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 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., 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.

Creative Commons Licensing

US Copyright law provides generally broad protections for the creators (“authors”) of original works of authorship.  In particular, authors have the exclusive right to copy, distribute, publicly perform, prepare derivative works from, and publicly display their works.  In addition, these rights last for a relatively long time – for an original fixed in a tangible medium – the lifetime of the author plus seventy years.  One of the problems with the broad protection is that creative people who want to start with the work of another may be stifled by the licensing regime of an author.  Absent “fair use” (a defense raised by an infringer and one that depends on the facts and circumstances of each use), an artist may just be unable to use a work without risking a lawsuit.  One partial solution to this problem is the Creative Commons licensing.

The Commons is a copyright licensing regime (actually a set of several kinds of licenses) and searchable database that permits users to obtain re-usable creative works that are not subject to the same restrictions under US copyright law.  The database permits a user to search in a variety of individual databases for a particular work, and the database result will then display the use restrictions, if any, based on the applicable license.  The database also contains many works that are in the copyright “public domain,” which are works that require no license at all to be used (generally, works published before 1923 are now in the public domain).  In reverse, authors of works who wish the work to be more freely distributed can publish works to the Creative Commons under one of the applicable licensing agreements.

The result is that more creative works are available that require less from persons that want to use them with less risk and potentially less licensing expense.

Autodesk and the First Sale Doctrine

Autodesk, Inc. and Timothy Vernor have gotten into a dispute over Mr. Vernor’s resale of Autodesk’s AutoCAD software on eBay.  Autodesk kept filing DMCA take down notices for each of Mr. Vernor’s auctions of AutoCAD software that Mr. Vernor had started on eBay.  After this happened a few times, Mr. Vernor hired a lawyer and sued Autodesk under the Declaratory Judgment Act, seeking a declaration of rights from a federal court within the 9th Circuit that Mr. Vernor had the right to resell Autodesk’s software.

Mr. Vernor won at the trial level.  A copy of the opinion is found at Vernor v. Autodesk, Inc., 555 F.Supp. 2d 1164 (2008).  At the heart of Mr. Vernor’s argument is the protections afforded by the Copyright Act under section 109, known as the “first sale doctrine.”  That section states: “Notwithstanding the provisions of section 106(3), the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.”  17 U.S.C. § 109(a).  Mr. Vernor argued that his purchase at yard sales of copies of the AutoCAD software could have only occurred if AutoCAD had already sold copies of its software to another party prior to Mr. Vernor’s purchases.  Therefore, the first sale doctrine would immunize Mr. Vernor from further liability under the Copyright Act.

Autodesk, on the other hand, argued that effectively it had never sold a copy of its software to anyone, because any sale of its software is subject to a licensing agreement that specifically forbids transfer of the software, and the software in Mr. Vernor’s possession was not sold but was transferred to the prior holder via a settlement agreement between the prior entity and Autodesk.  Furthermore, the software itself is only offered for sale via a restrictive license, making the subsequent holder of the copy of the software a licensee.  As a result, section 109 provides such a person, such as Mr. Vernor, any defense.

After the trial court entered judgment for Mr. Vernor, Autodesk appealed.  The Ninth Circuit reversed the trial court.  A copy of their opinion is here: 09-35969, and is found at Vernor v. Autodesk, Inc., No. 09-35969 (9th Cir. Sep. 10, 2010).  The Ninth Circuit established a three part test for determining if the subsequent holder of a copy of software owns the software or is merely a licensee: “We hold today that a software user is a licensee rather than an owner of a copy where 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.”

For fun, I downloaded a copy of the End User License Agreement that Microsoft licenses its Office Suite, which you can read here: clientallup_eula_english.  I know that you will be surprised to discover that Microsoft licenses but does not sell its software to end users.  Section 7 of this agreement provides a whole host of restrictions on use and resale of its software.  So I checked on ebay to see if anyone would sell me a copy of Microsoft Office, and this morning I found 9,623 offers.  Searching for Autocad turned up over 2,400 copies for sale. Apparently many people who possess copies of software don’t pay much attention to the license agreement that makes them licensees rather than owners, and that now makes them into copyright infringers when they started offering these software packages for sale on sites like eBay.

The licensing terms for the Microsoft EULA do suggest that “use of the software” constitutes acceptance of the agreement.  Mr. Vernor indicated that he never used the copies of AutoCAD, and therefore he wasn’t bound by the agreement with AutoCAD, but this was not dispositive for the Ninth Circuit, as he bought the software from a prior holder that could not be called an “owner” based on the agreement between that entity, CTA, and Autodesk.  I’d expect this ruling from the Ninth Circuit to cause some trouble for licensees, many of whom have probably never thought when they bought that shrink-wrapped CD that they could not re-sell it later, given how common limited licensing agreements are in the world of proprietary software today.  Open Source, here we come!

Software Licensing for Businesses

Here was a very good article on software license auditing for businesses: (click here for story).  The issues for businesses are twofold: (a) keeping track of the licensing that the business has purchased, and (b) keeping track and understanding the licensing agreements that control the software.  The former can be handled by software.  For example, Microsoft publishes Systems Management Server (SMS), which includes a software audit and metering tool.  I understand that Altiris also offers a solution, and undoubtedly there are other packages out there that can tell you what’s running on your network.

The latter, however, requires a human being to review the software licensing agreement terms, and then analyze purchase history against the usage from the audit/metering tool.  And the software license agreements themselves are often as clear as mud, especially if you have multiple, overlapping agreements for a variety of software packages.  Even small businesses may have a substantial number of software packages and licenses they have acquired over time, so keeping up with this to avoid an audit can take real effort and concentration.

Google’s Not the Only Online Book Deal

The academics have been working on digitizing their book collections with Google’s help.  (See Article here)  I suspect that, in spite of the fact that Google is ahead of the pack in total books digitized today, there may be a fair number of other groups that get together to digitize collections down the road, and as new books are written and published, most will be available electronically anyway.

In spite of the Copyright Office’s current objections to the original Google book deal, my bet is that the market in the future will push changes in how copyright ownership is managed, or perhaps streamline the management of these interests (for example, by requiring a statutory fee for access payable to the copyright owner).

Psystar’s Star Dims a Bit

Psystar and Apple have been in a tech law tango based on Apple’s allegations that Psystar violated the end user licensing agreement when it started releasing the OS X operating system on non-Apple manufactured clone computers.  The federal court ruled in favor of Apple on its claims on a motion for summary judgment.  (See article here)  (You can find a copy of the judge’s decision here)

The Court’s decision to grant summary judgment for Apple is primarily based on Apple’s copyright infringement claims against Psystar.  The Court addresses the exclusive reproduction, distribution, and preparation of derivative work rights under the Copyright Act that are exclusive to Apple.  Apple alleged that Psystar, by taking a copy of OS X, modifying it so that it would boot on a non-Apple made computer, and selling that modified work to the public, had violated Apple’s copyright in OS X.  The Court examines the possibility of a section 117 defense under the Copyright Act which does grant the owner of a copy of a copyrighted work a limited right to make an additional copy of adaptation of the work.  17 U.S.C. § 117(a).  There are two possibilities under section 117: a copy of the work is made as an “essential step” in using the computer program, or the copy is made for archival purposes.

The Court held that Psystar had essentially waived this defense by not timely raising it.  In any case, Psystar had been making a lot more than a single copy of OS X when it cloned its modified copy of the operating system and installed it to computers that Psystar offered for sale to the public.  The language in section 117 is more geared towards us consumers that might make a backup copy of our OS X disk, or backup the operating system to our Time Machines in the event of a failure of our prized Macbooks.

The Court briefly addresses section 107, fair use, noting only that Psystar doesn’t attempt to justify its use as a “fair use” under section 107.  Most likely, that Psystar offered a copy of OS X for sale with its computers without paying the “customary” licensing price to Apple would have doomed such a defense anyway under the first element of this test.

Psystar then raised the first sale doctrine as a defense, under section 109.  Under this section, I have the right to resell a copyrighted work I have purchased to the general public, without responsibility to the copyright owner (for example, to resell at a set price).  So, if I were to buy a legitimate copy of Snow Leopard for $100, and offer it on ebay for $50, I have that right under section 109.  The Court found that Psystar was not doing this at all in modifying OS X and then selling this modified copy on computers to which it was installed.  Section 109 does not really help Psystar.

The Court next addressed whether Psystar was creating a derivative work of OS X, by modifying certain operating system files so that OS X would load onto a non-Apple manufactured computer.  Psystar tries to assert that because it did not modify the kernel of OS X, only the bootloader file and certain kernel extensions (disabling Apple extensions and adding its own extensions for the software to run on non-Apple hardware), it had not created a derivative work.  Again, the Court sides with Apple.  Even the modification of such humble files is the preparation of a derivative work, which was unauthorized under the Copyright Act.

Psystar also alleged that Apple was misusing its copyright.  This doctrine addresses a copyright holder who attempts to leverage his limited copyright monopoly to control areas outside of the monopoly.  For example, if I write blog software, and license it under an agreement that requires that you never write blog software, I am misusing my copyright in the work.  I don’t have the right to prevent you from writing a competing software package.

Psystar is arguing that Apple is unfairly limiting where its operating system can be installed, which is perhaps anti-competitive.  Unlike Windows, which can run on a broad range of hardware that Microsoft does not manufacture, Apple limits OS X to Apple-made hardware.  Psystar is essentially arguing that Apple should do what Microsoft does with its operating system, to allow for competition.  The Court sided with Apple on this argument as well, reasoning that Apple was only trying to control the subject matter of its copyright – the software itself.  I don’t think the Court was persuaded that Apple must license its software as others have in the market.  Apple may also have a legitimate reason for controlling the hardware on which the software is operated, given the drivers mess that is created with most Microsoft operating system releases.  Older versions of Linux also struggled with this problem, in spite of the many volunteer developers who write drivers for the Linux system in its many flavors.