Fair Use Week 2019: Day Five With Guest Expert David R. Hansen and Kyle K. Courtney

Fair Use, Innovation, and Controlled Digital Lending

by Kyle K. Courtney and David R. Hansen

One of the beautiful things about fair use is how it can soften the copyright act, which is in many ways highly structured and rigid, to provide flexibility for new, innovative technology.

To understand how, it’s worth appreciating the structure of the Copyright Act. If you look at the table of contents of Chapter 1 of the Act (“Subject Matter and Scope of Copyright”), you see the first several sections define basic terms such as copyrightable subject matter. Included in that first half of the chapter is Section 106, which defines the exclusive rights held by rights holders: the right to control copying, the creation of derivative works, public distribution, public performance, and display.  In the bottom half of the Act, Sections 108 to 122 provide for a wide variety of limitations and exceptions to those owners’ exclusive rights. These exceptions are largely for the benefit of users and the public, including specific exceptions to help libraries, teachers, blind and print-disabled users, non-commercial broadcast TV stations, and so on.

Then, there’s fair use. As if perfectly positioned to balance between the broad set of rights granted to owners and the specific limitations for the benefit of users and the public, “fair use” is codified in Section 107, though it really isn’t a creature of statute. Fair use is a doctrine, developed by courts as an  “equitable rule of reason” that requires courts to “avoid rigid application of the Copyright Statute when on occasion it would stifle the very creativity which that law was designed to foster.” In that role, fair use has facilitated all sorts of technological innovations that Congress never could have anticipated, allowing copyrighted works and new technology to work together in harmony.

One particularly innovative system developed to enhance access to works is “controlled digital lending” (“CDL”):

CDL enables a library to circulate a digitized title in place of a physical one in a controlled manner. Under this approach, a library may only loan simultaneously the number of copies that it has legitimately acquired, usually through purchase or donation….[I]t could only circulate the same number of copies that it owned before digitization. Essentially, CDL must maintain an “owned to loaned” ratio. Circulation in any format is controlled so that only one user can use any given copy at a time, for a limited time. Further, CDL systems generally employ appropriate technical measures to prevent users from retaining a permanent copy or distributing additional copies.

While the courts have yet to weigh in directly on the CDL concept, we now have some guidance from a case in the Second Circuit Court of Appeals, Capitol Records, LLC v. ReDigi Inc. This case is about the development of an online marketplace created by ReDigi, which facilitated the sale of “used” mp3 music files. Capitol Records sued ReDigi, alleging that ReDigi infringed its exclusive rights to reproduction and distribution when it attempted to use a particular transfer method to sell the used mp3s.

The Court of Appeals upheld a lower court ruling that the doctrine of first sale is only an exception to the public distribution right and, therefore, does not protect digital lending because, in that process, new copies of a work are always made.

The court also rejected ReDigi’s fair use assertion. It found that the use was commercial in nature, was considered non-transformative, and replicated works exactly and precisely; simply put, they created mirror image copies of existing digital files.  Further, though the libraries associations in their briefs had raised the issue of a nexus of connection between fair use and specific copyright exceptions, such as Section 109 and 108, as an extension of Congressional policy that should influence the fair use analysis, the court did not discuss that argument.

That the court ruled ReDigi, a commercial enterprise, had interfered with the market for iTunes-licensed mp3s and their effort was not a transformative fair use, comes as no surprise to most lawyers and copyright scholars.

However, the decision, written by the creator of the modern transformative fair use doctrine, Judge Pierre Laval, contains several important lessons for CDL.

Transformative Use

First, the case raises a significant question as to whether CDL of digitized books may be “transformative” in nature. In the decision, examining the first factor, Judge Leval explains that a use can be transformative when it “utilizes technology to achieve the transformative purpose of improving delivery of content without unreasonably encroaching on the commercial entitlements of the rights holder.” For physical books, especially those that are difficult to obtain, this application of “transformative use” has a direct correlation to the core application of CDL.

Further, this quote interprets another critical technology and fair use case from the U.S. Supreme Court, Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984), famously called the “Betamax case.” Since its decision in 1984, the Sony ruling helped establish and foster the creation of new and vital technology, from personal computers and iPods to sampling machines and TiVo. This Sony quote was most recently used in another Second Circuit case, Fox News Network, LLC v. TVEyes, , where the same court laid out this particular reading of Sony. So, ReDigi here is drawing upon the precedent of two important transformative fair use cases to make its point. Under this transformative use definition, CDL should be determined to be transformative by the courts, especially if the commercial rights of the rights holder are not unreasonably encroached.

Therefore, while the court found ReDigi’s use to not be transformative, the Second Circuit opened the door for continued technological development, especially for non-commercial transformative uses under the first factor, like CDL. In fact, according to several scholars (Michelle Wu, Kevin Smith, Aaron Perzanowski), this creates a much stronger argument that CDL would be ruled a transformative fair use by a court.

Market Harm

The Second Circuit held that the ReDigi system caused market harm under the fourth factor of the fair use statute. Again, this is not a surprise to the copyright world. The court found that the service provider had no actual control of the objects being sold and that it “made reproductions of Plaintiffs’ works for the purpose of resale in competition with the Plaintiffs’ market for the sale of their sound recordings.”

What does this mean for CDL’s analysis under the fourth factor? Here, again, based on the language of the ReDigi decision, CDL looks pretty different. The ReDigi resales were exact, bit-for-bit replicas of the original sold in direct competition with “new” mp3s online through other marketplaces, such as iTunes. The substitutionary effect was clear, especially since the mp3 format is the operative market experiencing harm. For digitized copies of print books used for CDL, the substitutionary effect is far less clear. With most 20th-century books—the books that we feel are the best candidates for CDL—the market to date has been exclusively print. For those books, some new evidence from the Google Books digitization project suggests that digitization may in fact act as a complementary good, allowing digital discovery to encourage new interest in long-neglected works.

CDL doesn’t compete with a recognized market. When a library legally acquires an item, it has the right, under the first sale doctrine, to continue to use that work unimpeded by any further permission or fees of the copyright holder. CDL’s digitized copy replaces the legitimately acquired copy, not an unpurchased copy in the marketplace. To the extent there is a “market harm,” it’s one that is already built into the transaction and built into copyright law: libraries are already legally permitted to circulate and loan their materials. The CDL “own-to-loan ratio” ensures that the market harm for the digital is the exact same as circulating the original item.

Again, the language of the ReDigi court should be examined closely. The court distinguishes substitutionary markets from those that are complementary and natural extensions of the use inherent with purchasing the original: “to the extent a reproduction was made solely for cloud storage of the user’s music on ReDigi’s server, and not to facilitate resale, the reproduction would likely be fair use just as the copying at issue in Sony was fair use.” Reading this language through the lens of CDL, a modern reproduction service, such as CDL, that further enhances the owner’s use of materials that were purchased under first sale or owned under other authorized means would also qualify as a fair use.

All in all, the ReDigi case most certainly does not settle the CDL issue; if anything, the specific language of the court emphasizes the potential for more non-commercial transformative uses like CDL.

David Hansen is the Associate University Librarian for Research, Collections & Scholarly Communications at Duke University Libraries. Before coming to Duke he was a Clinical Assistant Professor and Faculty Research Librarian at UNC School of Law. And before that, he was a fellow at UC Berkeley Law in its Digital Library Copyright Project.

Kyle K. Courtney is Copyright Advisor and Program Manager at Harvard Library’s Office for Scholarly Communication (OSC). Before joining the OSC, Kyle managed the Faculty Research And Scholarly Support Services department at Harvard Law School Library.

Fair Use Week 2019: Day Three With Guest Expert Dr. Nora Slonimsky

The Public Figure Exception(s): Finding Fair Use in the Vastness of Early American IP

Originally published on Uncommon Sense, a publication of the Omohundro Institute. This post accompanies “Copyright and Fair Use in Early America,” episode 227 of Ben Franklin’s World. You can find supplementary materials for the episode on the OI Reader app, available through iTunes or Google Play.

by Nora Slonimsky

Whether you are Gigi Hadid or Jedidiah Morse, your copyright is often more than just a proprietary claim. Public figures have long been bound together in the public eye with perception and re-use of their works, whether people share photographs of you walking down the street or a map produced more than two hundred years before GPS. In an era of Twitter, paparazzi, and a rapidly turning over news cycle, deciding what information the public needs to make informed decisions is an increasingly fraught challenge—but not a new one. As early national writers sought to shape American media in the wake of independence, they confronted what it meant to be a public figure and what value that role had in the creation of new forms of expression.

A legal doctrine highlighted this week through collaboration among libraries, institutions of higher education, and professional research organizations, fair use emerged as a formalized legal framework in the nineteenth century with infamous competing biographies of George Washington and the 1841 case of Folsom v. Marsh, as Kyle K. Courtney and Liz Covart discuss in the #FairUseWeek episode of Ben Franklin’s World. The concept is intended to protect the right to circulate information that would otherwise be covered by copyright.

Fair use doctrine intersects with similar principles around the globe, but several of its particular qualities were formulated in the United States and have roots that date to the beginning of the nation’s history. One root involves a proposed aspect of fair use called the “public figure exception.” As described in the 1985 case of Harper & Row v. The Nation, the public figure exception limits an author’s or proprietor’s right to be paid for their expression when the work contains “matters of high public concern.”[i] A work “containing matters of high public concern” can often be intertwined with the public role of the author. As a consequence, the public figure exception introduces the reputation or image of the author as a consideration in the balance between the individual claims of artists and innovators over their creative labor and the broad social need for the learning and engagement that comes from expression.

Turning to early America can provide a deeper understanding of why. When the phrase “public figure exception” appears today, it is frequently in the context of defamation. In my first book project, I look closely at the relationship between libel and copyright, and how they function in the construction authorial, as well as state, authority. To write and publish a criticism of a public figure was still considered seditious libel in the late eighteenth century. The logic that something could not be libelous if it wasn’t true was not formalized in United States law until 1805, and even then, was determined by state, and not federal, law.[ii] The truth defense evolved over the next century and a half, but in the early national period, the standing of a writer – through their racial, religious, ethnic or gender identity, political affiliation, wealth, education, networks, regional ties – determined the authenticity of their expression alongside any innovative qualities.

It is more Jedidiah Morse than Gigi Hadid then who ties together these complex threads of copyright, fair use, libel, and public opinion. Although media in the late eighteenth century was indeed very social, the media were quite different. Morse might not have been the most adept at the eighteenth-century equivalents of Twitter, like pamphlets and broadsides, but he was extremely skilled at social networking. For the “father of American geography,” Morse shrewdly marketed his nationalistic series of geography books, from 1784’s Geography Made Easy to the 1789 The American Geography to The American Universal Geography, which appeared in several editions in the 1790s and early 1800s. As a strong supporter of the Federalist coalition who consistently cultivated an image of expertise in topography, environmental science, history, and political commentary, Morse was extremely close with other leading figures in the knowledge industry like Noah Webster and employed Alexander Hamilton and James Kent as his copyright lawyers in what would be the first known federal copyright case, Morse v. Reid, in 1798.

Despite, or perhaps because he was such a staunch advocate for copyright, Morse relied heavily on what we would now consider fair use. Writing that he often “aimed at utility rather than originality, and of course, when he has met with publications suited to his purpose, has made free use of them,” Morse added, without irony, that he “frequently used the words as well as the ideas of [other] writers” without telling the reader.[iii] Morse did not see any issue with compiling the work of other writers and using it in his own. Morse conducted his own research and wrote much of The American Geography on his own, but to bolster his credibility, “maintained extensive correspondence with men of Science,” and “in every instance, has endeavored to derive his information from the most authentic sources.”[iv] In other words, he relied on the expertise of others, and in turn, shared their findings while expanding his own. So if one of these experts in turn relied upon Morse’s work for their own, it does not appear that he had much of a problem with it.

Where Morse did have a problem, however, was when someone whom Morse did not deem a valid authority did so. Even worse, when the “pirate” in question was a Baptist minister held in Newgate Prison for sermons in favor of the French Revolution, the Congregationalist, pro-British Morse was aghast. William Winterbotham was in reputation everything Morse feared. He published An Historical, Geographical, Commercial and Philosophical View of the United States of America and of the European Settlements in the West Indies in London in 1795; it was reprinted in New York in 1796.

Only then did Morse have any legal recourse, as international copyright did not exist. Alerted to Winterbotham’s book by Morse’s London publisher, John Stockdale, Morse immediately recruited Hamilton as his attorney, writing that “After going over the Work with care & a great deal of labour, I have estimated that nearly a third part of the whole of Winterbothams work, has been copied verbatim from my work, or about 600 pages out of about 2000.”[v] By current fair use standards, this was a high percentage, but what seemed to truly incense Morse was not the quantity, but rather how Winterbotham had “artfully, in many instances … transposed paragraphs & sentences, apparently with a view to deceive the reader.”[vi] It was evident, according to Morse and his legal team, that Winterbotham had copied more of Morse’s work than was appropriate to demonstrate expertise or “authentic sources.” As you can see in the images to the left, while maps were not a source of dispute for Morse, there was clear reliance on The American Geography (top) in the New York edition of An Historical, Geographical, Commercial and Philosophical View of the United States of America and of the European Settlements in the West Indies made by John Reid (bottom).

Winterbotham did not criticize Morse. In fact, when Winterbotham mentioned him at all, it was to praise his status as a geographer and writer. Still, because of Winterbotham’s politics and precarious position, Morse remained worried about his authority as a public figure. This was both a commercial and credit-based fear. If readers began to associate Morse and The American Geography series with the work of Winterbotham, it could encroach on Morse’s market share, but also influence American readers about Morse’s message and his political standing within the Federalist network. Winterbotham’s piracy, whether rational or irrational, reasonable or unreasonable, functioned to Morse like a libel.

Whether the people involved are presidents like George Washington or Gerald Ford, or well-known authors like Morse, the public figure exception is based on an understanding of fair use in which the public need for the expression contained within a writer’s work is pivotal to making informed choices. If the author is an authority in a given subject, especially one that has obvious relevance for pressing issues, financial barriers to that material can have drastic consequences. And yet writers, like all workers, need to make a living. Writing nearly two hundred years before Harper & Row v. The Nation, and fifty years before Folsom v. Marsh, Morse was not articulating clear legal doctrine by any means, but rather musing on exceptions to exceptions. The copyright consciousness in which Morse wrote and published was one in which he could both reap the benefits of fair use and complain of piracy at the same time, in large part because both relied upon his carefully crafted public persona as a geographic expert. When looking at media, authority, and access through the lens of fair use, the early history of copyright is thus as much about public opinion as it is property.

Nora Slonimsky works on the history of copyright and its relationship with media regulation, state formation, and knowledge production in the long eighteenth century. Dr. Slonimsky is the Gardiner Assistant Professor of History at Iona College and Director of the Institute for Thomas Paine Studies (ITPS). This post also appears at the Copyright At Harvard Library blog.

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[i] Harper & Row v. Nation Enterprises, 471 U.S. 539 (1985): 3.

[ii] This was in the case of People v. Croswell (1804), in which Alexander Hamilton argued the truth defense. It was written into law by New York State the following year.

[iii] Jedidiah Morse, The American Geography; Or, A View of the Present Situation of the United States of America Containing – Astronomical Geography, Geographical Definitions, Discovery, and General Descriptions of America and the United States – of their Boundaries, Mountains, Lakes, Bays and Rivers, Natural History, Production, Population, Government, Agriculture, Commerce, Manufactures, and History –a Concise Account of the War, and of the Important Events with have Succeeded with a Particular Description of Kentucky, the Western Territory and Vermont – of their Extent, Civil Divisions, Chief Towns, Climates, Soils, Terrain, Character, Constitutional, Courts of Justice, Colleges, Academies, Religion, Islands, Indian, Literary and Humane Societies, Springs, Curiosities, Histories &c to Which is Added an Abridgement of the Geography of British, Spanish, French and Dutch Dominions in America and the West Indies – of Europe, Asia and Africa Illustrated with Two Sheet Maps – One of the Southern, the Other of the Northern States – From the Latest surveyors. Shepard Kollock: Elizabeth, New Jersey, 1789: vi-vii.

[iv] Morse, The American Geography, iv.

[v] Jedidiah Morse, “Letter from Jedidiah Morse to James Kent, January 21st, 1796,” Box Two, Morse Family Papers, Sterling Memorial Library, Yale University.

[vi] Morse, “Letter from Jedidiah Morse to James Kent.”