Last major update 10-26-01

L.H.O.O.Q.--Internet-Related Derivative Works

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That forces us to ask more questions about how granting or withholding the power to veto derivative works will affect the incentive calculus of the copyright system. The copyright owner's argument is that any increase of reward necessarily increases incentive and thus increases original authors' creation of artistic, or at least copyright-eligible, works. (Usually, this argument is coupled with appeals to maintaining the status quo ante absent a strong showing that change is needed. But there is no firm ground of status quo ante. Annotator can argue, pointing to Big Hairy Woman and Arriba Soft, that the fair use doctrine is the status quo ante just as loudly as Chaucer can argue, as the Second Circuit was persuaded in the Seinfeld trivia case, that copyright-owner veto power over derivative works is the status quo ante.) It is unsound to assume that every further increment in reward brings forth any perceptible further increment in creation of works, and certainly not a cost-justified increment in creation. This is particularly so when the increment in reward is from a new technological use that Congress never addressed (or probably even contemplated). The likelihood of future gain from the new type of derivative work, it being wholly unknown at the time of creation of the original work, does not provide authors with a substantial incentive to create. We need to make a present value calculation. The present value, circa 1400 for the Prologue, suitably discounted, of a tooltip-linked annotation was negligible. That is probably true for any future, as yet unknown kind of derivative work. It is proper to conclude, therefore, that according copyright owners a veto power over unknown forms of derivative work will not increase creative incentive and thereby promote an advance in knowledge and arts. On the other hand, according them a veto power is likely to lessen the opportunity of the public to benefit from such derivative works by hindering their becoming available.

That is not the only way to view the matter. Implicit in the foregoing analysis is the unarticulated premise that the main purpose of the copyright laws is to benefit the public, rather than to enrich authors or their publishers. Moreover, in the same vein, a variation on that premise is that when enriching authors or their publishers does not incentivize them to make more, desired works available to the public, mulcting the public for their benefit or depriving the public of benefits at their behest is a dead loss and a misuse of the congressional power to enact copyright laws. There is case-law support for that premise. But it is not the only possible premise. One might begin instead, particularly in the context of the immediately preceding Chaucer-Annotator debate, with this normative premise: "[C]opyright vests authors not merely with an entitlement to payment for copying and other exploitations; it grants them control over whether and how the work shall be exploited." That is a quotation from Professor Jane Ginsberg's critique of the Napster decision. In her view, "[b]oth economic and moral concerns underlie this control." The economic concern is that conceding this control to copyright owners gives them greater power to set their prices, directly and indirectly. The indirect power flows from the power to select or reject licensees, which encourages would-be licensees to bid up the price. It also induces them to offer to assure maintenance of quality for their uses of the work. "Finally, it enables authors to determine what kinds of exploitations fit their vision for their work." Presumably, that is the moral concern. By way of anticipatory rebuttal, it is said that assertions that copyright should yield when the author refuses or is slow to exploit a new use "misconceive the purpose of copyright," for part of the purpose is to achieve the constitutional goal "by securing for limited Times to Authors ... the exclusive Right to their ... Writings...." This is so, Professor Ginsberg argues, because "[t]he Constitution has provided for a system in which authors' deternination how to exploit their works promotes the 'Progress of Science.'"

The argument for this alternative approach is forceful but nonetheless deeply flawed on multiple grounds. Working backwards, the supposed constitutional underpinnings for the argument are not there. Nothing in Article I, section 8, clause 8 says that Congress must enact a system of copyright law in which "authors' deternination how to exploit their works" shall be the governing principle. The Constitution says that Congress shall have power to give authors the exclusive right to their writings. It does not specify how Congress shall exercise the power (if at all), or what kind or scope of exclusive right Congress shall provide. The Constitution certainly does not say that authors' deterninations how to exploit their works shall be paramount over considerations based on the public interest.

Congress has in fact chosen to implement Article I, section, 8, clause 8's grant of power. It did so in a statute (currently, 17 U.S.C. § 106) that grants authors the exclusive rights to reproduce and distribute copies of their works, to prepare derivative works based on the authors' underlying works, and to authorize (or not authorize) the foregoing acts, subject to the remainder of the statute. (Those are the most pertinent exclusive rights in the present context, although public display and public performance may also need mention.) The remainder of the statute qualifies the exclusive rights of authors in material ways that include the fair use doctrine, the first sale doctrine, archival and adaptation rights, and various compulsory licenses. Thus, it is not the Constitution but the statute that determines whether and to what extent authors' preferences shall govern how their works will be exploited. Copyright is a creature of positive law, to which authors' preferences about exploitation must defer. The contention that the Constitution insists that authors' determinations shall govern how works are exploited is not supportable.

By the same token, the argument mistakes means for ends. It is not part of the purpose of copyright law, or part of the constitutional purpose in Art. I, § 8, cl. 8, to give exclusive rights to authors. Giving such rights is a power that the Constitution gives Congress to utilize as a means for promoting the progress of science, but such promotion is the only goal. The means for accomplishing a goal is neither the goal itself nor a purpose of the law, and the means therefore commands no special deference. The means is a tool, not an icon. Thus, to say that Congress shall have the power to accomplish goal X by doing Y is not to say Congress shall regard Y as a goal or even a good in itself. A tool can be used well or misused. A tool works for some things and not others. (Granting exclusive rights is not even the only tool that exists, or the only tool that Congress has the power to utilize, under this or other enumerated powers given to Congress. For example, the Constitution does not forbid Congress to give subsidies to authors and artists, and it does so.) That the Constitution does not require Congress to have a copyright system in which authors are the sole determiners of how to exploit their works is shown by the well recognized limitations on authors' exclusive rights that immediately follow section 106. If the Constitution commanded a copyright system in which authors were the sole determiners of how to exploit their works, these judicially evolved, now statutorily codified, doctrines (for example, fair use and first sale) would all be unconstitutional, which they plainly are not. The Constitution thus does not require a ruling for Chaucer in the Chaucer-Annotator debate over vetoing derivative works.

The moral right argument can be dismissed without elaborate attention. That is an argument better suited for being made in France than in the United States. We do not have moral rights except to an insignificant extent. The vision of authors for their works gives way to positive law in the United States, particularly in the face of a fair use, even one that vastly antagonizes the author. (Big Hairy Woman is paradigmatic.) Scratch the vision thing.

Finally, maximizing the price that authors extract for the use of their work is not a goal mentioned in the Constitution. It is an idea flowing directly from the unstated premise that enriching authors and publishers is the constitutional purpose, which it is not. Or it is derived from the theory that increasing authorial rewards automatically increases authorial output, and doing that in turn constitutes promoting progress of science. As support for letting copyright owners veto new derivative works, the idea cannot rise above its generating premise. Its premise is unsound.

For these reasons, the argument for the alternative approach, however forcefully it may be put, must in the end be rejected. It is not supported by valid premises and it is based on an erroneous view of why we have copyright laws. More fundamentally, the two approaches reflect very different visions of what is a desirable society and what hierarchy of values should define it.

To return to Chaucer v. Annotator, arguments can be multiplied on each side. Nonetheless, for the reasons explored above, one might well conclude that Annotator has the better argument, and that therefore no copyright liability should attach to the preparation of this derivative work. In summary:

The purpose or nature of the challenged use is instruction and commentary or criticism. Such use is presumptively fair. In addition, the nature of the use is "transformative," in the Arriba Soft sense of the term. Or, in other terms that get to the point sooner, its purpose and character are that it is novel, previously unavailable, and highly beneficial to the public. (As suggested earlier, applying the black-hole epithet "transformative" to the use is an unnecessary intermediate step in the legal analysis. Occam's Razor would counsel discarding the step as surplussage. Nonetheless, counsel like the rhetorical crutch and it gives them the opportunity to quote the Supreme Court's Big Hairy Woman opinion on transformativeness.)
While the taking is wholesale, if it is based on a link to Chaucer's own Internet site (say, the content of the left column of the first Prologue display, above) then Chaucer may well have granted an implied license (constructively, for it is a matter of law, not fact, in the United States). In any event, even a total taking can be held fair use, as in the Big Hairy Woman case. This is not a dominating factor.
It is unclear how the challenged derivative use affects the market for the original work. The original work is the Middle English Prologue, not the Modern English translation or side-by-side display. Probably, it would be difficult for Chaucer to show that Annotator's new version has any adverse effect on the sale of or demand for the original Middle English work. But Annotator does arguably divert users from the authorized Modern English derivative work, arguably reducing Chaucer's licensing revenue. (This is a fact issue. There may be no diversion.) The case-law says that this factor must be considered, and it presents some difficulty in analysis.

The net balance of the fair-use factors appears to be that the public would stand to gain from the early availability of the new annotation system, and that failure of the law to make its approach exclusive to Chaucer would not appreciably diminish the ex ante incentive for persons in his position to create new underlying works such as the Prologue. Probably, Annotator prevails against award of injunctive relief to suppress publication of the derivative work.

That might not, however, be the end of the enquiry. Suppose that the tribunal determines that there would be substantial public interest in the immediate availablity of the superior teaching tool of Annotator and that publication of Annotator's derivative work will substantially impair Chaucer's revenue stream from his licensed derivative work (the side by side version). How is the conflict of interests to be resolved? One answer, addressed to some extent earlier, is: the public interest be damned; copyright exists simply to enrich authors and publishers, and thereby to encourage them to create and publish. Another, more nuanced answer is suggested in the Supreme Court's Big Hairy Woman opinion and some prior Ninth Circuit precedent. In footnote 10, the Court cautioned against the automatic grant of injunctions in cases involving derivative works. Rather, it suggested, when the defendant raises a reasonable contention of fair use, a strong public interest exists in publication of the derivative work, and when the copyright owner's interest can be adequately protected by a monetary award, then the relief should be monetary and not injunctive.

Now, let's apply the proposed test to a different derivative use of another's underlying work: iframing or other framing of others' content to attract users to a Web page containing advertising material or used to create a lead-in page to a mousetrapped site. Several earlier demonstration pages in these materials illustrate such uses: Professor Nefarious' home page, the notional Dilbert page, and the Total Advertising business model page. The character or nature of the later use is largely commercial. Since it is accepted that speech must pay its own way in the United States, this is not a fair-use bar. Still, an advertising-speech use often does not have a nature or character that advances its fair-use status. The case that the Professor Nefarious home page illustrates is an exception, in that the page has a superficial veneer of legal scholarship and criticism. In most possible cases, the nature and character of the use does not appear to aid the defendant's case.

The most important factor, of course, under the proposed test is what the new use gives to the public. Clearly, bait for a mousetrapped site gives the public little or nothing positive. A legal criticism page, regardless of the actual merit of the legal analysis, does further copyright and First Amendment policies. Those two are probably the polar cases. Other, intermediate commercial speech that is mostly advertising would provide more difficult cases to resolve. (We have now arrived at the meat of the coconut.)

Consider, for example, the Gator and eZula forms of contextual advertising, a/k/a scumware, that the later Mousetrapping pages describe. As explained there, the Gator and eZula systems operate by inducing PC users to load programs into their systems. These programs modify the appearance of Web pages that the PC users view with their browsers. Gator places popup windows on the screen displays of Web pages (as seen on the PC users' monitors) in response to the presence of keywords on the pages. The popup windows substantially change the appearance of the Web pages and divert advertising revenue to Gator and away from the proprietors of the Web pages, as is explained in the Mousetrapping pages. Ezula places links on the screen displays of Web pages (as seen on the PC users' monitors) in response to the presence of keywords on the pages. When the user places her cursor on the link a tooltip (small popup window) appears with a short message about the linked site. (The present discussion assumes familiarity with the descriptions in the Mousetrapping materials.)

Probably, most courts would hold that, when a Web page such as the Jimmy World page that consists of Content A + Advt. B is changed to appear as Content A + Advt. C, the resulting A+C page is a derivative work based on work A+B. Assuming that A contains copyright-protected material (a reasonable assumption), A+C infringes under § 106(2) unless an affirmative defense such as fair use or license applies. The case for preparation of a derivative work is similar for eZula, but not as strong. Ezula's links make less of a change in the appearance of the page than Gator's popups do. On the other hand, if the test for when a derivative work has been prepared, in the context of alleged infringement of the underlying work, is just one of exceeding de minimis, probably eZula qualifies for preparing a derivative work.

The question now is how to analyze Gator and eZula under the proposed legal test. At the outset, it is important that we no longer have Professors Annotator and Chaucer as the adversaries. This is purely commercial speech, which implicates none of the categories in the preamble of § 107. There are also no core First Amendment values at stake, no politics or religion, just two parties saying "Buy my stuff." As already suggested in the Mousetrapping material, however, contextual advertising arguably gives a benefit to the public -- more rapid and efficient transfer of information on subjects in which the public is interested, namely where and at what prices to purchase goods for which the public may be shopping. However, that is not a new function. The proprietor of the Web page subjected to the popups or links was also trying to provide that function -- perhaps more so in the case of gatored pages than eZula-ed pages, since the issue for gatored pages seems to be which party's ad gets viewed (say, Jimmy's or Gator's). Therefore, the public benefit of a new, previously unavailable, highly useful function is less substantial here than it was in the Arriba Soft case.

However, the kind of diversion of trade seen here is not the kind of diversion traditionally encountered under § 107's fourth fair use factor. The kind of diversion that a fair use analysis ordinarily considers is sales of the copyrighted work: the defendant makes sales of copyright-protected goods that the plaintiff otherwise would have sold, not the diversion of sales of an ancillary product. Here, nobody sells the Web pages that are modified visually. The business model of the Internet is give away the content of Web pages as "free" goods, while trying to earn revenue by getting the viewer to click on a link and thus go to another site where the viewer might buy something; the linked site's proprietor pays the first Web page for the click. What Gator and eZula divert is the investment based expectations of the proprietor of the first Web page as to advertising revenue for clicks. But will copyright law consider that expectation? How should this kind of diversion of trade fare under § 107? The resolution is uncertain, but the Web page proprietor is somewhat more likely to prevail.

No precedent is directly in point. No decided case of which I am aware involves a copyright proprietor that gave its copyright-protected content away. Several, however, involve accused infringers or contributory infringers that gave away content that a copyright proprietor sold. In the Napster case, the court upheld a preliminary injunction against Napster for, in substance, facilitating Internet giveaways of the plaintiffs' copyright-protected CD song recordings. In rejecting a claim of fair use, the court said, "Having digital downloads available for free on the Napster system necessarily harms the copyright holder's attempts to charge for the same downloads." The court also characterized the nature of Napster's use as commercial because it provided Internet users with a substitute for purchasing CDs, which harmed the plaintiffs' market by reducing their CD sales.

In terms of the notional Jimmy World page, one might regard Hitachi's per-click payments to Jimmy as the market for Jimmy's underlying work. Gator's popup substitute for the Jimmy/Hitachi advertisement impairs Jimmy's ability to collect revenue from Hitachi when Gator substitutes its own advertising for that of Jimmy and Hitachi. Therefore, Gator harms the only money-generating market for Jimmy's work when Gator causes its derivative work (Jimmy's content plus an advertisement for a competitor of Hitachi) to be prepared and displayed on PC users' systems. Arguably, this provides a satisfactory fourth fair-use factor rationale. If it does not, Jimmy has a serious problem in establishing his copyright infringement case against Gator.

Procedual considerations may inject another difficulty, in this case for Gator and eZula, the potential defendants in a copyright infringement suit by the Web page proprietor. Fair use is an affirmative defense. That means that the defendant asserting that a contextual advertising use is a fair use must make enough of a factual showing to require the plaintiff to show the inapplicability of the fair-use defense. Hence, the only major hurdle that the copyright owner must surmount is to persuade the court initially that the defendant's commercial speech or other conduct fits within 17 U.S.C. § 106. (For example, it is a derivative work.) If the plaintiff does that, the evidentiary burden shifts to the defendant to show a valid defense. If the defendant's evidence on what benefit the new use gives the public is equivocal, the copyright owner is likely to prevail on the ground that the defendant did not carry its case. It will often be problematic to show a resulting public benefit when one utilizes another's content simply to bait the public to view one's advertising. On the other hand, perhaps the allure of increased allocative efficiency in providing consumers with advertising information will sufficiently impress juries and judges as to carry the day for contextual advertisers.

Much the same analysis applies for framing, as in the case of the notional Dilbert page or the Total Advertising business model pages. In these pages, the content of someone else's Web page is iframed to juxtapose it with the commercial content of the prospective defendant. Probably, most observers would find little new and substantial benefit to the public in most cases of this type, although the analysis is necessarily dependent on the specific factual context. It is possible to conceive of cases of this type in which an argument like that which the district court made in Arriba Soft could be made. Consider, for example, a version of the Total News case in which the defendant customized news delivery by extracting and collecting specific kinds of news items. A notional user might want to see daily news items about the electronics industry. Total News Redux might extract the headlines of such news stories each day and then list them in a framed page along with links to the full stories. Arguably, such a service would provide the public with a beneficial new use. Given the needle and haystack problem, it is unlikely that the content of such Total News Redux pages would act as a substitute in the market place for the originals, although if it did that would tip the balance away from fair use. The case for the notional Dilbert page and similar pages is weaker, because the derivative use is less clearly the provision of a new benefit to the public, rather than re-providing the old use. In any event, the arguments either way tend to parallel those considered above for Gator and eZula.

Finally, another point deserves brief consideration, but no more than that. Would the analysis be different if, instead of considering these adaptations and uses of another's prior work under section 106(2)'s derivative work clause we considered them under section 106(5)'s public display clause, as the court of appeals did in the Arriba Soft case? At the outset, it must be recognized that a focus on display rather than preparation of a derivative work magnifies the difficulties that exist with the Ninth Circuit's Arriba Soft analysis. As will appear, assuming that the difficulties are overcome, the outcome is not changed.

First, it is questionable that the display of a substantially modified work (especially one that has been transformed by the defendant's conduct) is a display of "the work" rather than a display of something else. That is one reason why a derivative work analysis is superior to a public display analysis: the issue of "the work" is finessed. Further, although section 106(5)'s prohibition does not in terms require a copy, section 101's definition of "display" does so, and it is questionable that what is displayed is a "copy" of the work, i.e., a material object in which the work is fixed. The argument for a copy of the work would have to be (i) that the display, although transitory, has sufficient duration to qualify as fixed, and (ii) if that which is displayed embodies a substantial amount of expressive content from the original, so that it is substantially similar to the original, then what is displayed is not just something else but rather is the work itself. In sum, it is uncertain whether display of a derivative work based on a given work is a display of the given work, but when the alleged displayer is indubitably the preparer the question is academic, since preparation per se is infringement.
Second, who is doing the displaying? Contrary to the unstated assumptions of the Ninth Circuit in Arriba Soft, in iframing and linking the computer user (or her system) is at least arguably doing the displaying, rather than the third party who causes the inline linking or iframing. The third party uses them to create a situation that facilitates the PC user in doing the displaying, by directing the PC user's browser to seek and accept a signal from the copyright owner's Web page. By the same token, Gator could say that the copyright owner (say, Jimmy of Jimmy World) is doing the displaying and Gator just supplies a glorified footnote citation for the instruction of the browser of the user whose system is receiving a signal from Jimmy's Web page. The glorified footnote citation instructs the browser where to get some further material. Gator could also say that Jimmy should be considered the one who did the displaying, by putting the Jim World material up on the Internet in the first place. To be sure, the rejoinder is available that all of them are doing the displaying in parallel with one another.
Well, perhaps the second point is a draw. But when multiple actors are involved in causation, the legal system often uses policy considerations to determine that a single one of the actors proximately caused the complained-of act. Often, if the plaintiff is an important contributor to the occurrence of the complained-of act, the legal system denies recovery under a causation rubric or pursuant to a doctrine such as contributory negligence or volenti non fit injuria. One might even invoke attractive nuisance. Because the offended Web site proprietor was a significant contributor to the complained-of occurrence (linking or iframing), it would be appropriate for a court either to say that the offended Web site proprietor displayed the image (proximately caused the display) or to adopt the next rule (implied license or estoppel).
Third, by putting the material up on the Internet without even a notice not to link (for whatever legal force that notice would have), the copyright owner submitted to the customs of the Internet, which are to link freely whenever one wants to do so or at least whenever not asked to refrain. In other words, there is an implied license to link or an equitable estoppel against complaining about it. In addition, the offended Web site proprietor (say, Jimmy) put the material up on the Internet without including in his Web page's code any commands to limit unwanted linking. That could have been done cheaply and without much effort. Web sites exist that contain such scripts. Given the relative ease in adopting blocking expedients, and the great administrative inconvenience for search engine proprietors to try to ascertain the uncommunicated desires of perhaps thousands of potential linkees, a Web site proprietor's failure to adopt them arguably amounts to consent or even to making her conduct the proximate cause of the undesired linking. Simple software expedients also exist for advising search engine cyberspace robots ("bots" and "spiders") not to take data about a site using the expedient.
Besides, it is all academic. The defense of fair use is as available against a charge of infringement by public display as it is against one of unauthorized preparation of a derivative work. The four factors do not play out any differently. All that a focus on display accomplishes is, at best, to make the analysis awkward and non-intuitive, even assuming that the preceding difficulties can be overcome. The limited display-right case-law is directed mainly to other issues and it provides "little illumination" of this issue.

Regardless of how individual cases may come out under the proposed new test, it is seen that using the test will provide greater rationality than a nonspecific appeal to an undefined transformativeness. Defining transformativeness, or whatever it is that justifies an unconsented-to preparation of a derivative work, in terms of the public interests that § 107 and copyright law in general serve is more likely to lead to intuitively reasonable results. As applied to the several hypothetical Internet-related cases addressed in these pages, the test appears to produce results consistent with intuition. It may therefore be helpful in advancing legal analysis toward a general theory of copyright liability for preparation of derivative works.