Nurturing culture to build economies and communities

A newly released briefing by Professor Ann Markusen of the University of Minnesota Hubert H. Humphrey Institute of Public Affairs highlights the importance and influence of a creative arts community serves as a tool to develop a region’s broader economic growth.

The paper published by the Ewing Marion Kauffman Foundation highlights the opportunities created by encouraging a creative arts economy to help develop a more robust economic environment. Among the key findings of the report:

City appreciation for cultural entrepreneurship has grown following economists’ and city planners’ documentations of the roles that artists play in the local economy. Many artists and designers contribute to the city’s economic base, bringing in income from elsewhere by exporting their creations—books, recordings, visual art—and by travelling to perform elsewhere. Pools of artists attract and anchor cultural industry firms in fields like publishing, advertising, music, design, and architecture. Artists often work on contract in other industries to design and market products and services (visual artists, musicians, and writers) and improve employee relations (actors). …

Despite heightened interest in fostering artists/designers as innovators and entrepreneurs, most cities have found that traditional policies and services don’t work for artists. … Artists are many times more likely to be self-employed than are scientists and engineers. Some 48 percent of artists reported in the 2000 Census long form that they are self-employed. … Overwhelmingly, surveys of artists underscore that they need and want to develop business skills. Many organizations—some nonprofit, some linked to higher educational institutions, some for-profit—offer artist-tailored entrepreneurial training.

The work by Professor Markusen reinforces many of the themes discussed in the recent  NKU Chase Law + Informatics Institute program: Success Strategies for the Professional Artist in the Digital Age. That program helped artists and their attorneys learn to navigate self-promotion, online contracting, sophisticated financing, and a host of challenges that pull the artist away from the creative process and into the fast-paced world of digital commerce. A webcast is available of the program.

Group shot of panelists at Success Strategies for the Professional Artist in the Digital Age event

“With social media gaining in popularity, more people are becoming content creators, and there is great opportunity to share creative works, but many are now becoming aware that there is real value to maintain some control over what is shared,” commented Terry Hart, director of legal policy, Copyright Alliance.

“Artists have long been recognized as commodities in our communities, driving innovation and adding color to our environment,” shared Sarah Corlett, director of creative enterprise, ArtsWave SpringBoard. “It has become increasingly more important that our creative sector has opportunities to turn their passion into profit through education and training. This improves the likelihood that these individuals will stay in our region and continue to make this an even better place to live.”

Professor Markusen, building on her earlier scholarship concludes in the report that for cities, “economic development strategy/practice is increasingly turning to occupational approaches, asserting the significance of human capital and entrepreneurship in supplementing traditional industry-targeted programs.”

But the creative artist panelist had some words of caution.  Dayton School of Law professor Dennis Greene reminded audience members that “the devil is in the details.”  Jennifer Kreder noted “when art is created in more traditional visual medium and then digitized several issues will come up” to which Stephen Gillen explained that “there is no ‘one size fits all answer'” for how best to contract for rights.

The Kauffman Foundation report provides a strong reminder of what cities can do to improve the likely success of artists and entrepreneurs in their communities. These are partnerships well worth promoting.

Success Strategies for the Professional Artist in the Digital Age was presented by the NKU Chase Law + Informatics Institute and sponsored by the ABA Business Section Cyberspace Law Committee, Copyright AllianceArtWorks SpringBoardKentucky Arts Council, and Frost Brown Todd, this program featured expert attorneys and filmmakers who discussed a range of business and legal practices.

 Frost Brown Todd

ABA Cyberspace Law Committee
Springboard
KAC
Copyright Alliance

How Google Book Search transformed from impossible to inevitable

English: Google Digitization signs are all ove...

English: Google Digitization signs are all over the Michigan engineering library. (Photo credit: Wikipedia)

In a widely reported copyright fair use decision, Judge Denny Chin ruled that the Google Books program constituted fair use, denying claims of the Authors Guild that the scanning of 20 million library books and posting snippets of those works online infringed the rights of authors.

The litigation history reflects the transformation that has taken place on the internet in the past decade. In 2004 Google entered into an agreement with several universities, beginning with University of Michigan.

Google began the process of digitizing books at the nation’s great libraries, starting at the University of Michigan, the alma mater of company co-founder Larry Page. “Even before we started Google, we dreamed of making the incredible breadth of information that librarians so lovingly organize searchable online,” said Page. A 2005 lawsuit resulted in three years of negotiation and a proposed settlement in 2008. That settlement collapsed among antitrust concerns and fairness of the representatives of the plaintiffs’ sub-classes.

As the Google Books program evolved, two discrete projects operated. In the Partner Program “works are displayed with the permission of the rights holder.” The rights holders had the ability to opt out of the scanning, but in 2011 the Association of American Publishers settled with Google. According to the decision, “As of early 2012, the Partner Program included approximately 2.5 million books, with the consent of some 45,000 rights holders.” The participation suggests an industry voting with its feet.

Under the publisher agreement, Google stopped displaying ads with the publisher’s books. In turn, the publishers provide Google with the books. This settlement, even more than the two district court decisions, effectively ended the dispute – leaving the two lawsuits as mop-up activities.

In the HathiTrust litigation, Judge Harold Baer determined Google’s Library Project partners who comprised the HathiTrust partnership were entitled to fair use protection for the digitization of the 20,000,000 volumes copied and used by the libraries. The decision highlighted the benefits to visually-impaired students and researchers who had access to content not previously available through audio readers or braille, the benefits of digital search functionality, and the importance of protecting the library collections from physical harm and erosion.

In both opinions, the courts highlighted the new research opportunities created by the digital database:

Mass digitization allows new areas of non-expressive computational and statistical research, often called “textmining.” One example of text mining is research that compares the frequency with which authors used “is” to refer to the United States rather than “are” over time. Quoting the brief of the Digital Humanities amicus, “it was only in the latter half of the Nineteenth Century that the conception of the United States as a single, indivisible entity was reflected in the way a majority of writers referred to the nation.”).

The Google decision followed the same path, highlighting the benefits of digital search, the limits placed on commercial exploitation by Google, and the pro-market effects agreed to by the publishers. “Google Books expands access to books.” With this simple sentence, the court highlights the essence of the eight years of litigation. In looking at the transformative nature of the fair use test, the court explained, “Google Books does not supersede or supplant books because it is not a tool to be used to read books.”

The court does not discuss the tremendous value the Google Books program benefits the search engine, speech recognition and other algorithms operated by Google. It also dismisses the intermediary copying as a necessary function to enable the research and archival function to be exploited. But it does highlight that Google “does not run ads on the About the Book pages that contain snippets” and that Google “does not engage in the direct commercialization of copyrighted works.”

Google’s settlements and decisions not to commercialize the Google Books program likely tipped the scales with the publishers and may have strongly influenced the courts. Unlike Judge Baer, Judge Chin does not even discuss the potential to license the digitized database to Google. Baer rejected the potential to license the database as speculative. Moreover, since new works are added by voluntary participation with the publishers, the licenses for new works are included.

The decision appears a simplistic fair use summary that could lead casual observers to wonder why it required eight years of litigation. But changes to the conduct of both parties are what really led to this simple decision. Google adapted its behavior to limit its commercialization of the works. Publishers shifted their position from one of demanding opt-in, ex ante control to recognizing that the opt-out partnership met their needs. Eight years of experience did not produce significant evidence of authors being harmed as a result of snippet-searches replacing library purchases of academic texts.

In addition, the role of digital texts has changed. The Amazon Kindle and Apple iPad have paved the way for a fundamental shift in the relationship authors have with electronic texts. Market forces proved Google correctly anticipated a highly reconstructed book industry. Google was only one of the players bringing about this change.

Both the HathiTrust litigation and the Authors Guild v. Google litigation will likely be appealed, but there is little appeal in undoing the transformations to publishing that the Google Books program began.

Social Media in the workplace – wide-ranging overview now available

In a recent blog post regarding Sam Moore‘s claim for publicity rights in a fictional film, I provided a general update on publicity rights law because such laws are now being used as part of the social media agreement between the public and such companies as Google and Facebook.

The discussion about continuing evolution of publicity rights doctrine is part of a larger review I have written on the role of social media across the spectrum of media law.  That working paper, Social Media in the Workplace – From Constitutional to Intellectual Property Rights is now available at SSRN: http://ssrn.com/abstract=2348779 or for download.

Social media has become a dominant force in the landscape of modern communications. From political uprisings in the Middle East to labor disputes in Washington State, social media has fundamentally disrupted the way in which communications take place. As noted constitutional scholar Erwin Chemerinsky explained, “technology has changed and so has First Amendment doctrine and American culture. It now is much more clearly established that there is a strong presumption against government regulation of speech based on its content.” Just as the government must tolerate more speech, the same thing is true about employers. Chemerinsky further notes that “for better or worse, profanities are more a part of everyday discourse.” Abrasive speech may be coarse from the word choice or may more readily upbraid the objects of the speech. Whether foul or abusive, such speech now pervades commercial and social media.

Social media fundamentally upends the notion of the traditional commercial media environment and with that, it reverses the established legal doctrine from constitutional assumptions to everyday rules involving copyright, defamation, and unfair labor practice. For employers, these rules are particularly important to navigate because they effect the manner in which the companies communicate with the public, how employees communicate with each other, and how laws are restructuring the employee-employer relationship. The transformation is taking place with changing policies affecting trade secrets, confidential information, copyrighted material, aggregated data, trademarks, publicity rights, and endorsements.

This article highlights the nature of the changes as they present the new paradigm shift and provides some guidance on how to prepare policies for the transitional model. The article tracks the rise of the many-to-many model of social media, its effect on commercial speech, intellectual property, and labor law. The article concludes with suggestions on employment policies geared to managing these changes in the modern workplace.

There will be a CLE program sponsored by the Dayton Intellectual Property Law Association on Friday November 8, 2013 featuring these materials.

Sam Moore loses publicity rights dispute with The Weinstein Company while the use of the Transformative Use Test is applied again

Publicity Rights continue to vex courts and counsel. An October 31st decision of the Sixth Circuit in Moore v. Weinstein provides yet another unfortunate twist to the judicial approach to balancing publicity rights with free speech rights.

The litigation stems from the 2008 film Soul Men produced by The Weinstein Company starring Samuel L. Jackson and Bernie Mac. Grammy winning artist, Sam Moore claimed the movie was an unauthorized life story because of the title, story-line, and music used in the film. Having lost on appeal, Moore took his fight to the Sixth Circuit where the court again sided with The Weinstein Company.

The problem with the decision is not the outcome. Instead the concern is that the court interpreted a state law which relied on the Restatement (Third) of Unfair Competition to determine the scope of publicity rights but still insisted on adding an additional opportunity for plaintiffs to stop communicative works if the defendants could not prove the works were transformative.

State law protection of publicity rights are constrained by free speech concerns.[1] Publicity rights are protected as a common law extension of privacy,[2] but like other common law doctrine affecting speech, many aspects have been constitutionalized.[3] Publicity rights are properly considered a form of limitation on commercial speech and should be subject to legitimate content regulation as is allowed by the FCC and FTC, namely intermediate scrutiny.[4] Traditional publicity rights doctrine first asks whether the use of the name or likeness involves a commercial transaction.[5] The commercial transaction may be the sale of a commercial item or an endorsement of a good or service.[6] If the use of the publicity rights constitutes an endorsement, then the FTC endorsement guidelines offer further liability for unauthorized use.

In theory, formulations such as that embodied in the Restatement (Third) of Unfair Competition should provide clear breathing room between expressive works and their commercial cousins. As the Sixth Circuit recently stated, “A viable right-of-publicity claim usually requires (1) defendant’s use of plaintiff’s identity; (2) the appropriation of plaintiff’s name or likeness to the defendant’s advantage, commercially or otherwise; (3) lack of consent; and (4) resulting injury.”[7]

Section 47 of the Restatement sets an explicit limit on the scope of publicity rights:

The name, likeness, and other indicia of a person’s identity are used “for purposes of trade” under the rule stated in § 46 if they are used in advertising the user’s goods or services, or are placed on merchandise marketed by the user, or are used in connection with services rendered by the user. However, use “for purposes of trade” does not ordinarily include the use of a person’s identity in news reporting, commentary, entertainment, works of fiction or nonfiction, or in advertising that is incidental to such uses.[8]

The scope of publicity rights explicitly excludes news, entertainment, and creative works.[9] The limitation embodied in the Restatement is written to be categorical, which provides for greater certainty and reinforces the importance of free speech rights and avoidance of a chilling effect caused by fear of litigation involving a person’s identity in a communicative work. Comment d. to the Restatement recognizes this concern by stating “[b]roader restrictions on the use of another’s identity in entertainment, news, or other creative works threaten significant public and constitutional interests.”[10]

Nonetheless, in practice, publicity rights are tested under a variety of inconsistent court-fashioned doctrine which do not balance commercial and speech interest nearly as cleanly as does the Restatement. “Various commentators have noted that right of publicity claims—at least those that address the use of a person’s name or image in an advertisement—are akin to trademark claims because in both instances courts must balance the interests in protecting the relevant property right against the interest in free expression.”[11]

The Rogers test[12] most squarely distinguishes between commercial works and communicative works. Under that test, a court should not “permit the right of publicity to bar the use of a celebrity’s name in a movie title unless the title was ‘wholly unrelated’ to the movie or was ‘simply a disguised commercial advertisement for the sale of goods or services.’”[13] This test most closely mirrors the FTC commercial endorsement guidelines, particularly if the recognition of disguised commercial advertisements extends to the various undisclosed endorsements.

The Predominant Use test loosely balances the free speech rights of the publisher against the economic goals of that publisher.[14] Works that predominantly exploit the commercial value of identity must certainly include all celebrity magazines, ESPN, and the Sunday section of the New York Times. The fact that a work is published under a profit motive does not transform the content into commercial speech.[15] The Predominant Use Test is ineffectively under-inclusive and over-inclusive, making it unhelpful for jurisprudential guidance.[16]

The third common test flows from copyright law rather than trademark law. Based upon the Supreme Court jurisprudence involving fair use, the California Supreme Court adopted the transformative test from the first factor of copyright fair use to determine the right of publicity free speech doctrine.

According to the Supreme Court as applied by the California Supreme Court,

the central purpose of the inquiry into this fair use factor ‘is to see … whether the new work merely “supercede[s] the objects” of the original creation, or instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message; it asks, in other words, whether and to what extent the new work is “transformative.”[17]

To the first factor of the copyright test embodied in Transformative Test, the California Supreme Court obliquely reintroduced the copyright fair use test’s fourth factor: the effect on the potential market for the work.[18]

Virtual worlds and video games may trigger the most direct conflict between publicity rights and free speech jurisprudence.[19] The communicative nature of video games highlighted in Brown v. Entm’t Merchs. Ass’n should require the medium be treated like any other.[20] Nonetheless, both video game manufacturers and the courts tend to continue to treat these works as if they are commercial products rather than works of expression protected by the First Amendment.[21] As products, they are commercial works subject to the Transformative Test or another of the balancing tests rather than excluded from the limitation in publicity rights that such rights only apply to commercial products or the advertisements for such goods and services.

The communication in a video game generally is not a proposal of a commercial transaction or the sale of a product, so rights of publicity simply do not apply.[22] If instead, the media is used to make an endorsement or advertise a commercial product, then the FTC endorsement guidelines and the state publicity rights come back into play.[23]

This distinction should guide the behavior and social media policies of employers. To the extent they are creating content as media broadcasters, there are no publicity rights constraints and no endorsement concerns.[24] If instead the content is designed to promote commercial transactions, serve as advertisements, or sell merchandise, then permission is required from the endorser and the endorser must be providing factual, honest information.

The confusion surrounding publicity rights raises serious chilling effects. As reported in the Hollywood Reporter, the NCAA is trying to take up an appeal in Keller v. EA Sports despite the settlement in the case following a ruling unfavorable to EA based on an application of the Transformative Use Test. The NCAA petition for cert (read here) provided:

[T]he interplay between right-of-publicity claims and the First Amendment is an issue on which the lower courts are badly divided. It is also important, affecting the fundamental rights of a wide array of speakers—from movie and television producers (e.g., The Social Network) to biographers and songwriters (Bob Dylan’s Hurricane), to videogame makers, like one of the defendants here.

Something must be done to restore to return the presumption of free speech and eliminate the chilling effect of publicity rights claims against communicative works. Publicity rights are very important economic and personal rights which should be enforced against commercial theft of identity, but that does not mean they should be used to stifle the ability of other authors and artists. A Supreme Court decision in Keller will be unlikely to develop the balance needed to restore the law. Instead federal legislation is a more likely tool to get the balance correct.


[1] See, e.g., Donahue v. Warner Bros. Pictures Distributing Corp., 272 P.2d 177 (Utah 1954) (publicity rights statute limited to the use of name or likeness in advertising, or the sale of “some collateral commodity.”); Cal. Civ. Code § 3344(a) (West 1997) (limiting protection to use “on or in products, merchandise, or goods, or for purposes of advertising or selling, or soliciting purchases of, products, merchandise, goods or services, without such person’s prior consent.”).

[2] See Samuel Warren & Louis Brandeis, The Right to Privacy, 4 Harv. L. Rev. 193 (1890). See also William L. Prosser, Privacy, 48 Cal. L. Rev. 383, 383–85 (1960).

[3] Zacchini v. Scripps-Howard Broadcasting Co., 433 U.S. 562, 577 (1977) (In distinguishing between defamation, false light and publicity cases, the Court explained that the “Constitution does not prevent Ohio from … deciding to protect the entertainer’s incentive” to perform.)

[4] See Sorrell, 131 S. Ct. 2653, supra note 53 at 2663; Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n, 447 U.S. 557, 562 (1980); Ohralik v. Ohio State Bar Assn., 436 U.S. 447 (1978) (upholding state lawyer advertising regulation); Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748, 771-772 (1976) (establishing First Amendment protection for commercial speech and recognizing right of recipients of commercial speech to have access to the content).

[5] See, e.g., Comedy III Productions, Inc. v. Gary Saderup, Inc., 21 P.3d 797, 802 (Cal. 2001).

[6] Id. at 802 (although the speech was not an “advertisement, endorsement, or sponsorship of any product,” defendant nonetheless “used the likeness of The Three Stooges on . . . products, merchandise, or goods within the meaning of the statute.”).

[7] Moore v. Weinstein Co. LLC, 12-5715, (6th Cir. Oct. 31, 2013) (unreported) quoting Restatement (Third) of Unfair Competition.

[8] Restatement (Third) Unfair Competition §47 (1995).

[9]  Id.  at cmt. c. (“the use of a person’s name or likeness in news reporting, whether in newspapers, magazines, or broadcast news, does not infringe the right of publicity. The interest in freedom of expression also extends to use in entertainment and other creative works, including both fiction and nonfiction.”).

[10] Id. at cmt. d.

[11] Hart v. Elec. Arts, Inc., 717 F.3d 141, 155 (3d Cir. 2013).

[12] Rogers v. Grimaldi, 875 F.2d 994 (2d Cir.1989).

[13] Id.  at 1004.

[14] Doe v. TCI Cablevision, 110 S.W.3d 363 (Mo.2003) (en banc).

If a product is being sold that predominantly exploits the commercial value of an individual’s identity, that product should be held to violate the right of publicity and not be protected by the First Amendment, even if there is some “expressive” content in it that might qualify as “speech” in other circumstances. If, on the other hand, the predominant purpose of the product is to make an expressive comment on or about a celebrity, the expressive values could be given greater weight.

Id.  at 374.

[15] See New York Times v. Sullivan, 376 U.S. 254, 265 (1964). See also Valentine v. Chrestensen, 316 U.S. 52, 55 (1942) (commercial speech cannot evade regulation by appending protected first amendment content).

[16] See Hart, supra note 73 at 154 (“By our reading, the Predominant Use Test is subjective at best, arbitrary at worst, and in either case calls upon judges to act as both impartial jurists and discerning art critics.”).

[17] Comedy III Prods., Inc. v. Gary Saderup, Inc., 25 Cal.4th 387, 404 (2001) (quoting Campbell v. Acuff–Rose Music, Inc., 510 U.S. 569, 579 (1994) (citations omitted).

[18] Id.  at 407.

Furthermore, in determining whether a work is sufficiently transformative, courts may find useful a subsidiary inquiry, particularly in close cases: does the marketability and economic value of the challenged work derive primarily from the fame of the celebrity depicted? If this question is answered in the negative, then there would generally be no actionable right of publicity. When the value of the work comes principally from some source other than the fame of the celebrity—from the creativity, skill, and reputation of the artist—it may be presumed that sufficient transformative elements are present to warrant First Amendment protection. If the question is answered in the affirmative, however, it does not necessarily follow that the work is without First Amendment protection—it may still be a transformative work.

[19] See Hart, supra note 73 at 152-53; O’Bannon v. NCAA, 2010 U.S. Dist. LEXIS 19170 (N.D. Cal. Feb. 8, 2010) (dismissing Keller v. Elec. Arts, Inc., 2010 WL 530108 (N.D. Cal. 2010) to substitute anti-trust claims for publicity rights claims); In re NCAA Student-Athlete Name & Likeness Licensing Litig., 2011-2 Trade Cas. (CCH) ¶ 77, 549 (N.D. Cal. 2011) (ongoing litigation emphasizing anti-trust implication of refusing to negotiate rights with former NCAA players).

[20] Brown v. Entm’t Merchs. Ass’n, supra note 37 at 2737 n.4.

[21] See Hart, supra note 71 at 148-49 (“Appellee [EA Sports] concedes, for purposes of the motion and appeal, that it violated Appellant’s right of publicity; in essence, misappropriating his identity for commercial exploitation.”)

[22] Cf. Comedy III, supra note 71 at 802; Hart, supra note 75 at 149.

[23] Garon, supra note 52 at 615, 624.

[24] See Facenda v. N.F.L. Films, Inc., 542 F.3d 1007, 1017 (3d Cir. 2008) (quoting U.S. Healthcare, Inc. v. Blue Cross of Greater Phila., 898 F.2d 914, 933 (3d Cir. 1990)).

The Estate contends that the program is commercial speech, and we agree. Our Court has “three factors to consider in deciding whether speech is commercial: (1) is the speech an advertisement; (2) does the speech refer to a specific product or service; and (3) does the speaker have an economic motivation for the speech.”

Postal Service owes $685,000 for unauthorized use of sculpture in $1500 photograph

Memorial Stamp The U.S. Court of Appeals for the Federal Circuit set the damages in Gaylord v. U.S. This fair use and unfair licensing action involved the Korean War Veterans Memorial sculpture and the government’s decision to license an unauthorized photograph of the sculpture without securing rights to the sculpture itself.

Frank Gaylord created the memorial. Later John Alli photographed the Memorial. Given the beauty of his photographs, Mr. Alli decided to license his photographs. He purchased a license to reproduce the Memorial from Mr. Lecky, an architect with Cooper-Lecky Architects, P.C. the prime contractor for the creation, construction, and installation of the Memorial. Lecky did not inform Mr. Gaylord of the license fee, instead holding himself out as author of the sculpture. Eventually, however, Mr. Alli settled with Mr. Gaylord by paying a ten percent net licensing royalty.

Mr. Alli licensed his photograph to the Postal Service for $1500. “The Postal Service produced approximately 86.8 million stamps before retiring the stamp on March 31, 2005,” noted the court.

In the 2010 decision, the Federal Circuit rejected the notion that the use of the postal service stamp was fair use of the sculpture. It noted that the “Postal Service acknowledged receiving $17 million from the sale of nearly 48 million 37-cent stamps. An estimated $5.4 million in stamps were sold to collectors in 2003. The stamp clearly has a commercial purpose.” Presumably the collector stamps do not purchase mail services from the Postal Service, turning almost all of that revenue into net profit. Although the court did not see market harm stemming from the unauthorized postage stamp on other licensing opportunities for the sculpture, it nonetheless rejected fair use. “Even though the stamp did not harm the market for derivative works, allowing the government to commercially exploit a creative and expressive work will not advance the purposes of copyright in this case.”

The court also rejected claims the suggestions to the sculpture transformed the ownership into a joint work or the rather bizarre suggestion that the sculpture is an architectural work – meaning “the design of a building as embodied in any tangible medium of expression…” and a building as “humanly habitable structures.” Looking at the photograph below, it is difficult to see where one might inhabit the work. Gaylord memorial

Last week, the Federal Circuit answered the question as to the value of Mr. Gaylord’s sculpture depicted so beautifully in the photograph. According to Mr. Gaylord’s counsel, “the sculptor of the Korean War Veterans Memorial … has been awarded 10 percent of the United States Post Service profits from selling the collector stamps that featured the sculptures.”

The choice of the ten percent net licensing royalty seems particularly appropriate given the license granted by Mr. Alli to Mr. Gaylord. According to Mr. Gaylord’s attorneys, he was awarded $685,000.

Heidi Harvey of Fish & Richardson represented the artist on a pro bono-contingency hybrid basis. While it is disheartening that the U.S. did not settle this case earlier and that it took the position the work was not owned by the artist, the robust licensing fee hopefully rectifies the damage done by the Postal Service.

(Photographs from the 2010 Federal Circuit decision)

Copyright review hearings end first phase as DOC Copyright Green Paper is released

On April 24, 2013, House Judiciary Chairman Bob Goodlatte (R-Va.) announced that the Subcommittee on Courts, Intellectual Property, and the Internet would “conduct a comprehensive review of U.S. copyright law over the coming months.” The first set of those hearings have just concluded.

The first of the hearings featured a panel of experts who participated in the Copyright Principles Project led by Professor Pamela Samuelson of Berkeley Law School.[1] The second panel, in contrast, emphasized representatives from the creative industries. The third hearing focused on the technology industries. The three hearings represent the Venn diagram of copyright policy: Creators, Disseminators, and Users. Each of these groups overlaps and the boundaries are very imprecise. Nonetheless, there remains a tension among these three spheres because greater legal protections in one sphere tend to affect the other spheres in unwanted ways. Since all three spheres are critical to the culture and to the creative economy, copyright reform is a matter of finding balance and cohesion within this matrix.

In addition to the hearings by the House Judiciary Committee, the Department of Commerce Internet Policy Task Force issued a green paper entitled “Copyright Policy, Creativity, and Innovation in the Digital Economy.”[2] The green paper emphasizes the need for balance between protections for creative rights ownership and the broad dissemination of information.

Some would argue that copyright protection and the free flow of information are inextricably at odds—that copyright enforcement will diminish the innovative information-disseminating power of the Internet, or that policies promoting the free flow of information will lead to the downfall of copyright. Such a pessimistic view is unwarranted. The ultimate goal is to find, as then-Secretary of Commerce Gary Locke explained, “the sweet spot on Internet policy – one that ensures the Internet remains an engine of creativity and innovation; and a place where we do a better job protecting against piracy of copyrighted works.” Effective and balanced copyright protection need not be antithetical to the free flow of information, nor need encouraging the free flow of information undermine copyright. In fact, as the Supreme Court has recognized, “the Framers intended copyright itself to be the engine of free expression.”[3]

While the green paper is very detailed, it emphasizes areas such as the public performance right for sound recordings, issues involving notice and takedown under the DMCA, online licensing of works, and online enforcement.[4] The green paper also expresses support for expanded fair use and related exclusivity exemptions, particularly with regards to teaching and access for persons with disabilities. The green paper was distributed as the first round of hearings came to a close. The green paper had little influence on the initial hearings but is likely to become increasingly influential as the process continues.

The green paper and the Goodlatte hearings, together with the many efforts by the Copyright Office and others, are creating significant energy around changes to the copyright statute. At the same  time, the proposals are tweaks rather than overhauls and the public may quickly grow tired of what will be a lengthy process. But it matters, so try to stay tuned.


[1] See Pamela Samuelson, The Copyright Principles Project: Directions for Reform, 25 Berkeley Tech. L.J., 1175 (2011) http://www.law.berkeley.edu/files/bclt_CPP.pdf.

[2] Copyright Policy, Creativity, and Innovation in the Digital Economy, Dept. of Comm. Internet Policy Task Force, July 2013 at http://www.uspto.gov/news/publications/copyrightgreenpaper.pdf. See also USPTO & NTIA, Copyright Policy, Creativity, and Innovation in the Internet Economy, 75 Fed. Reg. 72790 (November 26, 2010) (notice of inquiry. The comments are available at http://ssl.ntia.doc.gov/comments/100910448-0448-01/.).

[3] Id. at 2, quoting Harper & Row, Publishers, Inc. v. Nation Enters., 471 U.S. 539, 558 (1985).

[4] Id. at 5.

W. Bruce Lunsford contribution to create Academy for Law, Business + Technology

With apologies for posting a press release as a blog post, the news that W. Bruce Lunsford has pledged $1 million to Chase under the direction of the Law + Informatics Institute for the creation of the the W. Bruce Lunsford Academy for Law, Business + Technology is exciting enough for us to share our news.

HIGHLAND HEIGHTS, Ky. (May 15, 2013) — The Northern Kentucky University Chase College of Law has received a $1 million gift from W. Bruce Lunsford to establish and support the W. Bruce Lunsford Academy for Law, Business + Technology.

Lunsford, a 1974 graduate of Chase College of Law, is chairman and CEO of Lunsford Capital, LLC, a private investment company headquartered in Louisville, Ky.

The W. Bruce Lunsford Academy for Law, Business + Technology will be an honors immersion program operated by the NKU Chase Law + Informatics Institute. The focus of the program will be to develop “renaissance lawyers” for the Information Age. The Lunsford Academy will provide students with the technological, financial and professional skill sets essential to the modern practice of law.  Through the program’s technology-driven, skills-based curriculum, students will acquire the fundamental skills that will make them more productive for their clients, more attractive to employers and better prepared to practice law upon graduation.

For those interested in learning more about the details of the program, the most comprehensive vision is provided in my forthcoming article from Connecticut Law Review. An working draft of the paper may be found here: Jon M.Garon, Legal Education in Disruption: The Headwinds and Tailwinds of Technology, (Conn. L. Rev. forthcoming) at SSRN: http://ssrn.com/abstract=2040560.

In addition to taking the program’s required and elective law and informatics courses, Chase students participating in the Lunsford Academy will have the opportunity to participate in technology-focused semester-in-practice placements and study abroad programs; they will also be able to seek joint degrees.

Chase College of Law partners with the NKU College of Informatics to offer a Juris Doctor/Master of Business Informatics and Juris Doctor/Master of Health Informatics and with the NKU Haile/US Bank College of Business to offer a Juris Doctor/Master of Business Administration.

Professor Jon Garon, director of the Law + Informatics Institute, said the development of the Lunsford Academy is the next step in the evolution of legal education. “In addition to a solid foundation in legal doctrine, theory and practice, law students need business education, information technology and intellectual property knowledge, and law practice management experience,” he said. “These skills will enable students to compete in today’s highly networked, efficient and global business community. The generous donation by Bruce Lunsford enables Chase to meet this challenge and redefine the scope of legal education.”

In recognition of Lunsford’s gift, the academy will be named the W. Bruce Lunsford Academy for Law, Business + Technology, upon approval by the NKU Board of Regents.

“We are extremely honored and pleased that Bruce has made this significant investment in our Law + Informatics Institute,” said Dennis R. Honabach, dean of the College of Law. “The Lunsford Academy will provide our law students with invaluable opportunities to become uniquely prepared for the modern practice of law.”

One year later – DRM-free ebooks hugely positive for Tor

New York Times technology columnist David Pogue discussed the decision last year by Tor Books UK and US to drop copy protection. It just released a statement regarding the effect of the DRM-free ebooks after one year.

His column deftly discusses the tension between consumers who want the inconvenience of encryption eliminated and concerns that DRM targets lawful consumers far more than those acquiring illegally distributed copies. Although he does not address the plethora of DRM-free versions on bit torrent sites, he notes that the changes to DRM for commercial products might affect the rate of piracy, but not the existence of piracy.

The Tor announcement highlighted a few other features of their strategy. First, the strategy was about their authors and the goals of the authors to engage more effectively with their readers. Secondly, as a science fiction imprint, their readership is among the most capable of getting DRM-free copies, so the publisher needs to make the consumer happy more than it needs to protect itself from the consumer. And finally, the decision to eliminate DRM does not mean that the works are not for-profit, on-sale copies. This statement captures many of Tor’s concerns:

We had discussions with our authors before we made the move and we considered very carefully the two key concerns for any publisher when stripping out the DRM from ebooks: copyright protection and territoriality of sales. Protecting our author’s intellectual copyright will always be of a key concern to us and we have very stringent anti-piracy controls in place. But DRM-protected titles are still subject to piracy, and we believe a great majority of readers are just as against piracy as publishers are, understanding that piracy impacts on an author’s ability to earn an income from their creative work. As it is, we’ve seen no discernible increase in piracy on any of our titles, despite them being DRM-free for nearly a year.

Pogue suggests but does not state outright that DRM is an ineffective strategy for reducing piracy. But he is very explicit that the point of an anti-piracy policy is to increase sales and revenue. DRM-free does not mean without cost. iTunes sells its music even though it dropped DRM. He also points out that his own books have had fared similarly in the market.

If book consumers thought that everyone in the household could easily read the same book (in the manner that a family can share a physical book), it might be more willing to spend money to own the ebook. For works that have no physical cost, the increase in unauthorized copies is not the right metric. The right question is whether more customers will purchase the work. If more copies are sold, the work is more successful, even if more copies are also pirated.

Pogue makes another strong point that the ease of the transaction directly impacts sales. “Friction also matters. That’s why Apple and Amazon have had such success with the single click-to-buy button. To avoid piracy, it’s not enough to offer people a good product at a fair price. You also have to make buying as effortless as possible.” High transaction costs are reasonable only for expensive, infrequent purchases. Weight is a normal force on friction; only weighty purchases should have high friction.

Finally, Pogue addresses the pricing of ebooks. Frankly, he is more generous to the publishers than I would be on this issue by acknowledging the costs associated with “author advance, editing, indexing, design, promotion, and so on” but like the music industry, the investments are declining. The public is likely to value the fair price point of an ebook as a percentage of its physical counterpart. If the physical copy has a secondary market in the used bookstore, then the loss of resale also needs to be factored in for the consumer. Otherwise the consumer is only paying for the convenience of instant access, and if the instant access is undermined by cludgy DRM, there is no value to be had.

Tor heard this from its constituents:

But the most heartening reaction for us was from the readers and authors who were thrilled that we’d listened and actually done something about a key issue that was so close to their hearts. They almost broke Twitter and facebook with their enthusiastic responses. Gary Gibson, author of The Thousand Emperors tweeted: “Best news I’ve heard all day.” Jay Kristoff, author of Stormdancer, called it “a visionary and dramatic step . . . a victory for consumers, and a red-letter day in the history of publishing.”

Tor never says it has become more profitable, but the company does relish the role it is taking in leading the publishing industry towards a more consumer-friendly business model.

The move has been a hugely positive one for us, it’s helped establish Tor and Tor UK as an imprint that listens to its readers and authors when they approach us with a mutual concern—and for that we’ve gained an amazing amount of support and loyalty from the community. And a year on we’re still pleased that we took this step with the imprint and continue to publish all of Tor UK’s titles DRM-free.

So the lesson from Tor is simple – for low-cost impulse purchases DRM doesn’t add value. High quality, fairly priced, and easy to access works will continue to attract a growing market. These are the points of emphasis and differentiation for the marketplace. DRM may be a legal solution, but it is not a sound business strategy.

Comprehensive Copyright Review – The First Steps of a Very Long Journey

House Judiciary Committee Chairman Bob Goodlatte has announced that the Judiciary Committee will conduct a comprehensive review of U.S. copyright law over the coming months. The comprehensive review is not any particular legislative agenda, but it will serve as an open invitation to content industries, technology industries, and the public in a way that likely never occurred in any of the Copyright Act’s prior legislative reforms.

Chairman Goodlatte emphasized the evolution of technology and media in his remarks:

The discussions during the early 1900’s over the need to update American copyright laws to respond to new technology were not the first time such discussions occurred and they will certainly not be the last. Formats such as photographs, sound recordings, and software along with ways to access such formats including radio, television, and the Internet did not exist when the Constitution recognized intellectual property. My Committee has repeatedly held similar discussions about new forms of intellectual property as they arose and enacted laws as appropriate. Driven by new technologies and business models, a number of changes to copyright law went into effect in 1976.

copyright officeNo one should expect immediate legislation. As Register of Copyrights, Maria Pallante noted in her recent congressional testimony “a major portion of the current copyright statute was enacted in 1976. It took over two decades to negotiate, and was drafted to address analog issues and to bring the United States into better harmony with international standards, namely the Berne Convention.” Even there, the effective date for U.S. adherence to the Berne Convention took until March 1, 1989.

In the decades of negotiation over copyright reform in the past, the tension was primarily between commercial interests of the content industries – film, television, music, and publishing industries with the trade unions, authors, and creative interests. But that focus has shifted dramatically with the rise of the information age.

The defeat of SOPA highlighted the tension between the technology industries – led by the ISPs, Google, Apple, Microsoft, eBay, Facebook, and Wikipedia with the content industries. In this fight, the content industries continue to lose. They could not push ACTA and they have lost in the courts over first sale in Kirtsaeng v. John Wiley & Sons, secondary liability in Viacom Int’l v. YouTube Inc. and Tiffany v. eBay, Inc., and many others.

Even more importantly, the rise of social media and the role copyright now plays – or interferes – in the daily lives of ordinary citizens means that the public’s interest in this debate will be higher than ever. Organized by social media companies like Facebook, LinkedIn, Twitter, Google and hundreds of others, the public will be exhorted to be heard every time they log on or check in. This is a great change for democracy. But we shouldn’t forget that those intermediaries are also the very technology companies that have their own stake in the outcomes.

Register Pallante has indicated some of the critical issues before the Judiciary Committee (though the explanation and approach is mine, not Register Pallente’s):

  • First sale doctrine – which could include both (i) a review of Kirtsaeng (2013) which internationalized first sale, and (ii) technologies that allow for a digital forward-and-delete that mimics first sale in the online environment;
  • Orphan works – questions about how to handle works for which the ownership information or the transfers of ownership have been lost;
  • Library exceptions – addressing digital collections and the ability to gain far greater usage out of far fewer copies;
  • Statutory licensing reform – on rate setting and rates;
  • Federalization of pre-72 sound recordings – resolving the issues involving retroactive pseudo-copyright protection for these works and the implications on the public domain;
  • Resale royalties for visual artists – addressing the conflict with those states which provide these rights and potentially creating national legislation;
  • Copyright small claims procedure or courts – adding a mechanism for copyright to be enforceable for small scale claims; and
  • Mass digitization of books – addressing the myriad of problems triggered by the intermediate copyright violations of works, the fair use of showing snippets, the procedural issues in the project, and many other concerns.

This list does not include many other potential areas for reform, including some of my preferred topics:

  • Explicit free speech and human rights accommodations for the statute, since copyright and First Amendment issues increasingly intersect;
  • Expanded fair use or copyright exemptions codified under Section 110 for digitization, reverse engineering, comparative advertising, and others;
  • Anti-circumvention (DMCA) reform to prohibit its use for use in commercial products – such as cars, printers, garage doors, and other goods;
  • Expanded registration requirements so that most of the economically insignificant works people create daily are outside of the copyright regime;
  • Statutory Damage Reform to tie statutory damages more closely to actual damages and separate commercial infringers from consumers;
  • Mandatory cease-and-desist system so that no one can be sued for copyright damages unless they have been notified directly the conduct is infringing and continue, after a reasonable opportunity to cure has been provided; and
  • Broader non-commercial exceptions to copyright analogous to the public/private distinction of the 1909 Act.

Copyright needs to continue to adjust to address these issues. While the system is not broken, there are many strains. Again, from Chairman Goodlatte:

There is little doubt that our copyright system faces new challenges today. The Internet has enabled copyright owners to make available their works to consumers around the world, but has also enabled others to do so without any compensation for copyright owners. Efforts to digitize our history so that all have access to it face questions about copyright ownership by those who are hard, if not impossible, to locate. There are concerns about statutory license and damage mechanisms. Federal judges are forced to make decisions using laws that are difficult to apply today. Even the Copyright Office itself faces challenges in meeting the growing needs of its customers – the American public.

It will be important to be heard on these issues and to think carefully about a system that is good for today’s issues, tomorrow’s challenges and the decades of unanticipated changes the new law will cover.

Untangling the web: Spider-Man lawsuit settlement highlights how to negotiate out of copyright collaboration agreements

The New York Times reports a final settlement in the long-running copyright and breach of contract battle between producers of “Spider-Man: Turn Off the Dark,” the musical’s original director Julie Taymor, which also involved composers, Bono and the Edge of U2 and Marvel Entertainment (which itself was acquired by Disney in 2009). The New York Times summarized the dispute as follows:

Ms. Taymor, the Tony Award-winning director of “The Lion King,” was fired from the $75-million “Spider-Man” production in March 2011 amid disputes over changes to the show’s script and staging. In November, Ms. Taymor filed a breach of contract suit against the musical’s lead producers, Michael Cohl and Jeremiah J. Harris, saying that they were continuing to profit from her creative contributions to the show without compensating her. Mr. Cohl and Mr. Harris filed a countersuit in January saying that she violated the terms of her contract and “could not and would not do the jobs” she was hired to do, and thus was not entitled to further royalties.

Last September, the parties “reached an agreement in principle,” according to a statement issued by the U.S. District Judge Katherine Forrest overseeing the trial. But the final agreement required an additional four months of negotiations. The delay likely comes from the conflicting nature of the parties’ interests and uncertainty over the value of the $75 million dollar property.

Although the stage musical has Spidermanachieved some weeks with grosses in excess of $1 million, it is unclear whether it is significantly profitable on most weeks. Assuming it is, at a profit of $150,000 per week (a considerable sum for Broadway), it would need to run over 9½ years to break even. For the investors, that is a monstrous timeline.

Royalty participants like Bono, the Edge earn income each week, so the length of the run matters more than its profitability, though complex formulae used in the Approved Production Contract for Musicals offsets some of this disparity.

More importantly, for the producers and investors, is the ability to restage and cut the musical so that its costs can be tamed and the production repackaged for other cities and for tours. The settlement of the copyright action by Ms. Taymor presumably allows the producers to use and to modify her material so that the show can be streamlined and packaged for other venues.

Despite the many accidents during development and the generally bad reviews, Spider-Man is reportedly a “fan favorite” according to the Times. Profitability will not likely come from Broadway, so the producers need this settlement to take their show on the road and lower their costs.

For other creators, seeking to learn from the settlement, what might such settlement negotiations entail?

1. Approval rights. A director may have approval rights over the use of various copyrighted elements in the production. A settlement agreement must terminate all future approvals.

2. Copyrighted elements. Generally a director does not contribute works that are protected by copyright. The Approved Production Contract provides very explicitly that the playwright (including the composer and lyricist for musicals) solely owns the copyright. General staging is not copyright protected, though choreography is protectable by copyright. All choreography and any staging should be licensed to the production to make the settlement effective.

The license must include both the right to publicly perform so that the productions can continue to be shown on stage; to reproduce so that any DVDs of the production can be sold; and to modify, so that the work can be changed as needed to accommodate new venues and new performers.

3. Contractually protected elements. The director of a play or musical will have protections provided by contract that go beyond copyright. Ideas on staging, conceptual approaches to the material and other elements that fall outside of copyright may still be covered by contract. The production contract should be superseded by the settlement agreement; all rights protected by the contract should be transferred; and any other claims waived.

4. Non-disparagement and credit.  There are two sides to every break up. Both parties are likely at fault and neither side is completely true. As such, the settlement agreement must protect both sides – particularly the individuals – from negative statements or efforts to paint the other side as unprofessional or wrong. A key component of this is affording credit to everyone involved. There may be an additional wrinkle because new participants have been hired to complete work started by those leaving the production. In some cases, the amounts of relative contribution are balanced by the applicable union and credit is arbitrated through the union agreement. In most cases, however, the settlement should itself provide some credit for everyone – with an effort to be generous to the leaving parties.

5. Payment. Ideally, the settlement of any creative dispute will include a payment of a fixed sum, so that the parties can be done interacting and so all future accounting obligations are avoided. If the future revenues (or profitability) are too uncertain, then future participation may be necessary. Even if the settlement provides for payments based on future revenues, the parties are better off with a royalty based on weeks performed or grosses earned than the more subjective definition of profits. Nothing will guarantee a return to the courtroom faster than a net profits settlement provision and a very successful run.

The actual settlement involving Spider-Man has not been disclosed. Still, these five key provisions are likely the topics identified by all the parties. Participants like Marvel needed to be sure the settlement did not change the producer’s obligations or harm its interests, while the producers and Ms. Taymor had a great deal of economic, professional and emotional issues to address. Does this mean Spider-Man will soon be coming to a town near you? It opens the possibility. Now the producers need to translate their $75 million enterprise into a smaller, simpler but audience-thrilling experience.

Like any creative endeavor, these projects always take time.