NATIONAL INFORMATION INFRASTRUCTURE

7. LIMITATIONS ON EXCLUSIVE RIGHTS

The copyright law provides a number of exceptions to the "exclusive" rights of copyright owners. The Copyright Act specifies that certain uses of copyrighted works are outside the control of the copyright owner.[1] While many regard these exceptions as rights of users, they are, as a technical matter, outright exemptions from liability or affirmative defenses to what would otherwise be acts of infringement.

 

a. FAIR USE

The most significant and, perhaps, murky of the limitations on a copyright owner's exclusive rights is the doctrine of fair use.[2] Fair use is an affirmative defense to an action for copyright infringement.[3] It is potentially available with respect to all manners of unauthorized use of all types of works in all media. When it exists, the user is not required to seek permission from the copyright owner or to pay a license fee for the use.

The doctrine of fair use is rooted in some 200 years of judicial decisions. The most common example of fair use is when a user incorporates some portion of a pre-existing work into a new work of authorship.[4] For example, quotation from a book or play by a reviewer, or the incidental capturing of copyrighted music in a segment of a television news broadcast is fair use. In the recent Campbell case, the Supreme Court expressly accepted the proposition that such "transformative" uses are more favored in fair use analyses than uses that amount to little more than verbatim copying.[5] As one moves away from such transformative uses into the area of uses that -- for practical purposes -- compete with the copyright owner's exploitation of the work, the analysis becomes more difficult (as the number of litigated cases grows).

Before examining the doctrine developed by the courts, it is useful to examine the statutory language concerning fair use. Section 107 of the Copyright Act provides:

The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.[6]

The language may usefully be divided into two parts: the first sentence, which is largely tautological ("fair use ... is not an infringement of copyright"), and the analysis required by the second sentence. The recitation of assorted uses in the middle of the first sentence has been held neither to prevent a fair use analysis from being applied to other "unlisted" uses nor to create a presumption that the listed uses are fair.[7] It does, however, provide some guidance on the types of activities which might be considered fair use.

The core of Section 107 is the second sentence, in which Congress elaborates a test similar to that articulated by Justice Story more than 150 years ago.[8] It is clear that courts must evaluate all four factors in determining whether a particular use is fair, but may also take into account unenumerated "extra" factors, when appropriate.

 

THE PURPOSE AND CHARACTER OF THE USE

Although the fourth factor has repeatedly been held to be the most important of the four factors, the first factor often plays a major role in determining the result when a defendant asserts a fair use defense.

The first factor contrasts "commercial" uses with "nonprofit educational" uses. There is, of course, a continuum between these two opposites, with most uses falling neatly into neither the favored nor disfavored pigeonhole. The weight of the factor may be inferred from the Supreme Court's very limited fair use jurisprudence: In the four fair use cases that it has decided, one noncommercial, noneducational use was held fair,[9] two commercial uses were held unfair,[10] and one commercial use was held potentially fair.[11]

In the Sony case, the Court announced a "presumption" that helps explain courts' near universal rejection of fair use claims in commercial contexts. It declared that all commercial uses were to be presumed unfair,[12] thus placing a substantial burden on a defendant asserting that a particular commercial use is fair. The Campbell case made clear that the Sony presumption was of greatest applicability in the context of verbatim copying, thus giving greater leeway to commercial but transformative uses.

For the most part, "mere reproduction" has fared rather badly in court under the Copyright Act, even in actual and ostensible educational contexts.[13] Courts have denied fair use,[14] for example, to:

THE NATURE OF THE COPYRIGHTED WORK

This second factor tends to play a less significant role than the first in fair use litigation. Courts have held that this factor weighs in the copyright owner's favor when works of fiction[18] and unpublished works[19] are copied, and in the defendant's favor when factual works[20] and published works[21] are copied. In the NII context, it is quite possible that a court might evaluate whether a work in digital form should be treated differently from a work in a conventional print or other analog form for the purposes of evaluating this factor.

THE AMOUNT AND SUBSTANTIALITY OF THE PORTION USED This is probably the least important factor, given that the taking of even a small amount -- if it is considered the "heart" of the work -- can lead to a finding of infringement.[22] Indeed, the most frequently cited copyright treatise devotes only four sentences to its discussion:

The third factor listed in §107 is "the amount and substantiality of the portion used in relation to the copyrighted work as a whole." This raises an issue discussed in a preceding section [concerning the quantum of copying that constitutes infringement], and may be regarded as relating to the question of substantial similarity rather than whether the use is "fair." This includes a determination of not just quantitative, but also qualitative substantiality. In any event, whatever the use, generally it may not constitute a fair use if the entire work is reproduced.[23]

 

THE ECONOMIC EFFECT OF THE USE

Courts have repeatedly identified this as the most significant of the four factors.[24] It is important to recall that it weighs against a defendant not only when a current market exists for a particular use, but also when a potential market could be exploited by the copyright owner. Harm in either market will, in most instances, render a use unfair.[25]

The Supreme Court's decisions demonstrate the significant weight given this factor:

It is reasonable to expect that courts would approach claims of fair use in the context of the NII just as they do in "traditional" environments. Commercial uses that involve no "transformation" by users and harm actual or potential markets will likely always be infringing, while nonprofit educational transformative uses will likely often be fair. Between these extremes, courts will have to engage in the same type of fact-intensive analysis that typifies fair use litigation and frustrates those who seek "bright lines" clearly separating the lawful from the unlawful.[30]

Courts in two cases decided to date concerning the unauthorized "uploading" and "downloading" of copyrighted materials to and from bulletin board services have held that such uses were not fair uses.[31] In the Playboy case, the court characterized the issue as whether "unrestricted and widespread conduct of the sort engaged in by the defendant bulletin board system operator (whether in fact engaged in by the defendant or others) would result in a substantially adverse impact on the potential market for or value of [Playboy's copyrighted photographs],"[32] and determined that it would. This, in turn, led the court to conclude that there was market harm and, thus, infringement.

In the MAPHIA case,[33] the court found that Sega established a prima facie case of direct and contributory infringement in the operation of the defendant's bulletin board system (where Sega's copyrighted video game programs were uploaded and downloaded). In issuing a preliminary injunction, the court found that each of the four factors weighed against a finding of fair use, but found that the fourth factor, in particular, weighed "heavily" against such a finding:

Based on Defendants' own statement that 45,000 bulletin boards like MAPHIA operate in this country, it is obvious that should the unauthorized copying of Sega's video games by Defendants and others become widespread, there would be a substantial and immeasurable adverse effect on the market for Sega's copyrighted video game programs.[34]

Cases already decided in other contexts will give valuable guidance to courts confronted with NII-related cases. Just as courts have distinguished between home use of a VCR to make time-shifting tapes of materials broadcast over the air (fair use) and school systems' attempts to use VCRs to download broadcast instructional materials for the creation of an educational film library (not fair use), courts will subject users of copyrighted works available via the NII to like scrutiny. Educational uses that serve the same ends and are constrained in the same manner as the copying permitted under the Classroom Guidelines[35] will likely be fair, while attempts to supplant the market for books, films, software and other materials by proliferating them without permission via the NII will likely be infringing.

Finally, it may be that technological means of tracking transactions and licensing will lead to reduced application and scope of the fair use doctrine. Thus, one sees in American Geophysical Union v. Texaco Inc.,[36] a court establishing liability for the unauthorized photocopying of journal articles based in part on the court's perception that obtaining a license for the right to make photocopies via the Copyright Clearance Center was not unreasonably burdensome. The court also speculated that should the proprietors fail to establish a licensing system for the use in question, then the balance might shift in favor of a finding of fair use.

 

FAIR USE GUIDELINES FOR LIBRARIES AND EDUCATIONAL INSTITUTIONS

The fair use, library copying and educational use provisions of the current copyright law have been the subject of four sets of "guidelines" for libraries and educational institutions, to which contending parties agreed, that are enshrined at various places in the legislative history.[37] The result has been, in certain circumstances, a quantitative gloss on the construction of fair use and library copying privileges. For instance, the classroom guidelines generally permit the copying, for educational purposes, of short extracts of works, provided that the copying is spontaneously done or requested by the instructor (and the copies are neither used nor re-made repeatedly over time).[38]

 

THE CONFERENCE ON FAIR USE

To determine whether educational or library guidelines of a similar nature might prove attainable in the NII context, the Working Group has convened a conference of more than 60 interested parties who have met more or less monthly since September 1994. To date, no formal guidelines have been the subject of agreement, but it appears reasonable to anticipate that drafts now in preparation may be formalized as guidelines before the end of 1995. The participants in the conference are discussing several areas, including multimedia, library preservation, "browsing" and "distance learning."

In most such instances, current law often provides clear rules while the "digital difference" tests, bends or sometimes breaks those rules. For example, library preservation is covered in some detail in the analog context (paper, microfiche, etc.) in Section 108 of the law, but that section's terms do not appear to encompass digital copying in the quantities to which libraries have become accustomed,[39] and many conventional distance learning issues are arguably covered -- with respect to the performance but not the reproduction of works -- in Section 110.

Some participants have suggested that the United States is being divided into a nation of information "haves" and "have nots" and that this could be ameliorated by ensuring that the fair use defense is broadly generous in the NII context. The Working Group rejects the notion that copyright owners should be taxed -- apart from all others -- to facilitate the legitimate goal of "universal access."[40]

Should the participants in the Conference on Fair Use fail to agree on appropriate guidelines, the Working Group may conclude that the importance of such guidelines may necessitate regulatory or legislative action in that area.

b. LIBRARY EXEMPTIONS

Section 108 of the Copyright Act provides that in certain circumstances and under certain conditions it is not an infringement of copyright for a library or archives, or its employees acting within the scope of their employment,[41] to reproduce or distribute one copy or phonorecord of a work[42] under circumstances that would typically not amount to fair use. The conditions of the library exemption are that (1) the reproduction or distribution must be made without any purpose of direct or indirect commercial advantage; (2) the collections of the library must be open to the public or available not only to researchers affiliated with the library, but also to other persons doing research in a specialized field; (3) the reproduction or distribution of the work must include a notice of copyright;[43] and (4) a specific exemption in subsections (b) through (g) of Section 108 applies.

The exemptions granted under Section 108 extend only to isolated and unrelated reproduction of a single copy or phonorecord of the same material on separate occasions,[44] and do not apply to (1) musical works; (2) pictorial, graphic, or sculptural works; or (3) motion pictures or other audiovisual works, except news programs.[45]

The circumstances under which a library may reproduce or distribute a copyrighted work without infringement liability include:

 

ARCHIVAL COPIES

A library may reproduce and distribute a copy or phonorecord of an unpublished work reproduced in facsimile form if the sole purpose is preservation and security, and if the copy or phonorecord reproduced is currently in the collection of the library.[46] The House Report notes that this right "would extend to any type of work, including photographs, motion pictures and sound recordings." However, the copy or phonorecord made must be in "facsimile form." A library may "make photocopies of manuscripts by microfilm or electrostatic process, but [may] not reproduce the work in 'machine-readable' language for storage in an information system."[47] Thus, this exemption does not allow for preservation in electronic or digital form.

 

REPLACEMENT COPIES

A library may reproduce a published work duplicated in facsimile form solely for the purpose of replacing a copy or phonorecord that is damaged, deteriorated, lost or stolen, if the library has, after reasonable efforts, determined that an unused replacement cannot be obtained at a fair price.[48] Again, the copy or phonorecord made must be in "facsimile form." The exemption does not allow for replacement of a published work by reproduction in digital form (at least when the original copy of the published work was not in digital form).

 

ARTICLES AND SHORT EXCERPTS FOR USERS

A library may make and distribute a copy of one article or other contribution to a copyrighted collection or periodical issue, or a copy or phonorecord of a small part of any other copyrighted work at the request of a user, subject to two conditions.[49] First, the copy or phonorecord must become the property of the user, and the library or archives must have no notice that the copy or phonorecord will be used for any purpose other than private study, scholarship, or research. Second, the library or archives must prominently display a warning of copyright at the place where orders are accepted and on its order form.[50]

 

OUT-OF-PRINT WORKS FOR SCHOLARLY PURPOSES

A library may make and distribute a copy or phonorecord of an entire work if it has determined that a copy or phonorecord of the copyrighted work cannot be obtained at a fair price, subject to two additional conditions.[51] First, the copy or phonorecord must become the property of the user, and the library or archives must have no notice that the copy or phonorecord will be used for any purpose other than private study, scholarship, or research. Second, the library or archives must prominently display a warning of copyright at the place where orders are accepted and on its order form.[52]

 

NEWS PROGRAMS

A library may reproduce and distribute by lending a limited number of copies of an audiovisual news program.[53]

 

INTERLIBRARY LOAN

The Copyright Act allows a library to make single copies of copyrighted works and to enter into interlibrary arrangements, but prohibits copying "in such aggregate quantities as to substitute for a subscription to or purchase of [a copyrighted] work."[54] CONTU offered its offices to the interested parties -- copyright owners, educators and libraries -- to develop guidelines to interpret the quoted phrase. The parties were successful in defining when such copying for the purpose of "borrowing" was not done in such aggregate quantities as to substitute for the subscription to or purchase of a work. These so-called CONTU Guidelines were later included in the Conference Report on the Copyright Act of 1976.[55] The guidelines provide that a library may "borrow" not more than five copies per year of articles from the most recent five years of any journal title.[56]

The CONTU Guidelines have been an effective means to protect both the interests of copyright owners and to provide libraries a clear "safe" guide to follow in "borrowing" from other libraries. [57] In 1976, there were no readily available systems for the supply of single copies of, or for the licensing of the reproduction of multiple copies of copyrighted works. Now, that situation has changed and the continuing evolution of the NII will permit the establishment of licensing systems to supply copies or to permit users to make reproductions of works or portions of works more widely available. Indeed, a publisher's license to access or download all or a portion of the aggregated copyrighted works on a server might be viewed as the on-line equivalent of a subscription. A publisher might allow free access to a table of contents and then through an appropriate payment mechanism such as electronic cash or a credit card, license the downloading of a single article. This "publication on demand" might become an effective and economic substitute for interlibrary loan on the NII. While the precise nature of all such systems cannot be known at this time, it is clear that the CONTU Guidelines, while remaining effective for print materials, cannot readily be generalized to "borrowing" electronic publications.

The Working Group emphasizes that the existence of systems for the supply of licensed copies of works or portions of works by electronic means does not negate the privileges conferred on libraries in Section 108(g)(2), nor do they limit "borrowing" permitted under existing voluntarily negotiated guidelines or such guidelines to set rules for interlibrary loan via the NII that may be negotiated in the future.[58] While it is clear that Section 108 does not authorize unlimited reproduction of copies in digital form, it is equally clear that Section 108(g)(2) permits "borrowing" in electronic form for interlibrary loan in the NII environment, so long as such "borrowing" does not lead to "systematic" copying. However, the existence of such licensing systems in a world of electronic publishing may make it difficult, if not impossible, to define "subscription or purchase" as intended, and equally impossible to apply the existing guidelines to all electronic transactions.

Therefore, new scenarios should be considered to avoid ambiguity and to continue to protect both the interests of copyright owners and to continue to provide libraries with a safe "borrowing" guide. Such scenarios are being considered in the on-going Conference on Fair Use. Should the parties fail to reach agreement in that forum, as noted earlier, a regulatory or legislative solution may be appropriate. Appropriate use of such electronic publishing systems by libraries can provide a ready means for avoiding not only liability for "borrowing" that exceeds that which is permitted under Section 108(g)(2) or any voluntarily negotiated guidelines developed by the concerned parties but also any need to devote resources to consider whether the "nth" transaction is "safe."

c. FIRST SALE DOCTRINE

A fundamental tenet of copyright law, and another limitation on the exclusive rights, is the "first sale doctrine," which prevents an owner of copyright in a work from controlling subsequent transfers of copies of that work. Once the copyright owner transfers ownership of a particular copy (a material object) embodying a copyrighted work, the copyright owner's exclusive right to distribute copies of the work is "extinguished" with respect only to that particular copy.[59]

Section 109(a) of the Copyright Act provides:

This limitation on the copyright owner's distribution right allows wholesalers who buy books to distribute those copies to retailers and retailers to sell them to consumers and consumers to give them to friends and friends to sell them in garage sales and so on -- all without the permission of (or payment to) the copyright owner of the work.

The first sale doctrine allows the owner of a particular copy of a work to dispose of possession of that copy in any way -- for example, by selling it, leasing it, loaning it or giving it away. However, there is an exception to this exemption with respect to two types of works -- computer programs and sound recordings. The owner of a particular copy of a computer program or a particular phonorecord of a sound recording may not rent, lease or lend that copy or phonorecord for the purpose of direct or indirect commercial advantage.[61] These exceptions were enacted because of the ease with which reproductions of those works can be made at a lower cost than the original with minimum degradation in quality.[62] The rationale for these exceptions may apply to other types of works as more types of works become available in digital form and the "nexus" of rental and reproduction of those works "may directly and adversely affect the ability of copyright holders to exercise their reproduction and distribution rights under the Copyright Act."[63]

This provision of the first sale doctrine limits only the copyright owner's distribution right; it in no way affects the reproduction right. Thus, the first sale doctrine does not allow the transmission of a copy of a work (through a computer network, for instance), because, under current technology the transmitter retains the original copy of the work while the recipient of the transmission obtains a reproduction of the original copy (i.e., a new copy), rather than the copy owned by the transmitter. The language of the Copyright Act, the legislative history and case law make clear that the doctrine is applicable only to those situations where the owner of a particular copy disposes of physical possession of that particular copy.[64]

If the owner of a particular copy transmits a copy to another person without authorization (either from the copyright owner or the law), such a transmission would involve an unlawful reproduction of a work, and the first sale doctrine would not shield the transmitter from liability for the reproduction nor for the distribution. Under the first sale doctrine, the owner of a particular copy of a copyrighted work may distribute it, but may not reproduce it.[65] Therefore, the transmission would constitute infringement of the copyright owner's reproduction right.[66] If the reproduction is unlawful, further distribution of the unlawful reproduction would not be allowed under the first sale doctrine because the copy distributed would not be one "lawfully made" under the Copyright Act, as required by the statute.

The requirement that copies distributed under the doctrine be "lawfully made" under the Copyright Act does not limit the doctrine's application to copies made or authorized by the copyright owner.[67] A copy could be "lawfully made," for example, if the reproduction is lawful under the fair use provision; the distribution of such a copy would be permitted within the limits of the first sale doctrine.

It has also been suggested that the scope of the first sale doctrine be narrowed to exclude copies obtained via transmission. This would mean, for instance, that if a copy of a literary work is legally purchased on-line and the copy so purchased is downloaded onto the purchaser's disk, the disk could not be resold. Clearly, the first sale doctrine should apply if the particular copy involved is in fact the copy that is further distributed, even if the copy was first obtained by transmission. Further, if the technology utilized allows the transmission of a copy without making an unlawful reproduction -- i.e., no copy remains with the original owner -- the first sale doctrine would apply and the transmission would not be an infringement.

Some argue that the first sale doctrine should also apply to transmissions, as long as the transmitter destroys or deletes from his or her computer the original copy from which the reproduction in the receiving computer was made. The proponents of this view argue that at the completion of the activity, only one copy would exist between the original owner who transmitted the copy and

the person who received it -- the same number of copies as at the beginning. However, this zero sum gaming analysis misses the point. The question is not whether there exist the same number of copies at the completion of the transaction or not. The question is whether the transaction when viewed as a whole violates one or more of the exclusive rights, and there is no applicable exception from liability. In this case, without any doubt, a reproduction of the work takes place in the receiving computer. To apply the first sale doctrine in such a case would vitiate the reproduction right.

A copyright owner's exclusive right to publicly display copies of a work is also limited by Section 109:

Thus, an art gallery that purchases a painting may publicly display it without liability. The owner of a particular copy of an electronic audiovisual game intended for use in coin-operated equipment may also publicly perform or display that game in that equipment.[69]

This exemption from liability would not apply to the public display of a copy of a work on a bulletin board system or other computer or communications network, because more than one image would likely be displayed at a time (to different viewers) and viewers would not be "present at the place where the copy is located."

The first sale doctrine allows the owner of a particular, lawfully-made copy of a work to dispose of it in any manner, with certain exceptions,[70] without infringing the copyright owner's exclusive right of distribution. It seems clear that the first sale model -- in which the copyright owner parts company with a tangible copy -- should not apply with respect to distribution by transmission, because transmission by means of current technology involves both the reproduction of the work and the distribution of that reproduction. In the case of transmissions, the owner of a particular copy of a work does not "dispose of the possession of that copy or phonorecord." A copy of the work remains with the first owner and the recipient of the transmission receives another copy of the work.

d. EDUCATIONAL USE EXEMPTIONS

Section 110(1) exempts from infringement liability the performance or display of a copyrighted work in the course of face-to-face teaching activities by a non-profit educational institution in a classroom or similar setting.[71]

Section 110(2) exempts from liability the transmission of a performance or display of a copyrighted work if (1) the performance or display is a regular part of the systematic instructional activities of the non-profit educational institution; (2) the performance or display is directly related and of material assistance to the teaching content of the transmission; and (3) the transmission is made primarily for reception in classrooms or similar places or by persons to whom the transmission is directed because of their disabilities.[72]

Like the library exemptions, the educational use exemptions are provided in addition to the fair use and other general exemptions, which are also available to educational institutions.

e. OTHER LIMITATIONS

REPRODUCTION OF COMPUTER PROGRAMS

The rights of an owner of a copyright in a computer program are limited such that the owner of a particular copy of a computer program may make a copy or adaptation of the program as an "essential step" in using the computer program in a computer or for archival purposes.[73] This limitation applies only with respect to "owners" of copies of programs, not licensees, borrowers or mere possessors.

 

CERTAIN PERFORMANCES AND DISPLAYS

Certain performances and displays are exempt from infringement liability under Section 110 of the Copyright Act, including:

The "communication of a transmission embodying a performance or display of a work by the public reception of the transmission on a single receiving apparatus of a kind commonly used in private homes" is also exempted if there is no direct charge to see or hear the transmission and the transmission is not further transmitted to the public.[79] This exemption allows proprietors to play radios or televisions (i.e., to perform or display copyrighted works in those radio or television transmissions) in public establishments such as restaurants, beauty shops and bars.[80] The applicability of this exemption is extremely fact-specific and what qualifies as a type of receiving apparatus "commonly used in private homes" will certainly change as home equipment merges (into, for example, radio/television/computer units) and becomes more sophisticated.

 

EPHEMERAL RECORDINGS

Section 112 provides that it is not an infringement of copyright for a "transmitting organization" that has the right to transmit to the public a performance or display of a work "to make no more than one copy or phonorecord of a particular transmission program embodying the performance or display" under certain conditions.[81]

 

COMPULSORY LICENSES

Sections 111 and 119 are compulsory licensing provisions that allow cable systems and satellite operators to retransmit copyrighted programming without infringement liability if they pay a statutory licensing fee (which is then distributed among the copyright owners of the programming retransmitted).[82] A compulsory license under Section 111 is only available to a "cable system," which is defined as "a facility ... that in whole or in part receives signals transmitted or programs broadcast by one or more television broadcast stations ...." A compulsory license under Section 111 generally would not be available with respect to NII transmissions because case law and regulations make clear that the term "cable system" does not encompass facilities such as those used for computer network transmissions.[83] Similarly, the compulsory license under Section 119 would not be available unless the transmitting entity qualified as a "satellite carrier" and met the other statutory criteria.[84]

Compulsory licenses are also available for the public performance of nondramatic musical works by means of jukeboxes,[85] for the use of certain works in connection with noncommercial broadcasting,[86] and for the reproduction and distribution of nondramatic musical works in the course of making and distributing phonorecords of such works.[87]

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