders and traffickers may violate the law, however, additional legislation may have no affect on victims’ remedies.[77] Yet, the arrests of Moore and another revenge porn website operator, Kevin Bollaert, indicate that law enforcement’s attitude toward investigating revenge porn using existing laws is changing.[78] Generally, the First Amendment prevents the government from restricting expression based on “its message, its ideas, its subject matter, or its content.”[79] As the Supreme Court explained in United States v. Stevens, the First Amendment has only accommodated restrictions on the content of speech in a handful of limited areas (including obscenity, defamation, fraud, incitement) and has never interpreted the First Amendment to include a “freedom to disregard these traditional limitations.”[80] The Court has held that offensive,[81] embarrassing,[82] and disgusting[83] speech warrants protection, even when it causes tangible harm.[84] Even so, nine states – Alaska, Arizona, California, Georgia, New Jersey, Idaho, Utah, Virginia, and Wisconsin – have enacted targeted revenge porn that criminalizes the distribution of intimate images of another person without that person’s consent.[85] From a First Amendment perspective, targeted revenge porn legislation occupies a tricky space: imprecisely drafted revenge porn legislation protects many victims but risks criminalizing protected expression,[86] but whittling down legislation to avoid trammeling free speech excludes many of the victims the law intended to protect.[87] Although broad legislation makes it easier to prosecute revenge porn uploaders and traffickers, it could also have unintended consequences on protected speech by criminalizing distributions made in the public interest,[88] linking to revenge porn websites for purposes of critique,[89] or disclosures made to document the harassment itself.

IV. Copyright Can Combat Revenge Porn

Even if revenge porn victims were able to successfully state claims for harassment, stalking or invasion of privacy, they may still be unable to remove their images from the Internet. An injunction could force uploaders to remove the images and pay monetary damages, but subsequent postings and re-postings would remain untouched because Section 230 protects the websites/ISPs hosting the content. Copyright is not a perfect solution but, unlike the aforementioned alternatives, victims’ invocation of copyright law does not threaten to erode the protections of free speech or Section 230, nor does it shoehorn revenge porn liability into existing tort schemes or create new criminal liability. The works protected, rights afforded, and remedies provided by copyright law empower the vast majority of victims to protect themselves.[90]

A. Authoring and Owning the Selfie

When Hunter Moore was asked whether the images he posted on IsAnyoneUp violated copyright laws, he offered this fascinatingly misguided explanation:
[B]ut when you take a picture of yourself in the mirror, it was intended for somebody else so, actually, the person you sent the picture to actually owns that picture, because it was intended as a gift. So whatever the – that person does with the picture, you don’t even own the nude picture of yourself anymore … So that’s how I’m protected.[91]
The majority of revenge porn images are “selfies,” like the ones described by Moore.[92] Copyright law protects any original work of authorship fixed in a tangible medium of expression, including photographs.[93] As the authors of their selfies, the vast majority of victims thereby own the copyright in their images.[94] Revenge porn features sexually explicit imagery, and neither Congress nor the Supreme Court have addressed the copyrightabilityof pornography. However, as the Fifth Circuit decision in Mitchell Brothers Film Group v. Cinema Adult Theater explained, “the protection of all writings, without regard to their content, is a constitutionally permissible means of promoting science and the useful arts.”[95] Subsequent decisions and treatises have recognized that the author of a sexually explicit work is afforded the full panoply of copyright protections.[96] Hence, the authors of a sexy selfie and a New York Times bestseller both retain the exclusive rights to their respective works, including the rights of reproduction and display.

B. Positive and Negative Rights of Copyright Owners

The reproduction and display of revenge porn victims’ copyrighted images without their permission constitutes copyright infringement. Section 104 of the Copyright Act grants the authors of unpublished and published works the same rights and protections.[97] Limited distribution of a copyrighted work – to a prospective publisher or a love interest –has no effect on the exclusive rights granted to an author.[98] The author of an unpublished work retains the exclusive right to decide whether to publish a work, and exercise or authorize any reproduction or display of the copyrighted work.[99] By definition, revenge porn victims did not authorize the reproduction or display of their copyrighted images, thus revenge porn uploaders and traffickers infringe upon the exclusive right to make and show copies in several ways. Uploaders reproduce victims’ copyrighted images when submitting them to a website,[100] traffickers reproduce the images when creating copies to store on webservers, and display copies of the original images when users direct their browsers to these websites.[101] Although these actions often occur simultaneously or concurrently, this doesn’t pose a problem to victims asserting their rights as the Copyright Act allows the rights protected by Section 106 to overlap.[102] The Supreme Court takes seriously the idea that the limited monopoly provided by copyright law incentivizes creativity and innovation.[103] Implicit in the positive rights enumerated in Section 106 is an equally powerful “negative right” not to exercise those exclusive rights.[104] The Supreme Court has acknowledged this negative right, explaining that
[T]he limited monopoly conferred by the Copyright Act is intended to motivate creative activity of authors and inventors by the provision of a special reward, and to allow the public access to the products of their genius after the limited period of exclusive control has expired. But nothing in the copyright statutes would prevent an author from hoarding all of his works during the term of the copyright.[105]
Consider the treasure trove of J.D. Salinger stories, which he chose never to publish, that are only available for limited viewing at Princeton’s Firestone Library.[106] In some way, that rareness, manufactured by Salinger’s decision not to fully exercise his exclusive rights, enhances the stories’ value.[107] Revenge porn victims are a perfect example of the ways in which negative copyrights incentivize creation: those images would never have been shared if victims did not believe they could control who saw them.

C. What Goes Up Must Come Down: The Digital Millennium Copyright Act

The same threat that drove Congress to pass Section 230, primarily crushing liability, pushed Congress to enact the Digital Millennium Copyright Act in 1998.[108] As part of its amendments and updates to the Copyright Act, Congress codified the Online Copyright Infringement Liability Limitation Act (“Section 512”).[109] In passing Section 512, Congress sought to provide “greater certainty to service providers concerning their legal exposure for infringements that may occur in the course of their activities.”[110]
1. Using DMCA Notices to Takedown Revenge Porn
Qualified ISPs[111] that comply with Section 512’s “notice and takedown” procedures are protected from liability for copyright infringement.[112] A procedure that is deemed complying is one in which the ISP creates and maintains a system for copyright owners to report infringement and allows the ISP to promptly respond to takedown requests.[113] Revenge porn victims do not need to register their copyrights or hire a lawyer to file a takedown notice.[114] Victims need only submit their name and signature; identify the image; and provide links to the infringing material, contact information and written verification that they believes the use is unauthorized.[115] Victims who discover their images re-posted to commercial porn websites, rather than revenge porn sites, are more likely to have success with takedown notification: commercial porn sites are hotbeds of pirated and infringing content and many link to DMCA notice and takedown procedures directly from their homepages and quickly comply with verified requests.[116] Victims can also issue de-indexing requests to search engines, like Google or Yahoo, to remove infringing links from search results.[117]
2. The Trouble With Takedowns
Websites that traffic exclusively in revenge porn present a problem for victims, as they may run into the problem that mainstream content creators encounter during takedown procedures[118] often called the “Whac-a-Mole” problem. The dynamic nature of the Internet means that as soon as infringing content is removed from one source, it “pops up” elsewhere, reminiscent of the whac-a-mole arcade game. In the case of revenge porn, this phenomenon is magnified. Revenge porn websites are meant to damage reputations and ruin lives.[119] By issuing a takedown notice – which requires the disclosure of personal information – victims may inadvertently draw more attention to the image as the websites might create additional posts about victims who request takedowns or encourage users to re-post victims’ images onto other websites.[120] Reposting is not the only problem that victims encounter. Identifying the location of revenge porn websites’ servers may require a subpoena. For victims who are able to afford a lawyer, filing a subpoena seeking the disclosure of servers’ locations could potentially attract attention to the images at issue.[121] Websites with servers in countries that do not have intellectual property agreements with the United States may refuse to comply with US law and ignore takedown requests entirely.[122] While additional investigation may buoy the success of revenge porn victims’ takedown notices, hiring a lawyer is not an option for most victims. Despite the shortcomings of takedown notices, revenge porn sites that choose to ignore takedown requests sacrifice the immunity afforded by Section 512, thereby risking exposure to tremendous legal liability.[123]

D. Monetary Damages and Criminal Penalties

The rare victim who is willing to register a copyright and file a lawsuit can seek up to $150,000 in statutory damages for each instance of willful infringement.[124] If a revenge porn site successfully rebuts the presumption of willfulness, victims are still entitled to have their images removed.[125] Although high criminal penalties for copyright infringement are meant to deter would-be infringers, website operators who know they are “judgment proof,” meaning they do not have the assets to sustain a judgment, may not be deterred by the threat of monetary damages.[126] In 1997, Congress enacted the No Electronic Theft (NET) Act to target infringers whose behavior could not be deterred by monetary damages alone.[127] The NET Act criminalizes willful copyright infringement when the total retail value of the infringed work exceeds $1,000.[128] Violations are punishable by up to ten years in prison.[129] The NET Act is frequently and justifiably critiqued for its harsh penalties, and it is unlikely that a revenge porn site operator could be charged with criminal infringement. Courts have expressed a willingness to use the highest dollar value possible to calculate the “retail value” of infringed works.[130] Revenge porn websites can fetch anywhere from $3,000[131] to $13,000[132] per month in advertising revenue, but it remains unclear whether advertising revenue is a satisfactory metric for “retail value.” While the arrests of Hunter Moore and Kevin Bollaert indicate that prosecutors are willing to test the waters using existing laws,[133] courts should be wary of permitting prosecutors to use criminal copyright infringement laws to prosecute revenge porn traffickers.


Existing tort laws, like harassment, stalking and privacy laws, are poorly equipped to handle the problem of revenge porn. Even if victims succeed in their cases against uploaders, those same claims will most likely be unable to pierce revenge porn websites’ Section 230 immunity or force operators to remove victims’ images. Working backward from the remedy victims most want – takedown procedures – copyright law stands out as the most efficient and predictable way to achieve those goals. Copyright is not a panacea for revenge porn. Victims must be willing to invest time to submit takedown notices and, if that fails, money into hiring an attorney to proceed with litigation. Copyright laws are also imperfect: the protections may well be too broad and the penalties too draconian. Still: for the vast majority of revenge porn victims, copyright presents an efficient means of self-help.
* J.D. Candidate, New York University School of Law, 2014; B.A. Publishing, Copyright & Technology, summa cum laude, New York University, 2011. Thanks for their suggestions and support are owed to the NYU Law Engelberg Center on Innovation Law and Policy, including Barton Beebe, Rochelle Dreyfuss, Jeanne Fromer, Jason Schultz, Chris Sprigman, Kathy Strandburg, and Chris Wong, the members of the Information Law Institute’s Privacy Research Group, and the participants in the Tri-State Region IP Workshop. And a special thanks to family and friends, who kept listening.
[1] Danny Gold, The Man Who Makes Money Publishing Your Nude Pics, The Awl (Nov. 10, 2011), [hereinafter Gold].
[2] Kashmir Hill, Revenge Porn with a Facebook Twist, Forbes (Jul. 6, 2011),
[3] Camille Dodero, Bullyville Has Taken Over Hunter Moore’s IsAnyoneUp: Open Letter from Hunter Moore, The Village Voice (Apr. 19, 2012), available at; Gold supra note 1.
[4] See Charlotte Laws, I’ve Been Called the Erin Brockovitch of Revenge Porn, and For the First Time Ever, Here Is My Entire Uncensored Story of Death Threats, Anonymous and the FBI, JaneXO (Nov. 21, 2013),
[5] Moore, along with alleged hacker Charles “Gary Jones” Evens, was indicted for conspiracy, identity theft, and unauthorized access of a protected computer to obtain information in violation of the Computer Fraud and Abuse Act. Indictment at 1, United States v. Moore, No. CR13-0917 (C.D. Cal. Dec. 30, 2013).
[6] Camille Dodero, Hunter Moore Makes a Living Screwing You, The Village Voice (Apr. 4, 2012), available at
[7] The survey included 1,182 online interviews amongst American adults ages 18-54. Kim Eichorn, Lovers Beware: Scorned Exes May Share Intimate Data and Images Online, McAfee (Feb. 4 2013),
[8] Lorelei Laird, Victims Are Taking On ‘Revenge Porn’ Websites For Posting Pictures They Didn’t Consent To, A.B.A. J.(Nov. 1, 2013, 4:30 AM CDT), According to a Cyber Civil Rights Initiative study, the vast majority of revenge porn victims are female. Danielle K. Citron, Revenge Porn: A Pernicious Form of Cyber Gender Harassment, Balt. Sun (Dec. 15, 2013), available at
[9] Victims who were videotaped without their knowledge represent an estimated ten percent of victims, though these victims were not expressly discussed in the non-consensual pornography statistics. Why One Mom’s Investigation Might Actually Stop Revenge Porn, On The Media (Dec. 6, 2013), [hereinafter One Mom’s Investigation]. Those victims may be able to use state video voyeurism or Peeping Tom laws. See Voyeurism Statutes 2009, National Defense Attorneys Association (Mar. 2009),
[10] An estimated twelve percent of non-consensual pornography was Photoshopped, or otherwise edited and manipulated. One Mom’s Investigation, supra note 9.
[11] Roughly forty percent of non-consensual pornography was hacked. Id. These victims may be able to use the Computer Fraud and Abuse Act. See 18 U.S.C. § 1030(a)(2) (2012).
[12] The remaining 36 percent constitutes the subset of revenge porn analyzed by this Note.
[13] The author developed this definition of revenge porn for Wikipedia. Revenge Porn, Wikipedia (Version Oct. 8, 2013, Amphiggins) available at This definition was adopted by the Criminal Court of the City of New York. People v. Barber, 2014 NY Slip. Op. 50193(U) (Feb. 18, 2014), available at
[14] See Maureen O’Connor, The Crusading Sisterhood of Revenge Porn Victims, N.Y. Mag.(Aug. 29, 2013), available at
[15] 47 U.S.C. § 230(c) (1998).
[16] See infra Part II. Israel, France, the Phillipines, and the Australian state of Victoria also have laws applicable to revenge porn. See, e.g., Pén.226-1 (Fr.); An Act Defining and Penalizing the Crime of Photo and Video Voyeurism, Prescribing Penalties Therefor, and for Other Purposes, Rep. Act No. 9995, § 4 (2009) (Phil.); see alsoRevenge Porn’ Outlawed: Israel and Australia Ban Spurned Lovers from Posting Compromising Photos of Their Exes, Daily Mail (Jan. 8, 2014)
[17] Danielle K. Citron and Mary Anne Franks, Criminalizing Revenge Porn, 49 Wake Forest L. Rev. (forthcoming 2014). Amending existing law, or creating new criminal ones, to tackle revenge porn creates additional problems for free speech and pornography, and poses a threat to websites, aggregators, and other Internet-based businesses. See Sarah Jeong, Revenge Porn Is Bad. Criminalizing It Is Worse, (Oct. 28, 2013),
[18] Proposed CA Bill Would Fail to Protect up to 80% of Revenge Porn Victims, Cyber Civil Rights Initiative (Sept. 10, 2013), [hereinafter CCRI Survey]. The remaining twenty percent of non-selfie revenge porn often falls into other categories of non-consensual pornography in which other federal laws are applicable.
[19] New revenge porn-specific legislation poses a threat to free speech by imprecise or overbroad drafting of new laws or amendments to old ones. For an in-depth discussion about the clash between free speech and revenge porn, see infra Part III.
[20] See, e.g., Erica Goode, Victims Push Laws to End Online Revenge Posts, N.Y. Times (Sept. 23, 2013), available at
[21] Hunter Moore encouraged users to repost the images he shared on IsAnyoneUp. One Mom’s Investigation, supra note 9.
[22] See Stratton Oakmont, Inc. v. Prodigy Servs. Co., 1995 WL 323710, at *3 (Sup. Ct., Nassau County1995) (“In short, the critical issue to be determined by this Court is whether … PRODIGY exercised sufficient editorial control over its computer bulletin boards to render it a publisher with the same responsibilities as a newspaper.”); see also Conor Clarke, How the Wolf of Wall Street Helped Write the Rules for The Internet, Slate(Jan. 7, 2014),
[23] Stratton Oakmont, Inc., 1995 WL 323719 at *2.
[24] See 47 U.S.C. § 230(b)(1)-(2) (1998).
[25] Id.§ 230(c)(1) (“No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”).
[26] Zeran v. Am. Online, Inc., 129 F.3d 327, 330 (4th Cir. 1997). (“[L]awsuitsseeking to hold a service provider liable for its exercise of a publisher’s traditional editorial functions-such as deciding whether to publish, withdraw, postpone or alter content-are barred.”).
[27] 47 U.S.C. § 230(e)(1) (1998). Explaining why categorizing revenge porn as “obscenity” could open a Pandora’s box of problems goes beyond the scope of this paper. For a sense of why using obscenity law might be problematic, see Amy M. Adler, Post-Modern Art and the Death of Obscenity Law, 99 Yale L.J. 1359, 1362 (1990).
[28] It also does not apply to harassing telephone calls made in Washington, D.C., among other limited carve-outs. 47 U.S.C. § 230(e)(2) (1998).
[29] Id. § 230(f)(3).
[30] CCRI Survey, supra note 18.
[31] 47 U.S.C. §230(c)(1) (1998).
[32] The content-related exceptions to Section 230 protection for posting obscenity, child pornography and copyright infringement still apply. For that reason, the two “security experts” who worked for Moore were tasked with ensuring that he did not post images of under-aged victims. Gold, supra note 1.
[33] Zeran, 129 F.3d at 330.
[34] Id. at 329.
[35] Id. at 331.
[36] Id.; see also Chicago Lawyers’ Comm. for Civil Rights Under Law, Inc. v. Craigslist, Inc., 519 F.3d 666, 669 (7th Cir. 2008) (“[Section] 230(c)(1) provides broad immunity from liability for unlawful third-party content. That view has support in other circuits.”) (internal quotations omitted) (citing Zeran v. America Online, Inc., 129 F.3d 327 (4th Cir. 1997); Ben Ezra, Weinstein & Co. v. America Online, Inc., 206 F.3d 980 (10th Cir. 2000); Green v. America Online, 318 F.3d 465 (3d Cir. 2003); Batzel v. Smith, 333 F.3d 1018 (9th Cir. 2003); Universal Commc’n Sys., Inc. v. Lycos, Inc., 478 F.3d 413 (1st Cir. 2007)).
[37] Jones v. Dirty World Entm’tRecordings, LLC, 766 F. Supp. 2d 828, 836 (E.D. Ky. 2011), aff’d, Jones v. Dirty World Entertainment Recordings, LLC, 840 F. Supp. 1008 (E.D. Ky. 2012) (citing Fair Hous. Council of San Fernando Valley v. Roommates.Com, LLC, 521 F.3d 1157 (9th Cir. 2008)).
[38] Id. at 832. The court denied defendants’ for judgment as a matter of law. Jones v. Dirty World Entm’t Recordings, LLC, 840 F. Supp. 2d 1008, 1013 (E.D. Ky. 2012). is appealing to the Sixth Circuit. Kashmir Hill, Big Deal For Internet Law: Ex-Bengals Cheerleader Sarah Jones Wins Suit Against The Dirty Over ‘Reputation-Ruining’ Comments, Forbes (July 11, 2013),
[39] Jones v. Dirty World Entm’tRecordings, LLC, No. 09-219-WOB, 2013 WL 4068780 (E.D. Ky. Aug. 12, 2013); Cf. Doe v. MySpace, Inc., 528 F.3d 413, 419 (5th Cir.2008) (“[S]o long as a third party willingly provides the essential published content, the interactive service provider receives full immunity [under Section 230] regardless of the specific editing or selection process.”) (citations omitted) (internal quotation marks omitted).
[40] See Dyer v. Dirty World, LLC, No. CV-11-0074-PHX-SMM, 2011 WL 2173900 (D. Ariz. June 2, 2011); S.C. v. Dirty World, LLC, No. 11-CV-00392-DW, 2012 WL 3335284 (W.D. Mo. Mar. 12, 2012) (“[M]erely encouraging defamatory posts is not sufficient to defeat CDA immunity.”). Although the Arizona district court claimed not to be addressing Section 230 liability expressly, its analysis of provider versus publisher indicates otherwise. As Eric Goldman noted, “[I]t appears that this is a 47 USC 230 case where the court denies it’s relying on 47 USC 230.” TheDirty Defeats Privacy Invasion Lawsuit–Dyer v. Dirty World, Tech. and Mktg. L. Blog (June 4, 2011),
[41] See Fair Hous. Council of San Fernando Valley v., LLC, 521 F.3d 1157 (9th Cir. 2008) (holding that, which provided dropdown menus users could select to reflect housing-mate and apartment-mate preferences, was not protected by Section 230).
[42] “By writing Section 230 into law, Congress left . . . Internet harassment victims vulnerable and helpless.” Ann Bartow, Internet Defamation As Profit Center: The Monetization of Online Harassment, 32 Harv. J. L. & Gender 383, 417-18 (2009).
[43] Mary Anne Franks, The Lawless Internet? Myths and Misconceptions About CDA Section 230, Huffington Post (Dec. 18, 2013), (discussing the merits of a Sarah Jones-type interpretation of Section 230).
[44] Barnes v. Yahoo!, Inc., 570 F.3d 1096, 1097 (9th Cir. 2009) (refusing to hold Yahoo! liable for false accounts featuring Cecilia Barnes’ name and nude pictures created by her ex-boyfriend, pursuant to Section 230).
[45] See CDA 230 Success Cases Series, (2013), (featuring interviews with legal counsel about the importance of broad Section 230 protections).
[46] Victims’ descriptions of feeling victimized when images reappear or strangers approach them in public because of the images is eerily reminiscent of the “haunting harm” described by child pornography victims. See New York v. Ferber, 458 U.S. 747 (1982).
[47] Though many states have online-specific harassment and stalking statutes, some continue to apply existing civil laws to digital torts. See generally State Cyberstalking and Cyberharassment Laws, Nat’l Conference of State Legis. (Dec. 5, 2013),
[48] Id.
[49] Many statutes do not define “material harm.” The specific standards vary amongst the states. Compare N.Y. Penal Law § 120.45 with Cal. Penal Code § 646.9. All 50 states and Washington, D.C. have anti-stalking laws. State and Federal Stalking Laws, BerkmanSoc’y (Nov. 6, 2013),
[50] See generally Naomi Harlin Goodno, Cyberstalking, A New Crime: Evaluating the Effectiveness of Current State and Federal Laws, 72 Mo. L. Rev. 125, 134 (2007).
[51] See Somini Sengupta, ‘Revenge Porn’ Could Be Criminalized in California, N.Y. Times (Aug. 27, 2013),
[52] It is unclear whether uploading the same image to different sites, several images to the same site or repeatedly re-uploading images in response to removals would sufficiently establish a “course of conduct.”
[53] States’ approaches to assessing what constitutes a “credible threat” differ. For deeper analysis, see Goodno supra note 50, at 196.
[54] Id.
[55] 18 U.S.C. § 875(c) (2012).
[56] Danielle Keats Citron, Cyber Civil Rights, 89 B.U. L. Rev. 61, 64 (2009); see also Azy Barak, Sexual Harassment on the Internet, 23 Soc. Sci. Computer Rev. 77, 80 (2005) (discussing the frequency of rape-related comments and threats directed at women on the Internet).
[57] See Bonnie D. Lucks, Electronic Crime, Stalkers, and Stalking: Relentless Pursuit, Harassment and Terror in Cyberspace, in Stalking Crimes and Victim Protection: Prevention, Intervention, Threat Assessment and Case Management 179 (Joseph A. Davis ed., 2001).
[58] United States v. Baker, 890 F. Supp. 1375, 1388-90 (E.D. Mich. 1995), aff’d sub nom. United States v. Alkhabaz, 104 F.3d 1492 (6th Cir. 1997).
[59] Although many states have additional privacy laws, Dean Prosser formulated the distinctions among the privacy torts that was adopted by the Restatement of Torts. See William L. Prosser, Privacy, 48 Calif. L. Rev. 383 (1960). Revenge porn lawsuits tend to focus on one or more privacy torts.
[60] See, e.g., Compl. at 5-6, Jacobs v. Seay, No. 2013-013626-CA-01 (Fla. Miami-Dade County Ct. Apr. 18, 2013) (alleging invasion of privacy and public disclosure of private facts); Compl. at 3-4, Wells v. Avedisian, No. 112013CA0014570001XX (Fla. Collier County May 13, 2013) (alleging invasion of privacy and publication of private facts); Compl. at 4, Toups v. GoDaddy, No. D130018-C (Tex. Orange County Ct. Jan. 18, 2013) (alleging intrusion upon the right to seclusion, public disclosure of private facts, wrongful appropriation of name or likeness and false light).
[61] Restatement (Second) of Torts § 652E cmt. a (1977).
[62] Alexa Tsoulis-Reay, A Brief History of Revenge Porn, N.Y. Mag. (Jul. 21, 2013),
[63] Wood v. Hustler Magazine, Inc., 736 F.2d 1084 (5th Cir. 1984), cert. denied, 469 U.S. 1107 (1985); see also Douglass v. Hustler Magazine, Inc., 769 F.2d 1128 (7th Cir. 1985) (refusing to dismiss plaintiff’s false light claim because the re-publication of her provocative photos, which appeared in another publication, falsely “insinuate[d] that she is the kind of person willing to be shown naked in Hustler.”).
[64] Judge Reavely also noted that the publication falsely attributed a “lewd fantasy” to the victim, which is mirrored in the explicit, demeaning comments that frequently accompany revenge porn. Id. at 1089.
[65] Ashby v. Hustler Magazine, Inc., 802 F.2d 856, 860 (6th Cir. 1986). The Supreme Court decision in Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 259 (1986), requiring plaintiffs in actions governed by an actual malice standard—including defamation and false light plaintiffs—to demonstrate actual malice with “convincing clarity” to survive summary judgment, was decided just before Ashby. The Liberty Lobby decision perhaps explains the Sixth Circuit dismissal, and the Fifth Circuit’s change of course shortly thereafter. See Faloona by Fredrickson v. Hustler Magazine, Inc., 799 F.2d 1000 (5th Cir. 1986).
[66] Restatement (Second) of Torts § 652C (1977); see also Digital Media Law Project, Using the Name or Likeness of Another, BerkmanSoc’y (July 30, 2008),
[67] If no value has been appropriated, there is no tort. Restatement (Second) of Torts § 652C cmt. c (1977). New York, Oklahoma, Utah and Virginia require that the misappropriation be for “advertising, or for purposes of trade.” Id.
[68] State-specific misappropriation laws often define “benefit” in more stringent terms. See, e.g. N.Y. Civ. Rights Law § 50 (limiting to advertising or purposes of trade). It is not clear how courts might evaluate page views or advertising revenues in misappropriation claims against revenge porn websites.
[69] Kristin M. Beasley, Up-Skirt and Other Dirt: Why Cell Phone Cameras and Other Technologies Require A New Approach to Protecting Personal Privacy in Public Places, 31 S. Ill. U. L. J. 69, 93 (2006) (“A plaintiff’s ability to recover on an invasion of privacy tort is premised on her having had a reasonable expectation of privacy.”); see also Restatement (Second) of Torts §§ 652D & 652B (1977).
[70] “[F]inely calibrated systems of social norms, or rules, govern the flow of personal information in distinct social contexts (e.g. education, health care, and politics).” Helen Nissenbaum, Privacy in Context: Technology, Policy and the Integrity of Social Life 2-3 (2010). See generally Jaime A. Madell, Note, The Poster’s Plight: Bringing the Public Disclosure Tort Online, 66 Surv. Am. L. 895 (2011).
[71] Id.
[72] As one victim put it after a sexually explicit image she shared with her boyfriend went viral, “I didn’t ever think he’d ever use this to try to ruin my life.” Gilma Avalos, Miami Woman Fighting to Outlaw Revenge Porn, NBC Miami (Oct. 31, 2013),
[73] United States v. Gines-Perez, 214 F. Supp. 2d 205, 225 (D.P.R. 2002) (declining to find that a criminal defendant had a reasonable expectation of privacy in images posted to a password-protected, non-public Internet site under the Fourth Amendment).
[74] See Woodrow Hartzog and Frederic Stutzman, The Case for Online Obscurity, 101 Calif. L. Rev. 1, 26 (2013) (“[T]he type of analysis employed in Gines-Perez persists.”).
[75] See Citron, supra note 17 at 3.
[76] Id.
[77] See Derek Bambauer, Exposed, 98 Minn. L. Rev. (forthcoming 2014).
[78] Both men were indicted under existing criminal laws. Neither was charged under the California revenge porn law because the alleged crimes occurred before the law was enacted. See United States v. Moore, No. CR13-0917 (C.D. Cal. Dec. 30. 2013). Bollaert was arrested and charged with 31 felony counts, in part because his website, UGotPosted, accepted money in exchange for removing victims’ images from the site. Attorney General Kamala D. Harris Announces Arrest of Revenge Porn Website Operator, Calif. Office of the Attorney Gen. (Dec. 10, 2013),
[79] Ashcroft v. American Civil Liberties Union, 535 U.S. 564, 573 (2002) (internal quotation marks omitted).
[80] United States v. Stevens, No. 08–769, slip op. at 5 (3rd Cir. Apr. 20, 2010) (internal citations omitted).
[81] Carey v. Population Servs., Int’l, 431 U.S. 678, 701 (1977) (“At least where obscenity is not involved, we have consistently held that the fact that protected speech may be offensive to some does not justify its suppression.”).
[82] NAACP v. Claiborne Hardware Co., 458 U.S. 886, 910 (1982) (“Speech does not lose its protected character, however, simply because it may embarrass others . . . . ”).
[83] United States v. Stevens, 559 U.S. 460 (2010) (striking down an overbroad statute criminalizing crush videos, “which feature the torture and killing of helpless animals and are said to appeal to persons with a specific sexual fetish,” on First Amendment grounds).
[84] See Bambauer, supra note 77, at 54.
[85] For an up-to-date digest of states’ proposed and enacted revenge porn legislation, see State Revenge Porn Legislation, Nat’l Conf. State Leg. (Apr. 16, 2014),
[86] The American Civil Liberties Union, Electronic Frontier Foundation and Digital Media Law Project at Harvard opposed broader drafts of the California legislation out of concern that the law would “clamp down” on free speech. Laura Sydell, Calif. Bans Jilted Lovers From Posting ‘Revenge Porn’ Online, NPR’s All Tech Considered (Oct. 2, 2013), available at
[87] As California Senator Anthony Cannella, who authored the revenge porn bill that was ultimately enacted, put it, “My bill would have died if we didn’t [limit the scope of the law].” Id.
[88] The Arizona law, for example, would apply to journalists’ coverage of New York mayoral candidate Anthony Weiner’s second sexting scandal. H.B. 2515, 51st Leg., 2d Reg. Sess. (Ariz. 2014), available at
[89] An early draft of the California law would have applied to linking to revenge porn websites for purposes of critique. S.B. 255, 2013-2014 Sess. (Feb. 13, 2013), available at
[90] See Amanda Levendowski, Our Best Weapon Against Revenge Porn: Copyright Law?, The Atlantic (Feb. 4, 2014), available at
[91] Revenge Porn’s Latest Frontier, On The Media (Dec. 6, 2013),
[92] Press Releases, Cyber Civil Rights Initiative, available at (last visited Apr. 27, 2014).
[93] 17 U.S.C. § 102 (2012); 17 U.S.C. §101 defines “pictorial, graphic, and sculptural works,” the language used in §102(a)(5), to include “photographs.”
[94] 17 U.S.C. § 201 (2012).
[95] Mitchell Bros. Film Grp. v. Cinema Adult Theater, 604 F.2d 852, 860 (5th Cir. 1979), cert. denied, 445 U.S. 917 (1980).
[96] The Fifth Circuit decision has been described as the “most thoughtful and comprehensive analysis of the issue.” 1 Nimmer on Copyright, § 2.17 (2013). Both the Ninth Circuit and the S.D.N.Y. have adopted the Fifth Circuit standard for copyrightability of obscenity. See Jartech, Inc. v. Clancy, 666 F.2d 403, 406 (9th Cir. 1982) (“Acceptance of an obscenity defense [to copyright infringement] would fragment copyright enforcement, protecting registered materials in a certain community, while, in effect, authorizing pirating in another locale.”); Nova Products, Inc. v. KismaVideo, Inc., 02 CIV. 3850 (HB), 2004 WL 2754685, at *3 (S.D.N.Y. Dec. 1, 2004) (“In short, even if the videos were ultimately proven to be obscene, following the Fifth and Ninth Circuits’ holdings [in Mitchell Bros. and Jartech], this would not be a defense to copyright infringement.”).
[97] 17 U.S.C. § 104(a) (2012).
[98] See Harper & Roe Publishers, Inc. v. Nation Enterprises, 471 U.S 539, 555 (1985). The distinction between unpublished and published works also factors into the fair use inquiry: an “author’s right to control the first public appearance of his undisseminated expression will outweigh a claim of fair use” because “the scope of fair use is narrower with respect to unpublished works,” Id. at 554, 564.
[99] See 17 U.S.C. §§ 106(1), (3), (5)..
[100] See, e.g., Sega Enters. v. MAPHIA, 852 F. Supp. 679, 686 (N.D. Cal. 1994) (“[U]nauthorized copies . . . are made when such games are uploaded . . .”; Ohio v. Perry, 697 N.E.2d 624, 628 (Ohio 1998) (“Uploading is copying”).
[101] See 4 Patry on Copyright §13:11.
[102] Perfect 10, Inc. v., Inc., 508 F.3d 1146, 1161 (9th Cir. 2007).
[103] See Eldred v. Ashcroft, 537 U.S. 186, 247 (2003) (copyright gives “authors an incentive to create”) (quoting H. R. Rep. No. 100-609, p. 17 (1988)); Golan v. Holder, 132 S. Ct. 873, 889 (2012) (copyright “supplies the economic incentive to create and disseminate ideas”) (quoting Harper & Row, Publishers, Inc. v. Nation Enterprises, 471 U.S.C. 539, 558 (1985)) (emphasis omitted).
[104] This negative right is contemplated by the Copyright Act itself, which protects unpublished works. 17 U.S.C. §104(a) (“Unpublished Works.— The works specified by sections 102 and 103, while unpublished, are subject to protection under this title . . . . ”).
[105] Stewart v. Abend, 495 U.S. 207, 228-29 (1990) (internal citations and quotations omitted).
[106] The stories were leaked online in December 2013. For a discussion of the stories, see The Ocean Full of Bowling Balls, On The Media (Feb. 5, 2010), available at
[107] As Salinger obsessive PJ Vogt explained, “I don’t know if there’s an aura around something that, that you can’t possess, and if maybe, if you were to possess that, that loses something.” Id.
[108] See 3 Nimmer on Copyright § 12A.02[A].
[109] 144 Cong. Rec. S11,889 (daily ed. Oct. 2, 1998) (statement of Sen. Hatch).
[110] S. Rep. No. 105–190, at 20 (1998); H.R. Rep. No. 105–551, pt. 2, at 49 (1998).
[111] As defined by 17 U.S.C. § 512(k)(1)(A) or (B) (2012).
[112] Id. § 512(c)(3), (f) and (g) (2012).
[113] 17 U.S.C. § 512(c)(3).
[114] Cory Brittain, who managed the revenge porn site IsAnybodyDown, encouraged victims to pay $250 to a “takedown lawyer.” Brittain is suspected of posing at the lawyer, David Blade III, and using takedown requests to extort victims. Is Anybody Down?, On The Media (Nov. 16, 2012),
[115] 17 U.S.C. § 512(c)(3).
[116] See Jim Edwards, The Porn Industry Is Being Ripped Apart by Piracy-Fueled ‘Tube’ Websites, Business Insider (Jul. 19, 2012),
[117] Removing Content From Google, Google (Dec. 2013),; Copyright and Intellectual Property Policy, Yahoo (Dec. 2013),–.
[118] Ben Sisario and Tanzina Vega, Playing Whac-A-Mole With Piracy Sites, N.Y. Times (Jan. 28, 2013), available at
[119] Marlow Stern, Hunter Moore, Creator of ‘Revenge Porn’ Website Is Anyone Up?, Is the Internet’s Public Enemy No. 1, The Daily Beast (Mar. 13, 2012),
[120] Increasing publicity for information by trying to suppress it is called the “Streisand Effect.” The term was coined after Barbara Streisand issued a request to remove a photograph of her home from the Internet. The image was subsequently re-posted across dozens of websites. What is the Streisand Effect?, The Economist (Apr. 15, 2013), (hereinafter Streisand Effect).
[121] See Streisand Effect, supra note 131.
[122] Susanna Lichter, Comment, Unwanted Exposure: Civil and Criminal Liability for Revenge Porn Hosts and Posters, Harv. J.L. & Tech. Digest (May 28, 2013), available at
[123] Hunter Moore bluntly explained why he was undeterred by the threat of legal action for managing IsAnyoneUp: “It takes you $50,000 to get me into court, and people who work at Starbucks don’t make that kind of money.” Stern, supra note 130.
[124] 17 U.S.C. §504(c)(2) (West).
[125] Id. Courts also retain the discretion to award anywhere from $750 to $30,000 in damages. 17 U.S.C. § 504(c)(1).
[126] The Digital Theft Deterrence and Copyright Damages Improvement Act of 1999 amended section 504(c) and raised the statutory damages available under the Copyright Act. Pub. L. No. 106-160, 113 Stat. 1774.
[127] Pub. L. No. 105-147, 111 Stat. 2678.
[128] Id.
[129] See 18 U.S.C. § 2319 (providing scaled penalties based on a number of aggravating factors, including whether the infringement was a first offense and the size of the infringement operation).
[130] See, e.g., United States v. Armstead, 524 F.3d 442, 443 (4th Cir. 2008) (holding that retail value is determined by taking the “highest of the face value, par value, or market value of copies of the copyrighted material in retail context” (internal quotations excluded).
[131] Cory Brittain’sself-reported revenue during the height of IsAnybodyDown. ‘Revenge Porn’ Website Has Colorado Women Outraged, CBS4 (Feb. 3, 2013, 10:13 PM), – at_pco=cfd-1.0.
[132] Hunter Moore’s self-reported revenue for IsAnyoneUp. David Kluft, Revenge Porn: “IsAnyoneUp” on Copyright Law?, Foley Hoag Trademark and Copyright Law Blog (Dec. 20, 2011),

The Merger and the Damage Done: How the DOJ Enabled an Empire in the Live Music Industry

The Merger and the Damage Done: How the DOJ Enabled an Empire in the Live Music Industry
By Josh Baker* A pdf version of this article may be downloaded here.  


In February 2009, Ticketmaster Entertainment and Live Nation announced a “merger of equals” that would unite these two titans of live entertainment, sending shockwaves through the industry.[1] On January 25, 2010, the United States Department of Justice approved the merger. When the Antitrust Division of the Department of Justice (“DOJ”) announced its decision, it encountered harsh criticism and backlash from within the industry for allowing these already-dominant firms to join forces. Spurred on by outcries from rock stars and politicians, the public regarded this deal with serious skepticism.[2] Nevertheless, the merger went through and Live Nation Entertainment (“LNE”) was born. A close examination of the merger can shed light on aspects of the music industry that inform the antitrust analysis, the efficacy of the remedies imposed in the consent decree, and the effects of the merger on the live music industry. This analysis will show that the DOJ should not have permitted the merger to proceed. In Part I of this Note I will detail the aspects of the music industry that are relevant to an examination of this merger. In Part II I will reexamine the DOJ’s antitrust analysis of the merger while Part III will explain how the structural and behavioral remedies imposed have failed to engender competition. Finally, I will argue that the DOJ overlooked a vital opportunity to create competition in the budding market of fully integrated live performance services.

I. The Live Music Industry

A. Yesterday: A Brief History of the Music Industry

Since the turn of the century, the music industry has been popularly characterized as a sinking ship, doomed by the prevalence of piracy and file-sharing. However, this depiction ignores half of the story. From 1999 to 2009 as the recording industry flailed, revenue from concert ticket sales in the United States skyrocketed from $1.5 billion to $4.6 billion.[3] It should be noted that such figures are a relatively new phenomenon, as the live music industry was not always so profitable. Prior to the 1950s, live concerts were only seen at nightclubs, dance halls, and restaurants. In the decade following World War II, technological advances helped create a mass market for recorded music. Record companies formed, signing artists to multi-album contracts and helping artists expand their audiences. The record companies encouraged artists to perform large concerts to draw fans and drive record sales. As some artists began to surge in popularity they were able to tour regionally, and the more successful ones, nationally. These artists would use local promoters to market their performances at each venue. The mass market for popular music grew rapidly, and soon enough promoters and other entrepreneurs began to build concert venues to accommodate larger audiences. Artists with a substantial fan base would perform in indoor clubs and artists who could draw a larger audience played in amphitheaters. The most popular artists began performing in arenas and stadiums. These “superstar” artists typically generated the lion’s share of ticket sale revenues. By 2009, gross revenues from the top one hundred tours had reached $2.5 billion.[4] However, superstar artists are few and far between. In 2009 fewer than one hundred artists worldwide were capable of drawing enough fans to fill amphitheaters or larger venues, and not all of these superstars tour each year.[5] The services of superstar artists are thus a scarce and crucial resource, fervently sought after by concert promoters.

B. A Day In The Life: Staging a Concert

A complex string of relationships is required to produce a concert. The key figures and entities in the chain are the artist, manager, booking agent, promoter, venue, venue service providers (including the ticket distributor), secondary ticket market, and consumers. Understanding each role in the process is crucial to analyzing the Live Nation-Ticketmaster merger under antitrust law. The first link is the artist’s personal manager. The manager serves a variety of purposes, one of which is arranging performances via the booking agent. The booking agent contracts with a promoter (such as Live Nation) to produce either an individual show or a multi-performance tour. The artist generally receives a guaranteed payout from each performance, or alternatively, a percentage of revenues. The manager and agent receive percentages of the artist’s income (typically 15% and 5%, respectively). The promoter is responsible for obtaining the performance space and marketing the event. The promoter usually receives a guaranteed payout, subordinate to the artist’s. After the guaranteed payouts are made, the remaining revenue is split between the artist and the promoter. The venue rents out the performance space and contracts for ticket distribution, concessions, merchandise, security and other services, or provides them in-house. The venue receives a percentage of the ticket distributor’s fees as well as a percentage of the concessions and merchandise sold during the performance. Artists receive the largest share of merchandise revenue. The ticket distributor delivers tickets to consumers (“primary ticketing services”). The distributor receives a portion of the ticket service fees, which are added to the face value of the tickets. To clarify a common misunderstanding, the face value of the ticket is split between, and determined by, only the artist and the promoter. It is beyond the purview of ticket distributors. Critics of surging ticket prices must understand that ticket distributors (such as Ticketmaster) should only be held responsible for increases in service fees, not increases in ticket prices. Finally, the consumer pays the face value of the ticket, plus the service fees, in exchange for admission to the concert. Once the tickets are purchased, secondary ticketing services (such as allow for the resale of tickets between consumers. On the secondary market, prices may fluctuate considerably. The secondary ticketing service provider also charges a fee for each sale.

C. Hello, Goodbye: Recent Industry Developments

For a litany of reasons, sales of physical albums have declined precipitously from levels seen at the turn of the century. Per Nielsen SoundScan, total album sales in 1999 reached 755 million—648 million from CDs and 105 million from cassettes.[6] By 2009, total album sales had dropped to 374 million.[7] Digital sales, which accounted for 40% of all music purchases in 2009, are increasing but have not yet replaced the losses incurred from declining physical sales. Conversely over the same time period, revenue from live performances has been steadily increasing. Even with ticket prices on the rise, concert attendance is growing. Artists used to go on tour to promote album sales, but now the relationship has flipped. In 1999, Millenium by the Backstreet Boys was the top selling album, generating $187 million in sales.[8] The Backstreet Boys’ touring revenues however only came to $37.1 million.[9] In contrast, U2’s record-breaking 2011 tour grossed $156 million in ticket sales, while the band pulled in a mere $4.8 million from combined album and digital sales.[10] Another significant trend the music industry has recently experienced is the emergence of “360 deals.” While the proliferation of these deals may seem revolutionary, this is not an altogether unexpected phenomenon. For years, record companies were models of vertical integration, providing artists with distribution, marketing, promotion, production and other services that were crucial to commercial success. Artists dreamed of signing “the big record deal,” seeking a big company to provide them with everything needed to release a successful album, since that used to translate into financial success. There is a well-documented history of artists agreeing to long-term contracts with the biggest labels, pursuing lucrative upfront advances and instant celebrity. The recent change has not been the behavioral pattern of artists, but rather that companies on the live performance side of the industry have begun consolidating their many roles. Artists still demand one-stop shopping, and with touring replacing album sales as the primary source of revenue, the major entities in the concert business are developing their capacity to supply those services.

D. Come Together: Live Nation, Ticketmaster, and the Merger

Live Nation and Ticketmaster were the two premier examples of increasingly vertically integrated firms in the live performance industry. Each had a history of pursuing vertical integration by acquiring companies in complementary markets. The merger of these two firms demonstrated their commitment to this strategy.
1. Live Nation: History and Strategy
Live Nation was principally a promotion company that started in the late 1990s as SFX Entertainment. Around 1997, SFX Entertainment began acquiring competing major promoters around the country to develop a national network. As SFX expanded, it introduced the practice of exclusively promoting significant portions, or even the entirety, of an artist’s national tour. Previously, artists (via their booking agents) would contract with individual local promoters in the regional markets where they wished to perform. In 2000, Clear Channel bought SFX and renamed it Clear Channel Entertainment.[11] Over the next few years, Clear Channel Entertainment significantly increased its share of the concert promotion market and acquired exclusive rights (via sale or contract) to numerous prestigious amphitheaters and other performance venues across the country. In 2005, following antitrust investigations, Clear Channel was forced to spin off Clear Channel Entertainment as a new entity, Live Nation. In 2008, Live Nation boasted that it was “the largest producer of live concerts in the world, annually producing over 16,000 concerts for 1,500 artists in 57 countries.”[12] In the United States alone, Live Nation owned 18 venues, held leases on 70 more, and operated many beyond that. Live Nation also owned or operated approximately 90% of the amphitheater venues in the United States. Additionally, Live Nation’s subsidiaries held booking rights for 159 venues around the world, and their events represented between 35-58% of all concerts, depending on the estimate.[13] In addition to achieving horizontal integration through the acquisition of competitors, Live Nation began to expand its reach vertically as well. In 2006, Live Nation acquired MusicToday, an online retailer for music merchandise. Although Live Nation was a longtime Ticketmaster client, in 2008 Live Nation announced that it would partner with CTS Eventim (Europe’s largest ticket distributor) to create its own ticket distribution platform. This platform was expected to compete directly with Ticketmaster in the market for primary ticketing services.[14] That same year, Live Nation also announced an agreement with SMG, a venue operator and former Ticketmaster client, to provide ticketing services for SMG venues. Live Nation has drawn antitrust scrutiny and allegations of engaging in anticompetitive behavior on multiple occasions. A set of class action lawsuits commencing in 2002 claimed that Clear Channel (prior to divesting Live Nation) restricted airplay on its radio stations for artists that competing promoters had booked.[15] A 2009 claim brought by an independent promoter claimed that Live Nation engaged in anticompetitive tying arrangements by leveraging its venues and promotional services, illegally monopolizing markets for amphitheater venues and promotional services, and denying competitors access to major artists (a “critical input”).[16] After the merger, in 2011, a separate class action by concertgoers claimed that Live Nation imposed mandatory parking fees as a form of illegal tying.[17]
2. Ticketmaster: History and Strategy
Ticketmaster offers integrated, full-service ticket distribution, which includes online sales, retail outlets, call centers and venue box office operations. In its early years, Ticketmaster competed with Ticketron, another primary ticket distribution service provider. With superior online technology and service, Ticketmaster surpassed and eventually acquired Ticketron. Over the past decade, has grown into one of the five largest e-commerce sites in the world, with over 26 million unique visitors each month.[18] Ticketmaster has also demonstrated a predilection for pursuing vertical integration. In 2008, Ticketmaster acquired Front Line Management Group. Front Line is the world’s leading artist management firm, representing over 250 artists.[19] Ticketmaster also acquired Paciolan, a leading supplier of ticketing software, as well as TicketsNow and GetMeIn, which offer secondary ticketing services. Both Ticketmaster and its subsidiary Front Line have distinct histories of acquiring rivals and companies in complementary markets. Ticket buyers and artists have launched a bevy of complaints over the years alleging that Ticketmaster charges excessive fees on primary ticket sales as a result of its monopoly power.[20] Pearl Jam was involved in a very public (if ultimately fruitless) spat with Ticketmaster over excessive service fees in the mid-1990s.[21] In 2003, The String Cheese Incident and its associated booking group claimed Ticketmaster had abused its market power by denying the group a customary percentage of the tickets to a concert through the use of exclusive contracts.[22] In another case which began in 2003, the Superior Court of California granted class certification on allegations that Ticketmaster misrepresents or omits the fact of a profit component in its shipping and processing fees.[23] Immediately preceding the merger with Live Nation, Ticketmaster faced public outcry and claims that it had conspired to divert tickets for popular events directly to TicketsNow, where tickets were sold at substantially higher prices.[24] A series of class action complaints regarding this alleged behavior were filed in Canada in February 2009, and later settled in February 2012.[25]
3. The Merger Investigation and Consent Agreement
On February 10, 2009, Live Nation and Ticketmaster entered into an agreement under which they would merge into a new entity called Live Nation Entertainment. The companies joined in a tax-free, all-stock merger with a combined enterprise value of approximately $2.5 billion.[26] Over the course of the following year, the DOJ conducted an investigation into the effects the merger might have on competition. A number of competitors and interested parties submitted comments opposing the merger.[27] Ultimately, the DOJ found that the merger would substantially decrease competition in primary ticketing services for major concert venues. To allay this concern, on January 25, 2010, the DOJ and the parties entered into a consent agreement that would permit the merger provided that specific measures were taken to address the effect on the primary ticketing market. Although the DOJ’s Competitive Impact Statement said its only concern was the primary ticketing market, their remedies and analysis touched on other potential anticompetitive effects.[28] These secondary concerns will be discussed in Part II, infra. The ten-year consent agreement—still in effect—includes both structural and behavioral remedies. Ticketmaster agreed to license its ticketing software to AEG, the second leading promoter in the United States, and to divest its Paciolan division to Comcast-Spectacor, one of Ticketmaster’s competitors in the primary ticketing services market.[29] The consent agreement also prohibits LNE from misusing proprietary ticketing information.[30] Promoters that were Ticketmaster clients would be at a significant disadvantage if their chief rival, Live Nation, were privy to such sensitive information, so LNE is restricted from sharing this information between their ticketing and promotion operations. The agreement also stipulates that Ticketmaster provide these clients with a copy of this information should the clients decline to renew their contracts with Ticketmaster.[31] Further, the agreement forbids LNE from engaging in retaliatory measures against competitors, which might occur via anticompetitive tying practices involving their venues, ticketing services, promotional services and Front Line-managed artists.[32] To enforce the agreement, the DOJ established a new Compliance Committee to monitor industry developments and encourage consumers and competitors to report violations. The Committee is authorized to interview employees of the firm and demand corporate documents regarding matters relating to the consent decree.[33]

II. The Department of Justice’s Antitrust Analysis

The Clayton Act prohibits combinations and acquisitions where “the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.”[34] A central tenet of antitrust law is that effective competition drives prices towards marginal costs, spurring innovation, incentivizing efficiency, and benefiting consumers. The antitrust analysis resulting from the DOJ’s investigation into the Live Nation-Ticketmaster merger formed the basis for the consent order and the remedies included therein. This section will scrutinize the DOJ’s antitrust analysis and examine alternative theories the DOJ should have considered.

A. Jigsaw Puzzle: Horizontal Components of the Merger

The focus of the DOJ’s antitrust analysis was the market for primary ticketing services, the sole significant market in which Ticketmaster and Live Nation both already participated and where they had been chief rivals. When Live Nation partnered with CTS Eventim to enter the primary ticketing services market, it became Ticketmaster’s fiercest competitor. The merger threatened to eliminate this significant competitive force.
1. The Market for Primary Ticketing Services
A proper analysis of the horizontal effects of this merger must begin with a definition of the competitive market at stake. A standard test for appropriate market definition, the “SSNIP test,” entails identifying a set of products or services over which a hypothetical monopolist (i.e. the merged firm) could profitably impose a small but significant and non-transitory increase in price. For the merger at hand, the relevant market included major concert venues and primary ticketing service providers.[35] If a monopolist in this market were to impose a SSNIP above the otherwise competitive pricing level, major concert venues would not be able to freely substitute an alternative. Venues must provide a primary ticketing service to consumers, and there are no viable alternatives to providing such a service outside of the identified market. In the market for primary ticketing services, sellers are able to price discriminate among different venues, as contracts between ticketing companies and venues are individually negotiated and typically prohibit the resale of those services.[36] Price discrimination could therefore result in the merger affecting each class of venues differently. Hence, the antitrust analysis focused on venues with few alternate service providers because the merger could disproportionately disadvantage such venues. The analysis found that the venues most affected by this merger were major concert venues.[37] These venues require sophisticated ticketing services that can withstand heavy transaction volume and complex marketing and distribution needs.[38] Only a limited set of firms was capable of providing these specialized services and fewer still had the proven track record that these venues desired. Live Nation and Ticketmaster were both among this select group. Defining the market at issue also requires examining geographical boundaries. For this merger, the relevant geographic market was the United States.[39] Although foreign ticketing services could potentially enter into the domestic market, at the time of the merger they were not significant market participants and have still not exerted much competitive influence within the domestic market. Therefore, the relevant market was defined as major concert venues within the United States. Once the market is defined, market participants must be identified and their respective market shares need to be calculated. Ticketmaster has long been the dominant supplier of primary ticketing services to major venues, with over an 80% market share before 2009.[40] In fact, in 2008 no other firm held more than a 4% share.[41] In the months preceding the merger, Live Nation declined to renew its contract with Ticketmaster and began to compete in primary ticketing services. According to TicketNews, the power scores (a market share approximation using an estimation of actual transactions) of and at the end of August 2009 were 60.32 and 16.02, respectively.[42] Using these power score figures, the Herfindahl-Hirschman Index (HHI)—a metric used by the DOJ as well as the Federal Trade Commission since 1982 to measure market concentration—for this market was nearly 4,000 prior to the merger, even ignoring all other firms.[43] The DOJ-FTC 1992 Horizontal Merger Guidelines regard a market with a HHI greater than 1,800 as “highly concentrated.”[44] The Merger Guidelines declared that a merger is presumed “likely to create or enhance market power” if it increases the HHI of a highly concentrated market by more than one hundred.[45] Based on the power score figures, this merger increased the HHI by almost two thousand. Although this illustration omits important parts of the market, such as companies that enable self-distribution, the merger still presented significant concerns under traditional horizontal merger analysis. However, calculating the HHI of a potential merger produces only a presumption of market power. It does not constitute a full analysis of the effects the transaction could have on competition. Accordingly, the DOJ has stated that the calculation of market shares and concentration ratios “provide only the starting point for analyzing the competitive impact of a merger.”[46] Importantly, the presumption that the merger is likely to increase market power does not necessarily indicate that the merged firm will, or has the ability to, act anticompetitively. One key factor the HHI calculation does not take into account is potential competitors not presently participating in the market. A hypothetical price increase by the merged firm could entice outsider firms to enter the market, making the price increase unsustainable. However, in the primary ticketing market, substantial barriers to entry prevent potential entrants from supplying a competitive check on LNE’s behavior. The DOJ identified a number of these barriers to entry in its investigation of the merger. Providing ticket distribution services to major concert venues requires platforms that are technologically complex and expensive to develop.[47] The high fixed costs necessary for developing and maintaining such platforms are especially problematic for potential entrants because they exacerbate the difficulty of achieving sufficient scale to provide effective market competition.[48] Furthermore, after years of operating at an impressive scale, LNE has unparalleled access to individual consumer data. The firm can leverage this data to provide marketing services that others could not initially offer venues.[49] Other aspects of Ticketmaster’s business model also discourage market entry. Ticketmaster regularly uses medium- to long-term exclusive contracts with venues (averaging six years in duration), with approximately twenty percent of these contracts expiring each year.[50] These contracts limit how quickly another firm could obtain a competitively effective scale. Venues also incur costs to install and teach employees to use new platforms; these costs act as counterincentives to the venue switching its primary ticketing service provider.[51] To evade these prohibitive cost barriers, new entrants might adopt software platforms that offer cheaper, yet effective, online distribution alternatives.[52] The licensing of web-based ticketing platforms involves extremely low marginal costs, which may help attract potential entrants. However, this would still not avoid the scale effects and costs to venues of switching service providers. Even firms already engaged in the business of ticket distribution face barriers to real competition for major concert venues. The major venues have complex ticketing needs, such as a high volume of sales upon initial ticket availability, and accordingly can be extremely reluctant to sign long-term deals with unproven ticketing companies. The slightest hiccup in primary ticketing services can produce disastrous effects for a venue, so a track record of reliability is a prized commodity.[53] Ticketmaster has established a strong reputation for capably providing complex ticketing solutions. Immediately prior to the merger, Live Nation, in an effort to establish a reputation for its own ticketing platform, was attempting to build experience handling ticketing services for its own venues. As the DOJ stated in its Competitive Impact Statement assessing the merger, “[n]o primary ticketing company other than Ticketmaster and Live Nation has amassed or likely could have amassed in the near term sufficient scale to develop a reputation for successfully delivering similarly sophisticated primary ticketing services.”[54] The DOJ recognized that potential entrants would be hard-pressed to convince venues to gamble on unproven ticketing partners that may encounter growing pains. The DOJ identified one firm who could potentially provide direct competition in the primary ticketing services market: CTS Eventim, a German ticketing firm. While the DOJ pointed to Live Nation’s agreement with CTS as evidence that former Ticketmaster clients could emigrate to newer competitors, the merger itself showed that such competition was not yet viable on a significant scale.[55] After Live Nation explored engaging in direct competition with Ticketmaster via licensing CTS software and adapting it to the North American market, it decided to forego this option. According to LNE’s own 10-K filing, the company terminated its agreement with CTS because the German firm “fail[ed] to deliver a North American ticketing system that met the contractual requirements of being a ‘world class ticketing system . . . that fits the needs of the North American market.’”[56] While new competitors may be better equipped to compete with LNE in the primary ticketing market, CTS was the most likely entrant and most viable competitor at a significant scale. Live Nation’s decision to join, rather than compete, was at least partially motivated by a lack of competing services capable of rivaling Ticketmaster’s dominant platform. One consideration the DOJ omitted from its analysis was the potential for substitution, specifically in the form of self-distribution. Rather than contract out to Ticketmaster or Live Nation for primary ticketing services, venues could turn, and have turned, to companies that offer software solutions that enable venues to handle ticket distribution in-house. Even with a dearth of effective competitors in the market for third-party ticketing services, were LNE to significantly raise prices for its ticketing services, venues in that market could substitute this in-house distribution option. In fact, a number of former Ticketmaster clients did just that.[57] Companies that offer these services have already developed the capacity to serve major venues and thus face fewer cost barriers to entry. This in-house option provides at least a plausible restraint on the sustainability of potential price increases from LNE.
2. The Market for Integrated Service Packages
The second horizontal concern the DOJ identified in its analysis of the merger was the effect on the market for vertically integrated service packages.[58] The DOJ noted that prior to the merger, both companies strove to supply a package that included both primary ticketing services and access to concert content.[59] Live Nation was able to offer this bundle (at least implicitly) when it entered the primary ticketing services market, and showed it could serve both the ticketing and promotional needs for venue clients.[60] In response, Ticketmaster acquired a majority stake in Front Line, allowing Ticketmaster to grow its capacity to offer its own ticketing and concert content package.[61] As the DOJ explained, “the merged firm’s ability to bundle primary ticketing services (implicitly or explicitly) with access to artists managed by Front Line and/or promoted by Live Nation would require competitors to offer venues both primary ticketing services and access to content in order to compete effectively.”[62] In 2009, the American Antitrust Institute published an article alleging that “[i]f the merger is consummated, firms seeking to enter the market would, to an even greater extent than at present, need to enter on several levels at once,” which would serve as a significant barrier to entry.[63] The issue was not that the firms engaged in bundling—which the DOJ did not deem anticompetitive behavior—but that save for the merger, the companies would have competed with each other in a newly minted market for integrated service-and-content packages. The DOJ should have expanded on this insight. For a brief few months, Live Nation had spurred Ticketmaster into a new arena of competition—albeit one which included only these two firms—forcing both Ticketmaster and Live Nation to experiment with innovative business models that championed vertically integrated services. Regardless of whether this development is characterized as having birthed a new market or having transformed the existing one, the two firms were nevertheless engaged in productive competition. Based on the companies’ respective histories of pursuing vertical integration, the DOJ anticipated that both would have continued on this path, save for the merger. The DOJ surmised that, “but for the proposed transaction, venues and concertgoers would have continued to enjoy the benefits of competition between two vertically integrated competitors.”[64] Notably, the merger proposal itself evidenced the intentions of both Live Nation and Ticketmaster to pursue vertical integration. The firms were not mirror images, as they were direct competitors only in the individual market for primary ticketing services. Aside from primary ticketing services, each firm had access to markets that the other had yet to penetrate, suggesting that Ticketmaster and Live Nation, respectively, were significant and likely entrants into a number of markets in which the other already participated. Competition likely would have spurred the firms to expand into these complementary markets. For instance, Live Nation could have entered (via acquisition) the markets for artist management and/or secondary ticketing. Conversely, Ticketmaster could have entered the markets for promotions and/or merchandising. Even if they never actually entered those markets, the standing threat of entry would have exerted significant competitive effects on those markets.[65] These complementary markets may have been competitive in their own right, but the merger eliminated significant potential competition in each of them. The DOJ should have recognized that two vertically integrated competitors, each with a history of pursuing vertical integration, were well-positioned to compete or threaten to compete in complementary markets.[66]

B. All Down The Line: Vertical Components of the Merger

Vertical mergers, and the vertical components of mergers, have historically received lower antitrust scrutiny than their horizontal counterparts. Enforcement agencies rarely view these types of mergers as posing competitive risks since they are most often motivated by efficiency concerns rather than efforts to grow or maintain market power.[67] Nevertheless, certain vertical behaviors still draw antitrust scrutiny. Vertical combinations and agreements can be illegal if they injure the competitive process. The “principal concern with vertical transactions is the possibility that companies will be denied significant access to suppliers and customers.”[68] The Financial Times, considering the Live Nation – Ticketmaster merger in 2009, opined that a vertically integrated firm “running the entire process… would stifle competition. This would work against fans in the longer term, no matter what innovations were on offer initially.”[69] The DOJ neglected to include potential anticompetitive effects arising from the vertical components of the merger in its analysis, but did address some of these concerns by imposing behavioral remedies in its Final Judgment.
1. Anticompetitive Concerns of Vertical Integration
The Ticketmaster-Live Nation merger implicated some of the worrisome behaviors associated with vertical integration. One such behavior relating to the vertical components of this merger was anticompetitive tying or bundling practices. Although most tying is lawful, courts have held parties liable for “anticompetitive forcing,” where a firm coerces buyers of the tying product to also buy the tied product.[70] For example, here the concern was that LNE could require that venues exclusively book Live Nation artists (the “tied” product) as a condition for access to Ticketmaster’s ticketing services (the “tying” product).[71] Mere bundling, however, is often a desirable procompetitive behavior, which does not violate federal antitrust laws.[72] For a tying practice to be considered anticompetitive, the firm must use its market power in the tying market to coerce buyers to purchase the firm’s products or services in the tied market for reasons unrelated to the quality or price of the products offered.[73] Traditional industrial organization economics suggest that this strategy often makes little economic sense, as the firm would prefer to market its monopolized product independently.[74] Yet, there is reason to believe that in the primary ticketing services industry, LNE might have sufficient incentive to pursue this anticompetitive strategy. Competitors have asserted that, prior to the merger, Live Nation unlawfully tied the purchase of its promotional services to the use of its venues and venue services, with the intent to foreclose competing promoters and venues from accessing major artists.[75] Live Nation was (and remains) the only promoter capable of booking an artist’s entire national tour—its competitors tend to be concentrated in local markets—arguably providing Live Nation with substantial market power on its own (an issue distinct from the immediate merger). Live Nation could exert its market power to coerce artists not to partner with a competing regional promoter or venue. Without access to artists, these smaller rivals cannot compete effectively, giving Live Nation sufficient incentive to tie its products as a means of further entrenching its dominance in promotions and choking off competition in the market for venues. The merger could aggravate this concern, affording LNE increased leverage (in its superior market position in ticketing services) to persist in this exclusionary strategy. LNE incurred operating losses of $203.8 million, $70.4 million and $161.9 million in 2010, 2011 and 2012, respectively, possibly indicating an anticompetitive strategy of offering artists and venues unsustainable supercompetitive prices in order to exclude and eliminate competitors.[76] On the other hand, neither Live Nation nor Ticketmaster has yet been found liable for such conduct, as the IMP suit is still pending. In its response to public comments regarding the proposed final order in the DOJ’s investigation, the DOJ expressed doubts that Live Nation wields the significant market power alleged.[77] If the DOJ is correct, concerns over anticompetitive tying are purely speculative. However, the DOJ did specifically account for the increased potential for coercive tying in its behavioral remedies, in the form of anti-retaliation provisions.[78] Retaliation represents the enforcement or punishment side of anticompetitive tying offers.[79] Another antitrust concern relating to the vertical components of this merger was the use of exclusive contracts. Long-term exclusive contracts can be used by firms with strong market power to prevent competitors from entering a market, an anticompetitive practice that may violate sections 1 or 2 of the Sherman Act.[80] Ticketmaster has been accused of using such contracts to foreclose rivals in precisely this manner.[81] Likewise, Live Nation has been accused of abusing exclusive dealings contracts to foreclose competition.[82] However, the use of exclusive agreements is generally seen as efficient, procompetitive conduct.[83] Finally, a number of competing independent promoters related concerns that the merger would give Live Nation access to their proprietary information. As a primary ticketing service provider, Ticketmaster has access to this information as a result of its independent contracts with venues. Seth Hurwitz, a prominent independent promoter, described this issue in his testimony before the Senate subcommittee, explaining, “my biggest competitor will have access to all of my sales records, customer information, on sale dates for tentative shows, my ticket counts, they can control which shows are promoted and much more. This will put ALL independent promoters at an irreparable competitive disadvantage.”[84] The DOJ directly addressed this problem in the Final Judgment through a firewall provision.[85]
2. The Firms’ Asserted Procompetitive Justifications
Vertical mergers are generally presumed procompetitive, but courts and enforcement agencies still inquire into the particular efficiency gains asserted by the merging parties. In this case, the DOJ refused to credit a number of LNE’s asserted efficiencies. The DOJ’s Merger Guidelines require that the claimed efficiencies be merger-specific and non-speculative; the burden of substantiating the claims is imposed on the merging firms.[86] Ultimately, “if cognizable efficiencies are of a character and magnitude such that the merger is not likely to be anticompetitive in any relevant market,” the DOJ will not challenge the merger.[87] The press release announcing the merger of Ticketmaster and Live Nation claimed that the firms anticipated “approximately $40 million of operating synergies through the combination of their ticketing, marketing, data centers and back-office functions.”[88] A few weeks later, the CEOs of the two companies—Michael Rapino (Live Nation) and Irving Azoff (Ticketmaster)—outlined the benefits of the merger during a congressional hearing.[89] According to Azoff, “[i]t is designed to address the obvious inefficiencies in the supply chain — the large volume of unsold tickets to events, higher costs, surcharges and the explosion of the resale market.”[90] The DOJ largely rejected the procompetitive efficiencies claimed, explaining that the parties “could realize many of the asserted efficiencies without consummating the proposed transaction,” pointing to the fact that each company had already started to pursue strategies of vertical integration before the merger agreement.[91] The DOJ debunked claims of increased innovation by describing how a vertically integrated monopolist is actually less likely to innovate and yield efficiency gains than two competing firms would be. The DOJ also noted that a pair of competing firms had a greater likelihood of passing these advantages on to consumers.[92]

C. Under My Thumb: The DOJ’s Final Judgment

After weighing the anticompetitive effects and the firms’ procompetitive justifications, the DOJ determined that the merger could not proceed as proposed. In its Final Judgment, the DOJ allowed the merger, provided that certain steps were taken to alleviate the anticompetitive effects on the primary ticketing services market.[93] The remedies stipulated therein indicate the DOJ’s concern with horizontal effects in the market for vertically integrated services. However, the Final Judgment neglected to address how the merger extinguished the competitive effects of having potential entrants to complementary markets (promotions, artist management, etc.). With its proscription against retaliation, the DOJ subtly attempted to remedy the increased potential for LNE to engage in anticompetitive exclusive dealings and coercive tying.[94] In sum, although the DOJ spoke warily of the anticompetitive effects of the merger and discredited the parties’ explicit procompetitive efficiency claims, it nevertheless allowed the merger to proceed. While the Final Judgment was an effort to quell the DOJ’s antitrust concerns and produce effective competitive markets, as the next section will explain, that effort fell short.

III. Remedies

The DOJ’s Final Judgment employed a hybrid solution to address the anticompetitive concerns raised by the merger, including both structural and behavioral remedies. This section will argue that the structural remedies implemented were insufficient to cure the anticompetitive ills. Furthermore, in employing a then-novel enforcement strategy of imposing behavioral restrictions along with structural fixes, the DOJ imprudently neglected to address a number of concerns inherent with behavioral remedies in general. In the case of the behavioral restrictions on the Live Nation-Ticketmaster merger, those concerns are particularly apparent.

A. I Want To Break Free: Structural Remedies

The primary distinction between structural and behavioral remedies is that structural remedies create or preserve independent firms to maintain market competition, while behavioral remedies permit integration, subject to operating rules that aim to prevent the newly formed firm from undermining competition post-merger.[95] Historically, structural remedies have been preferred in addressing antitrust concerns over proposed mergers. The DOJ’s 2004 Antitrust Division Policy Guide to Merger Remedies (“2004 Guide”) stated that structural remedies, compared to behavioral remedies, “are relatively clean and certain, and generally avoid costly government entanglement in the market.”[96] The DOJ followed this preference in many merger investigations, both before and after publication of the 2004 Guide.[97] A number of studies, including reports by the FTC as well as European and Canadian agencies, have examined the strengths and limitations of structural remedies, concluding that they have been “largely effective —and superior to alternatives—in accomplishing their stated goal.”[98] The DOJ viewed decreased competition in the market for primary ticketing services as the primary evil presented by the Live Nation-Ticketmaster merger, and imposed two structural remedies to combat it. First, the DOJ sought to establish AEG as a viable, vertically integrated competitor in the primary ticketing services market because it was LNE’s most likely competitor. The DOJ required LNE to grant AEG a perpetual license of its Host ticketing platform, believing this would fill the market’s competitive void.[99] Second, the DOJ wanted to “establish another independent and economically viable competitor” in the primary ticketing services market and thus directed the divestiture of Ticketmaster’s Paciolan division to Comcast-Spectacor.[100] In February 2011, one year after the DOJ closed its merger investigation, AEG announced that rather than implementing Ticketmaster’s Host platform, it would be partnering with Outbox Enterprises.[101] Prior to the merger, AEG had been a Ticketmaster client. As the prime competitor affected by the merger, it follows that AEG sought to replace Ticketmaster as the provider of its in-house ticketing services and compete with LNE in that market generally. The fact that AEG chose Outbox over the DOJ-prescribed Host platform shows that this structural remedy had no appreciable effect on competition in this market. The intended effect of this remedy was to provide a competing platform seller. By rejecting the option to license the Host platform, AEG nullified any possible remedial effect on the competitive imbalance that concerned the DOJ. Conversely, the AEG-Outbox partnership demonstrated that competing promoters and venues may have more options available to fulfill their ticketing needs than the DOJ anticipated. Outbox, which operates on a venue’s website as opposed to a ticket company’s site, allows venues more power and control over customer service, and the venue retains consumer data and profiles without any third party involvement.[102] Other ticketing service purveyors have lauded this approach as embracing innovation and opening the door for viable competition.[103] In the wake of the merger, other competing venues have followed suit, so as not to provide business to LNE.[104] However, as promising as these developments may be with regard to increased innovation and competition in the primary ticketing services market, it remains unclear whether these cases are examples of a trend or temporary aberrations. If the newcomers prove sustainable, they may obviate the need for the DOJ’s structural remedies altogether. Prior to the merger, Ticketmaster’s usual renewal rate with venue clients was higher than 85%.[105] In 2010, the rate increased to 95%.[106] According to LNE’s Supplemental Operational and Financial Information, Ticketmaster “again achieved a net renewal rate of over 100% for 2012.”[107] In the company’s 2012 year-end financial report, it showed growth of 3.6% and 5.6% for the adjusted operating incomes of its concerts and ticketing divisions, respectively, over the previous year. Since 2010, the firm’s revenue has increased from $5.1 billion in 2010, to $5.4 billion in 2011, to $5.8 billion in 2012.[108] LNE has also continued to pursue its strategy of acquiring competitors.[109] Furthermore, Outbox and other upstart challengers have only just reached a scale where they can compete, so it remains to be seen whether their new technologies will prove viable substitutes. To truly exert a competitive influence on the market, the firms will need to attract more than just sympathetic (or vindictive) venue clients. These upstarts will need to prove that they can provide reliable service for venues with various capacities and ticketing needs. Until they do, current Ticketmaster clients will be reluctant to risk a change by implementing unproven software, no matter how innovative.

B. Don’t Stop Me Now: Behavioral Remedies

Behavioral or “conduct” remedies allow merging parties to consummate the deal, subject to conditions on their operational behavior. The aim is to create room for the procompetitive efficiencies gained from the merger while regulating anticompetitive behavior that the newly-merged firm might pursue.[110] Naturally, this creates a tension with the firm’s profit-maximizing incentives. A number of significant concerns derive from this tension and therefore behavioral remedies must be supplemented with continuous oversight of the firm’s conduct.[111] Such oversight is analogous to the work of a regulatory body; hence conduct remedies face shortcomings similar to those associated with industry regulation.[112] These shortcomings include informational asymmetries, vagueness, inconsistent incentives, implementation costs, and enforcement problems. The 2004 Guide warned that behavioral remedies are typically “more difficult to craft, more cumbersome and costly to administer, and easier than a structural remedy to circumvent.”[113] Firewalls, fair-dealing, and transparency provisions were all characterized as posing “substantial policy and practical concerns,” requiring considerable resources to oversee and carrying potential for “harm as well as good.”[114] Nevertheless, the DOJ’s Final Judgment imposed a set of behavioral remedies including anti-retaliation and firewall provisions as well as establishing a Compliance Committee. These remedies implicate a number of the general concerns with behavioral remedies and regulation. The anti-retaliation provisions of the consent agreement demonstrate the asymmetry of information between the firm and its regulating agency. In the Final Judgment the DOJ defined retaliation as
[R]efusing to Provide Live Entertainment Events to a Venue Owner, or Providing Live Entertainment Events to a Venue Owner on less favorable terms, for the purpose of punishing or disciplining a Venue Owner because the Venue Owner has contracted or is contemplating contracting with a company other than Defendants for Primary Ticketing Services. The term “Retaliate” does not mean pursuing a more advantageous deal with a competing Venue Owner.[115]
It is readily apparent that this definition may be subject to multiple interpretations, with the inquiry into a retaliatory action resting on a determination of the firm’s motives. The firm is considerably better positioned than the agency to know or obtain knowledge as to the motivation driving a particular business decision. This inherent informational disadvantage leaves the agency in the uncomfortable and ineffective position of deferring to the firm’s proffered explanation for engaging in the behavior in question.[116] Even a marginally clever company can understand this fl