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AI Generated Art and Copyright Infringement

Artificial Intelligence is coming to art near you! And with AI’s entrance into the field through systems like Stable Diffusion, DALL-E, and Midjourney, copyright infringement lawsuits are the next wave as we try to sort out the technology and the rights of persons affected by the technology.

The use of AI in generating art online has become increasingly popular. Many artists and designers are using AI tools to create new and unique pieces of art, from digital paintings to animations and more. The problem is how these AI systems learn how to respond to text prompts from system users.

One approach to training AI systems is to use images scraped from the internet – regardless of the copyright status of the image – and to use this library of images to inform the algorithm on how to interpret a text prompt from a system user. So, to simplify, if a system user enters a text message such as “please make an image of a cow standing in a green field on a rolling hill,” the AI algorithm would need to have reference material of what a cow, green field, and rolling hill looks like. The reference images that are indexed in relation to these words and phrases help the AI to learn how to respond to the text prompt and generate a new image.

Figure 1 – DALL-E generated image of a “cow standing in a green field on a rolling hill”

The problem comes in with the images that are used by the AI in its original training, as some aspect of these images must be re-used by the AI to respond to a user text prompt. If the copyright owner of the source image has not dedicated the image to the public domain, or otherwise licensed the work openly, an AI that works based on combinations of these protected works may infringe a copyright right (such as the exclusive right of duplication, derivative work, etc.) under section 106 of the Copyright Act.

And several lawsuits along these lines have been filed, challenging the use by AI companies of these original source images. For example, Anderson v. Stability AI is a putative class action lawsuit brought by artists alleging infringement against Stability and several other AI image generation businesses. Getty Images has also filed a similar type of infringement suit. In Getty’s case, the images it owns have a proprietary watermark that permits the company to track unlicensed use of works, and alleges that “millions” of its images have been used by companies like Stability AI without license or consideration.

This leads to the unanswered question of whether the use of these protected works is infringing, and if it is, whether the use could be a defensible fair use under section 107. A key question for the source works harvested from internet sources is whether they are sufficiently original to be protected. The bar of originality through court decisions here is relatively low. Feist v. Rural Tele., 499 U.S. 340 (1991). Absent slavish copying of an original, most photographs will have some originality, at least as to photographer choices about composition and lighting, though the copyright interest in photographs of common objects and scenery must be relatively narrow, which is another way of saying that an infringing work must be nearly identical for liability to accrue. However, there really is no fixed formula of originality of all photographs and the degree of similarity for a subsequent work to be infringing. Such issues require a judgment on a case-by-case basis. For example, are Warhol prints based on a photograph of the late musician, Prince, sufficiently different to not be a copy of the protectible aspects of the photograph? The Second Circuit judged them to not be sufficiently different and to also not be sufficiently transformative to be protected under fair use. Even a casual reading of the literature on fair use would find the wide range of decisions and the absence of simple rules in this area. Andy Warhol Foundation for the Visual Arts v. Goldsmith, 992 F.3d 99 (2d Cir. 2021) (oral arguments heard at US Supreme Court Oct. 12, 2022).

Another problem of duplication involves the doctrine of scenes a faire, which essentially is the idea that genres or subject matters of works will necessarily share some common ground. Feist, 499 U.S. at 340. All works of penguins will share commonality in the “penguinness” of the birds pictured, therefore my photograph of penguins cannot prevent all others from taking their own photo of that bird at the zoo or in the wild. Teaching AI what image relates to the word “penguin” necessarily means showing the AI many penguin images for it to construct some generalized model of “penguin.” Therefore, copyright holders would not be able to prevent AI from generating images of penguins, even images that are based on images made by others, as all pictures of penguins necessarily include aspects of the bird’s form, markings, and size that make it a penguin rather than other birds or animals.

Another unresolved issue with this situation is the idea of sampling. The Ninth Circuit discussed several sampling cases – where a small portion of a work is used by another such that the average observer would not notice the appropriation – and explained that such sampling is generally not actionable infringement. Bell v. Wilmott Storage, 12 F.4th 1065 (9th Cir. 2021) (discussing Newton v. Diamond, 388 F.3d 1189 (9th Cir. 2004). A court could view the AI use of copyright materials of other as a mere sampling of that protected material, and therefore not actionable if the AI were to stitch together hundreds of pieces of digital files to render a response to a user-supplied text prompt.

A final fair use issue has to do with Google’s admitted copying of millions of paper books and indexing of those books into Google’s index of these works, without permission or license from the copyright holders. The Second Circuit ultimately affirmed the finding of fair use in this case, partly on the grounds that works that were still within copyright, while indexed in the database, only appear to searchers in “snippet” form that displays a limited portion of the relevant book page with the search result. Author’s Guild v. Google, Inc., 804 F.3d 202 (2d Cir. 2015). In addition, many courts will examine whether the use of the plaintiff’s work is “transformative,” though this determination often can be viewed as subjective. For example, the second circuit did not find Andy Warhol’s use of Goldsmith’s photograph of Prince as transformative, but the same circuit has found numerous other appropriationist artist’s use of another’s work as transformative, such as in Cariou v. Prince, but not in Rogers v. Koons, yet confoundingly Koons’ use of a different photograph in Blanch v. Koons was sufficiently transformative. Andy Warhol, supra; Cariou v. Prince, 714 F.3d 694 (2d Cir. 2013); Rogers v. Koons, 960 F.2d 301 (1992); Blanch v. Koons, 467 F.3d 244 (2d Cir. 2006). Perhaps a court could view AI’s use of photographs scraped from the internet as sufficiently transformative, as AI generates a “new” image based on the user text prompt from relevant reference material.

While the source materials are photographs that are published on the internet, a court would most likely view them as within the core protection of the Copyright Act, so this factor would likely favor photographers whose works have been used by AI to generate images. Cariou, 714 F.3d at 710.

The third factor, the amount and substantiality of the protected work used by AI to generate the subsequent image to the AI user, is less certain as to which party is favored. Id. We do not really know how much of the scraped images the AI actually uses in the finished product it displays to users of these various systems, or whether the AI has used more than is necessary to accomplish its transformative purpose.

Finally, courts would have to examine whether the AI’s use “takes away from”usurps” the existing market for the original photographs. Id. at 709. The market for AI-generated art is relatively new. DALL-E does have a paid subscription level for image generation beyond a minimum number of free images; whereas Midjourney is a subscription-based system that starts at $96 per year.  What remains to be determined is whether these paid systems reduce the market value of works in Getty Images’ database. For example, are AI users merely generating images with the AI system that they would otherwise just license from Getty Images? While this may seem unlikely from a cursory use of the AI systems, what evidence offered in court of market impact may support either party’s contentions here. However, if the AI systems are generating income, the door is open for these systems to enter into some licensing system with the works they have used to go “legitimate.”

Stay tuned for what’s next and further market disruption by AI systems available and yet to come to market.

Arbitration Clauses in Maryland

Arbitration Clauses in Contracts

An arbitration clause is a provision in a contract that requires disputes to be resolved through arbitration rather than in court. The general purpose of arbitration clauses is to provide a more efficient and cost-effective way for parties to resolve disputes. There is a strong federal and Maryland public policy that favors arbitration where parties have agreed in advance to resolve disputes in that manner, as this reduces the load on the civil court system, and also respects the voluntary, private choices of persons and businesses.

Benefits for companies can include:

  • Lower costs than litigating in court, as arbitration proceedings generally do not involve appeals of decisions made by the arbitrator.
  • More control over the process and the outcome.
  • Confidentiality of the proceedings and the outcome. Unlike civil court proceedings, where the public has a right to access non-privileged records and information about court proceedings are available through online resources such as the Maryland Judiciary Case Search, arbitrations are confidential by default.
  • The possibility of a more favorable outcome, as arbitrations preclude jury trials that may be more favorable to consumers, and also preclude class action lawsuits against businesses. Instead, aggrieved consumers must litigate individually in an arbitration proceeding.

Benefits for consumers can include:

  • Potentially lower costs than litigating in court, though consumers need to take into account the cost of the arbitrator, which generally must be shared with the other party and must be paid in advance to file an arbitration.
  • A faster resolution than in court. Arbitrations can be resolved on average in less than a year, where actions in state courts like the Maryland circuit court may take years (https://go.adr.org/impactsofdelay.html)

However, there are also costs and drawbacks to consider:

  • Consumers may have less protection under arbitration than in court, especially if they are not familiar with the process or do not have the resources to hire an attorney. Generally, arbitrations are governed by different rules of procedure than civil cases, which in some cases may limit rights to obtain discovery, or limit other litigation steps.
  • Consumers may be limited in their ability to participate in class action lawsuits, which can provide more leverage in disputes, and also permit pooling of small claims for resolution making the class action more cost-effective for consumers in some cases.
  • Companies may use arbitration clauses to limit consumer rights and protections.

The Maryland federal district court recently decided a case involving a broad, mandatory arbitration clause in an employment agreement between a car dealership and a former manager. Brown v. Brown’s Md. Motors, Inc. (U.S.D.C. June 10, 2022). In that case, the plaintiff had entered into an employment agreement that contained a broad arbitration clause, and was subsequently terminated from his employment. The plaintiff sought to have his day in court against his employer, but his employer filed a motion to compel arbitration. In response, the court analyzed plaintiff’s claims as to the enforceability of the arbitration clause, applying Maryland contract law to the dispute. Such defenses can include: (a) claims that the agreement was not entered into or was otherwise defective, (b) applicable contract defenses like unconscionability, or (c) in this case, claims that arbitration would prevent the plaintiff from vindicating important federal rights. Ultimately, the court dismissed these claims and ordered arbitration.

If you are considering an arbitration agreement, schedule a consultation on Zoom to review the details before you enter into the agreement.

Is AI Coming for Your Law Job?

Artificial Intelligence (AI) refers to the simulation of human intelligence in machines that are programmed to think and learn like humans. AI systems can be trained to perform tasks such as recognizing speech, understanding natural language, and making decisions.

Legal research is a primary target for an AI intervention, as current legal research tools are fragmented and require advanced knowledge by the human user to identify relevant authority. These tools can also be time consuming, as the human user often still must sift through search results to evaluate if the case, statute, or other authority is most relevant to the assigned research task.

Google had made some strides in this area of research when it published Google Scholar. This research tool incorporated publicly available cases across all US jurisdictions and indexed them. This research tool could be more effective in taking natural language search phrases and finding relevant results, though it lacks other research tools to validate that cases or statutes remain in force.

Another key issue is that different research databases may return different results, and therefore a careful researcher may have to consult multiple databases, including official paper-based reporters, to get a complete picture on the applicable legal authority.

AI has been used in the practice of law in several ways, including:

  1. Legal research: AI-powered legal research tools can analyze large amounts of legal text and help lawyers quickly find relevant case law and statutes. For example, LexisNexis has a “brief analysis” product within Lexis+ that utilizes AI to quickly summarize cases for legal researchers. Brief Analysis in Lexis+
  2. Contract review: AI-powered contract review tools can assist lawyers in analyzing and summarizing the key terms and provisions of contracts. A variety of vendors offer solutions in this area, such as Foley & Lardner LLP, LinkSquares, and Klarity.
  3. Litigation Support & eDiscovery: AI-powered predictive coding tools can help lawyers identify relevant documents in large sets of data, such as during discovery in litigation, though debate continues as to whether AI lives up to the marketing hype surrounding litigation support. Law.Com (2022)
  4. Chatbots: AI-powered chatbots can assist lawyers in answering frequently asked legal questions and guiding clients through legal procedures.

In the court system, AI has been used for tasks such as:

  1. Sentence classification: AI-powered tools can assist judges in determining appropriate sentences for defendants based on factors such as criminal history and the nature of the crime, though such use is not without concerns about bias and due process. Hillman, Noel (2019)
  2. Predictive policing: AI-powered predictive policing tools can assist law enforcement in identifying areas where crimes are more likely to occur and allocating resources accordingly, though such tools may also lead to claims of racial and ethnic bias. Verma, Pranshu (2022) Washington Post

Overall, AI is being used increasingly in the legal system to analyze data and make predictions, but it is important to note that the implementation and use of AI in the legal system is still in its infancy, and there are concerns regarding bias and accountability. AI holds the promise of improving knowledge worker productivity, for example, to aid a human knowledge worker in more quickly identifying relevant authority and summarizing it for the human knowledge worker. Important limitations on AI remain, however. For example:

  1. Complex legal reasoning: The legal system is complex and requires a deep understanding of the law and its application. AI systems may struggle to fully grasp the nuances of legal reasoning, making human lawyers more effective in this area.
  2. Communication and negotiation: The legal system requires human interaction and communication, as well as the ability to negotiate and come to agreements. AI systems may not be able to fully replicate the emotional intelligence and interpersonal skills of human lawyers.
  3. Ethical considerations: The legal system involves many ethical considerations, such as the protection of individual rights, which may be difficult for AI systems to fully comprehend. More generally, concerns exist about the ethical use and implementation of AI (Garibay, Ozlem, et al. (2023))
  4. Creativity: There are cases where creative thinking is required to find solutions, AI systems may not have the ability to think creatively.
  5. Understanding of social, cultural and economic context: In the legal industry, understanding the broader context of laws, regulations, societies and cultures is important in order to make informed decisions.

However, with the rise of ChatGPT and the substantial reported investment in this platform by companies like Microsoft (Browne, Ryan (2023) CNBC) suggests that 2023 will likely be a year to watch for AI in a job near you!

The FTC and Non-Competition Agreements

Earlier this month, the Federal Trade Commission proposed a rule that would ban the use of non-competition clauses for employees, on the grounds that such clauses constitute an unfair method of competition, in violation of section 5 of the Federal Trade Commission Act. FTC Press Release

Non-competition agreements, also known as non-compete clauses, are agreements in which an individual agrees not to work for a competitor for a certain period of time after leaving a job. The enforceability of non-competition agreements varies by state in the United States. Some states, such as California, generally do not enforce non-competition agreements because they are viewed as unreasonable restraints on trade. Cal. Att’y General Other states such as Maryland will enforce “reasonable” non-competition clauses depending on the geographic extent and duration of such clauses. Holloway v. Faw, Casson & Co., 319 Md. 324 (1990).  The ostensible purpose in enforcing such clauses has been to protect an interest in the goodwill of the employer that might be invaded by a departing employee that turns to a competitor with a book of clients obtained through work at the former employer. Fowler v. Printers II, 89 Md. App. 448 (1991). The proposed FTC rule acknowledges that this sort of promise to not solicit customers, however, is not a violation of section 5 of the FTCA. Instead, the FTC rule seems to be aimed at making unenforceable those clauses that prevent a worker from seeking employment at a different business or starting their own, competitive business with a former employer. § 910.1(b)(1).

The FTC’s comments estimate that approximately thirty million workers or about twenty percent of the nation’s workforce is subject to a non-competition clause. Studies cited by the FTC support its conclusion that preventing the enforcement of non-competition clauses may increase wages for workers. For example, the FTC discusses research by Matthew S. Johnson, et al., that concludes that an increase in enforcement of non-competition clauses tends to reduce workers’ earnings and exacerbates gaps in wages based on gender and race. (Johnson, 2021)

In particular, the study authors discuss that wages decline by 3.5% when comparing worker wages in a state that is less likely to enforce a non-compete clause with one that is very likely to. The authors also estimate that if all non-compete clauses were unenforceable nationally, average earnings among all workers would rise between 3.3% and 13.9% (Johnson, 2021, pps 18-19).

Undoubtedly, the FTC rule will be subject to court challenges as to its enforceability under FTCA in the coming months. Concerned about a non-competition clause in an agreement? Reach out to schedule a review of your agreement.

Fair Use in the Copyright Act

Section 107 of the Copyright Act provides for a “fair use” defense to claims of copyright infringement. The statute generally requires the application of a four-factor test to determine whether the defendant’s use of the plaintiff’s work, while infringing, is still permissible under the Act. The problem with this statute is that its application is not self-evident in numerous cases involving contemporary art.

The first element of first use, the purpose of the defendant’s use of the plaintiff’s work, involves a factual analysis of why the defendant did what she did with the plaintiff’s work. On the one hand, a defendant merely trying to profit from a plaintiff’s original work is probably not a fair use purpose, while a defendant that “transforms” the original work into a new expression may be a fair use purpose.

Recently, the Second Circuit had to address this issue in the case, Andy Warhol Foundation for the Visual Arts v. Goldsmith, 11 F.4th 26 (2nd. 2021) (cert. granted by USC Mar. 28, 2022). At issue in that case was a photograph taken by the Goldsmith of the late, well-known musician, Prince, which was subsequently used by the late Andy Warhol in a series of prints based on the photograph. On discovery of the unlicensed use, Goldsmith notified Andy Warhol Foundation for the Visual Arts (“AWF”) of the apparent infringement, and AWF subsequently filed a lawsuit for a declaration that the Warhol works were not infringing as a matter of law.

Appropriation artists are no stranger to copyright infringement lawsuits in the second circuit. Jeff Koons was subject to two different cases involving his use of photographs in his works. In Rogers v. Koons, 960 F.2d 301 (2nd cir. 1992), the Rogers Court found that Koons’ use of the photo was not a fair use as the use was not sufficiently transformative. However, in a later case, Blanch v. Koons, 467 F.3d 244 (2006), the Court found that Koons’ use of a different photograph was a fair use. Both, of course, were appropriations of another’s work, but the distinction of which was fair under the copyright statute turned on the Blanch court’s finding that the use was sufficiently transformative.

Another appropriation artist, Richard Prince (no relation to the late musician, Prince), was subject to a lawsuit involving copyright infringement by yet another photographer, Patrick Cariou. Cariou v. Prince, 714 F.3d 694 (2nd cir. 2013) (cert. denied). There, the Cariou court found that most of Prince’s paintings and collages were fair uses of Cariou’s works as a matter of law, and remanded the case to the district court to evaluate whether the remaining five were also fair use using the standards laid out in the appellate court’s decision.

In Goldsmith, however, the Second Circuit decided that Andy Warhol’s use was not a fair use of Goldsmith’s unpublished photograph of the late Prince. The Court found that Warhol’s removal of certain elements from Goldsmith’s photograph, and embellishing them with loud and unnatural colors was simply not transformative. While the Court is careful to insist that judges should not be transformed into art critics to decide fair use claims, the Court’s attempt to cabin in fair use to some objective standard for works may just be the Court’s rejection of “appropriationism.”

Virtual Practice of Law

I recently wrote an article for the Maryland Bar Journal (Nov/Dec 2014 edition) entitled Virtuality: The Lawyer that is Almost Really There, and I recently made a presentation on the same topic to the SL Bar Association.  Please find a link here to the recording of the presentation.

Fundamentally, technology has significantly impacted the practice of law.  Part of that impact has been felt in the greater access to information that previously was only available in proprietary database systems.  Part of that impact has also been felt in more cost effective methods to acquire new clients and provide more access to the legal system through fixed cost or unbundled legal services that may be provided electronically. However, not all aspects of these changes have been welcomed by the legal marketplace with open arms. For one, our ethics rules have not embraced the changes driven by technology to the delivery of legal services, leaving the practicing lawyer with uncertainty about the ethics status of newer technologies available to support the practice of law. In addition, there are substantial questions about the security and integrity of some of the technology available to lawyers to support virtual practices.  There is one constant: change, and one consistent struggle for all of us: trying to keep up with it.

Estate Planning in the 21st Century

So, what happens to all your digital stuff when you die, anyway?  Of course, if you are dead, chances are you won’t much care.  But your loved ones might.

As an exercise, think for a moment about all of the digital stuff you use during the typical day.  If you are like many, you may have:

  • a smartphone, a tablet computer and perhaps a laptop
  • a bunch of online accounts to websites like Facebook, LinkedIn, Flickr and other places
  • your own domain and web site, and an email account or three
  • many people with bank accounts or other financial accounts have online access to view and manage their money
  • auction or retail site account access on places like ebay or etsy
  • an account on an entertainment site like iTunes
  • a remote data account if you use the cloud to backup your important data remotely
  • one or more accounts for a virtual world like Second Life
  • and there are probably a whole lot of other accounts and passwords you have

Now, holding those accounts in your head, answer these questions:

  • Who might be able to access all of those accounts if you were to die?
  • Does anyone you care about know your password to your computer?
  • Do you have a list somewhere of accounts that you maintain online?
  • Are there online accounts you would prefer be kept private, or things you have written you would prefer not become public knowledge, like an online private diary?
  • If no one has your password, what might your family do if they needed to gain access to those accounts after you die?

These are the kinds of dilemmas we face in the 21st century as technology expands into more as

pects of our lives.  The law has also not exactly caught up with the technology issues for estate planning.  There are a patchwork of federal and state laws that tend to restrict the ab

ility of a personal representative or family member from having access to online content of a deceased loved one.  For example, the Computer Fraud and Abuse Act (CFAA), which became law in 1986, was intended to prevent the unauthorized use by a person of a “protected computer.”  18 U.S.C. § 1030.  Court decisions over time have interpreted the CFAA to subject unauthorized users to civil and criminal sanctions for various forms of unauthorized access to computers or online accounts.  The Stored Communications Act (SCA), another federal law, provides a private cause of action for the unauthorized and intentional access of another’s online communications.  18 U.S.C. § 2701.  Because these laws have been around before the age of Google and Facebook, many online service providers have established, within their terms of service, limitations on the access by others of a user’s account.  There is some concern in the legal community that a person who violates such an online agreement to gain access to a user’s website could be prosecuted under CFAA or SCA.

In addition, some online services may not give you more than a personal license to access an item, such as music.  Bruce Willis, of hard-talking and explosion-surviving Die Hard fame, got into an argument with Apple about whether Willis could leave his extensive iTunes collection to his children.  B. Griggs, Can Bruce Willis Leave his iTunes Music to his Kids?,  http://www.cnn.com/2012/09/03/tech/web/bruce-willis-itunes/ (accessed Aug. 4, 2014).  The iTunes license agreement contains a provision that prohibits you from sharing your account information with anyone else.  The agreement also limits access to content on iTunes for “only for personal, noncommercial use.”  Apple, Inc., iTunes Store Terms and Conditions, http://www.apple.com/legal/internet-services/itunes/us/terms.html (accessed Aug. 4, 2014).  If you think about that restriction, after you die, your estate would be unable to transfer your account to an heir to access your iTunes music or movies.

Mark Twain, who lived in a very different technology age, planned that his autobiography would not be published for a 100 years, to reduce the chances that his writing would trigger a libel lawsuit from a living contemporary, or heap an unwanted burden on his surviving family.  G. Adams, After Keeping Us Waiting for a Century, Mark Twain Will Finally Reveal All, http://www.independent.co.uk/arts-entertainment/books/news/after-keeping-us-waiting-for-a-century-mark-twain-will-finally-reveal-all-1980695.html (accessed Aug. 4, 2014).

You may very well have digital items you would prefer that your heirs not be able to access.  That might have been Alison Atkins’ intention when she died prematurely at 16, having finally succumbed to a colon disease.  Though upbeat publicly about her health and condition, she also kept a private blog secured by a separate password where she contemplated suicide and other “dark” thoughts.  G. Fowler, Life and Death Online: Who Controls a Digital Legacy?, Wall Street Journal, Jan. 5, 2013, http://online.wsj.com/news/articles/SB10001424127887324677204578188220364231346.

Without an expression of your intent, your family may have no choice but to break into your computer and gain access to all of your online and social media accounts, risking a violation of federal or state privacy law, and also gaining access to information you might wish to protect them from.  Give us a call or get in touch with us if you want to talk more about your digital estate planning.

Aereo Loses the War Before the Supreme Court

The question presented to the court was whether Aereo’s conduct, in recording and re-broadcasting over-the-air television broadcasts to individual subscribers to Aereo’s services, constituted copyright infringement.  Aereo’s service is a web-based system that permits subscribers to watch broadcast television through a web broadcast.  Subscribers are able to access available television programming by selecting a specific live broadcast from a menu on Aereo’s website.  The system will then direct an Aereo-controlled antenna to tune in to the program and transcode the broadcast for access by the requesting subscriber.  In the process, the Aereo system makes a digital copy of the over-the-air broadcast to permit streaming of the content to the subscriber.  The digital copy is only made available to the individual subscriber that requested the particular broadcast.  Am. Broadcasting Cos. v. Aereo, Inc., 573 U.S. ___ (2014).

The plaintiffs in this case are the broadcasters that transmit over-the-air television programming, along with the producers, marketers, and distributors of this content.  They sought a court’s order to enjoin the conduct of Aereo on the grounds that Aereo’s services infringe on the public performance right provided under section 106 of the Copyright Act.  Section 101 defines “public performance” to mean:

(1) to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or

(2) to transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.

17 U.S.C. § 101.

Case law over time has helped to clarify when a performance is to the “public.”  In Columbia Pictures v. Redd Horne, 749 F.2d 154 (3rd Cir. 1984), the defendant operated a video rental and sales business.  In addition, patrons of the store could rent one of eighty five private viewing booths, permitting up to four people to view a video in the store in the booth.  The plaintiff had alleged that the private viewing booths constituted an unauthorized public performance, in spite of the defendant’s attempt to limit the number of people who could view a tape in the store.  The third circuit agreed, finding that the video store was open to the public and that it was the defendant, not the patrons, that performed the copyrighted works in the private viewing booths.

However, as technology has evolved, a separate line of cases has developed in an attempt to shield technological improvements from claims of copyright infringement.  Starting with Sony in 1984, the Supreme Court held that the VCR could be sold, even though the people purchasing the technology might use it to record copies of copyrighted materials on television, without permission or a license from the copyright holders.  Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417 (1984).[1]  In more recent years the federal courts have sided with the music industry and found infringement with certain file sharing and peer-to-peer sharing technologies, such as Napster, Grokster and Limewire, concluding that these technologies resulted in massive and wholesale infringement.[2]

The Aereo service itself is like a cloud-based VCR, in that the service permits users to request that a particular over-the-air broadcast be recorded and transmitted via the internet to the individual requesting the recording.  Aereo also went to great pains to distinguish its service from peer-to-peer sharing services by emphasizing that a user selects a broadcast he wishes to watch via the internet, and Aereo only records and directs that recording to the individual requestor, not making the copy available to any other Aereo user – even one that requests the same broadcast through the service.  Unfortunately, Aereo could not prevail on these points before the Court.  Instead, the Court found that Aereo’s service was functionally similar to community antenna television systems (“CATV”), and that Congress had specifically amended the Copyright Act to define CATV systems as copyright infringing, overturning legislatively two Supreme Court decisions holding otherwise: Fortnightly Corp.[3] and Teleprompter Corp.[4]

In each of those cases, the defendants operated a system where the defendant would collect over-the-air broadcasts from a region and transmit those broadcasts to subscribers in another broadcast market without the payment of a royalty and without a license from the copyright holders.  The Court held that these activities were outside of the scope of the Copyright Act as it stood prior to the 1976 amendments, because the CATV systems were acting more like “viewers” rather than “broadcasters” of the copyrighted content of others.  This was so, according to the Court, because the CATV system “‘no more than enhances the viewer’s capacity to receive the broadcaster’s signals [by] provid[ing] a well-located antenna with an efficient connection to the viewer’s television set.’”  Aereo, Inc., slip. op. at 6 (quoting from Fortnightly Corp., 392 U.S. at 399).  However, Congress disagreed with the conclusion of the Court and ultimately amended the Copyright Act to reach the conduct of CATV system providers, establishing a compulsory royalty regimen under section 111 of the Act.

Ultimately the Court held that Aereo was providing a service similar to the CATV systems, and, in spite of some differences that the dissent argued were significant, held that if the CATV systems were infringing, so to must the Aereo system.  However, the Court did not declare that Aereo is, in fact, a cable system, which would permit Aereo to take advantage of the compulsory licensing system established by Congress.  In a filing July 9, Aereo has apparently now taken the position that it is a cable system and is seeking a license to operate as such.[5]  Time will tell whether Aereo will be able to operate in this manner or whether Aereo will be unable to become a “legitimate” content distributor, like some other technology innovations that had originally been declared infringing.

[1] Admittedly, the Sony case was about unauthorized copying, rather than public performance of, copyright works, and Sony was in the suit defending against a contributory or vicarious infringement claim, where Aereo was accused of direct infringement by publicly performing copyrighted works without a license.

[2] See, e.g., Metro-Goldwyn-Mayer Studios, Inc. v. Grokster Ltd., 545 U.S. 913 (2005); A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001); Arista Records LLC v. Lime Group LLC, 715 F. Supp. 2d 481 (S.D.N.Y. 2010); but see Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121 (2nd Cir. 2008) (cert. denied 557 U.S. 946 (2009)).

[3] Fortnightly Corp. v. United Artists Television, Inc., 392 U.S. 390 (1968).

[4] Teleprompter Corp. v. Columbia Broadcasting System, Inc., 415 U.S. 394 (1974).

Google Books Ends in Fair Use Verdict for Google

The case brought by the Author’s Guild against Google, for scanning of millions of books without any author’s permission, ended without a trial when Judge Chin granted a motion for summary judgment in favor of Google at the end of 2013.  In his thirty page opinion, Judge Chin agreed that Google’s conduct is affirmatively protected by section 107 of the Copyright Act, which sets out the factors that courts consider when determining if a use of another’s copyrighted work is “fair,” meaning the defendant is not required to obtain a license or pay a royalty for the use.

This controversy started almost ten years earlier when Google began its “Library Project” to scan and index books from a variety of library collections, including Harvard, the University of Michigan, the New York Public Library, Oxford and Stanford.[1]  Millions of books were to be scanned and indexed using Google’s engineering expertise and search engine, including some books that remain under copyright protection.  Google also established a “Partner Program” under which Google worked with publishers and rights holders to index and display books with permission from the owner of the rights in the work.[2]  By Judge Chin’s decision last year, more than twenty million books had been scanned and indexed into the Google Books project.[3]

Google’s database of books includes a full digital copy of each book it scans.  Each such book is indexed for searching.  Users can navigate to books.google.com and search through the index using queries of their own design.  In response, the search engine will return a list of books from the index that are relevant to the query.  Clicking on a particular book will take the user to a page which displays the cover of the book and a short summary of the content.  If the book was scanned through the Partner Program, the user is able to view what the author or publisher has consented to display on the results page.  If the book is in the public domain, the user is able to view the entire book and also to download the electronic version of the book.  However, for books still under copyright protection but not available from the Partner Program, the search result displays the book in “snippet view.”[4]  “Snippet view” is the source of controversy for the plaintiffs in the Author’s Guild because Google did not obtain permission to show portions of the indexed book in search results.[5]

Copyright infringement is the invasion of an exclusive right of an original work by another.  Among the exclusive rights of authors are the rights to reproduce, distribute, and publicly display their works.[6]  Fair use is an affirmative defense to a claim of copyright infringement.  Under section 107, courts consider four factors when determining if a defendant’s infringing use is “fair:” (a) the purpose and character of the defendant’s use, (b) the nature of the plaintiff’s work, (c) the amount and substantiality of the work used by the defendant, and (d) the impact of the use on the plaintiff’s market for his work.[7]  Determining whether fair use applies depends on the facts and circumstances of each case.[8]  Judge Chin emphasizes in his opinion that “transformative” uses of copyrighted material are more likely to be a fair use.  Citing Campbell v. Acuff-Rose,[9] the court defines “transformative” uses of a work as the creation of a new work from an old one, where the new work has a different purpose or character and the fair user alters the original expression resulting in a new work with a new meaning or message.

Fair use has been heavily litigated because the defense turns on the specific facts of each case.  In addition, while the Google Books case is an important one, it is not the first case to raise the issue of fair use in the context of technology on the internet.  More than ten years ago, the Ninth Circuit confronted a search engine that was sued for copyright infringement by a photographer, Leslie Kelly, whose photographs had ended up indexed into Arriba Soft Corp.’s internet image search engine.[10]  In that case, Kelly created, sold and licensed landscape photographs of the American West, which he made available for sale through his website.  The defendant, Arriba Soft, had crawled and indexed images available from public internet web sites, including Kelly’s web site. The Ninth Circuit held that Arriba Soft’s use of Kelly’s photographs was transformative.  Kelly’s purpose in creating his photographs was aesthetic: people would purchase Kelly’s works to have a framed photograph of a landscape in their home.  In contrast, Arriba Soft used Kelly’s photographs to create thumbnails which were placed into a search database so that search users could use keywords to find related images.[11]  The thumbnails could not supplant the original aesthetic use of the works because the thumbnails were at a considerably lower resolution.  Ultimately, Arriba Soft prevailed on the basis that its use of Kelly’s works was a fair use.[12]  Amazon obtained a similar outcome in the case Perfect 10, Inc. v. Amazon.com, 508 F.3d 1146 (9th Cir. 2007).

In the Google Books case, the court also found that Google’s use of the plaintiff’s works was transformative: “Google Books digitizes books and transforms expressive text into a comprehensive word index that helps readers, scholars, researchers, and others find books.  Google Books has become an important tool for libraries and libraries and cite-checkers as it helps to identify and find books.”[13]  The court continued: “Similarly, Google Books is also transformative in the sense it has transformed book text into data for purposes of substantive research, including data mining and text mining in new areas, thereby opening up new fields of research.”[14]

The court held that the second factor – the nature of the plaintiff’s works – also favored a finding of fair use, because most of the books indexed by Google, 93%, were non-fiction, and all of the books had been published before Google indexed them.  A court is less likely to find fair use when the defendant has used highly creative works, or works that are not yet published.  The court held that on balance, the third factor – the amount and substantiality of the use of the plaintiff’s works by Google – weighed slightly against a finding of fair use because Google had used all of the works verbatim, though that was required for the purpose of Google’s use.[15]

Finally, the court held that the last factor – the impact on the plaintiff’s market for its works – also strongly supported a finding of fair use.  In this case, the court found that the plaintiff’s market for its original works would be very unlikely to be supplanted by the “snippet” view that was available through Google’s website in response to user searches for keywords.  To the contrary, the court found that Google’s database would most likely enhance the sales of the plaintiff’s works.[16]

As a result, the court found that Google’s use of the plaintiff’s works was a fair use and entered judgment for Google.  The Author’s Guild filed notice of its intention to appeal, and subsequently filed an appeals brief with the Second Circuit in April.  Google’s reply is due in July.  Stay tuned for further developments!

[2] The Author’s Guild, Inc. v. Google, Inc., 1:05-cv-08136-DC 5 (S.D.N.Y. Nov. 14, 2013) (appeal pending in 2d circuit in case number 13-4829 CV).

[3] Id. at 1.

[5] A careful reader will note that Google also has a complete digital copy of each book it scans, which Google backs up to backup media and shares with the source library that provided the work to be scanned.  Plaintiffs alleged that these acts violate the authors’ exclusive rights of reproduction and distribution.

[6] 17 U.S.C. § 106.

[7] Id. at § 107.

[8] The Author’s Guild, Inc. at 16-17.

[9] 510 U.S. 569 (1994).

[10] Kelly v. Arriba Soft Corp., 336 F.3d 811 (9th Cir. 2003).

[11] Id. at 818.

[12] Id. at 822.

[13] The Author’s Guild, Inc. at 19.

[14] Id. at 20.

[15] Id. at 22-23.

[16] Id. at 25.

Final HIPAA Security Regulations and EHRs

Note: this article was originally published in Maryland Physician Magazine in its May/June 2013 issue.

The HiTech Act in 2009 set in motion a series of changes to the HIPAA rules that govern the use, disclosure and protection of protected health information (“PHI”).  The Department of Health and Human Services (“HHS”) subsequently issued interim regulations in response to these changes in the law, and this year issued a final regulation as of March 26, 2013 that requires compliance by covered entities and business associates within 180 days.  These final HIPAA security regulations make a number of important changes which may impact your relationship with vendors that provide you with electronic health record (“EHR”) licensing and support.

First, prior to HiTech, business associates of covered entities were not required to comply with the security rules and standards set forth in the HIPAA security regulations.  HiTech changed the applicability of the security regulations to include business associates.  The final regulation from HHS implements this provision of the HiTech Act, but with a twist: subcontractors to business associates are also defined as business associates within the final regulation.  What this means is that EHR vendors and their subcontractors must fully comply with the HIPAA security rules, not just with “reasonable” security measures.

Second, prior to HiTech, there was no federal requirement that a covered entity or business associate report a security breach that resulted in the disclosure of protected health information (“PHI”).  HHS subsequently issued interim regulations to implement these notification requirements, and as of March 26, 2013, HHS issued final regulations that alter the assumptions and exceptions to what constitutes a “breach” under HIPAA.  In addition, business associates and subcontractors are obligated to report security breaches to covered entities.

For providers that are at the beginning of their search for an EHR vendor, have an attorney review any proposed contract between your organization and the vendor to ensure that the business associate provisions comply with the final regulations.  If you already have an existing relationship, work with your attorney to ensure that the contract in place complies with the final regulatory requirements.  All business associate agreements must come into compliance with the final regulations by September, 2014.

In recent years, some EHR vendors have moved to “cloud”-based data storage and access solutions for their clients.  These cloud systems are designed so that provider data collected by the EHR is stored at a remote data center, and made available over an internet connection with the provider.  Some EHR vendors subcontract with a third party to provide the cloud data storage.  More likely than not, that subcontractor is now a business associate under the final regulations and takes on the same obligations as the EHR vendor with regards to your data.  The final regulations require that a covered entity’s contract with their business associate require subcontractor compliance with the final security regulations.

Beyond compliance issues, providers will want to evaluate whether an EHR vendor that hosts your data in the “cloud” has really made sufficient provisions for security.  Such an evaluation makes good business sense because of the incredibly negative consequences of any security breach that results in a loss of PHI for a health care provider.  For example, does the vendor comply with a recognized, national security standard (like NIST)?  Is the EHR vendor, or the data center it uses for storing your data, audited against a SAS standard like SAS-70?  What are the security practices and security devices in place at the EHR vendor to protect your data?  If the vendor will host your data, what are its disaster recovery and data backup procedures?  Are those procedures regularly tested?

Providers and their counsel should also evaluate what, if any, additional provisions should be negotiated into any final agreement with the EHR vendor concerning the vendor’s compliance with a security standard, commitment to security procedures, and related obligations (such as maintaining appropriate border security and/or appropriate encryption for data during its transmission).

The changes in HIPAA compliance mean that providers cannot simply treat EHR vendors as a “black box” into which providers place PHI, and rely on the EHR vendor’s representations that they know best regarding security.  In addition, because the scope of HIPAA now covers more than just covered entities and business associates, but also most subcontractors of business associates that handle PHI, more entities are at risk for substantial fines for failing to comply with the applicable security standards.  All providers should work with their counsel to analyze and address compliance with the final regulations.