1976 Copyright Act

17 U.S.C. § 101 (definition of derivative work):
      . . . a work based upon one or more preexisting works such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship is a “derivative work.”

17 U.S.C. § 106
      [T]he owner of copyright under this title has the exclusive rights to do and to authorize any of the following:   . . .
        (2) to prepare derivative works based upon the copyrighted work;
      (3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending; . . . .

17 U.S.C. § 109. Limitations on exclusive rights: Effect of transfer of particular copy or phonorecord
    (a) Notwithstanding the provisions of section 106(3), the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord. . . .

17 U.S.C. § 117. Limitations on Exclusive Rights: Computer Programs.
      Notwithstanding the provisions of section 106, it is not an infringement for the owner of a copy of a computer program to make or authorize the making of another copy or adaptation of that computer program provided:
      (1) that such new a copy or adaptation is created as an essential step in the utilization of the computer program in conjunction with a machine and that it is used in no other manner. . . .

Notes

1. Section 106(2) gives copyright owners the exclusive right "to prepare derivative works based upon the copyrighted work" and to authorize their preparation. Preparation of a derivative work does not imply embodiment in a tangible copy, such as a paper writing or recordation in a magnetic disk. The legislative history of the 1976 Act indicates Congress’ odd concern to protect owners of copyright in pantomimes and similar works, which might be the basis for a derivative work without recordation. In legislating to protect pantomimes, dumb shows, and choreography, Congress deliberately omitted the requirement of fixation in a copy, characteristic of reproduction and distribution under clauses (1) and (3) of section 106. For no particular reason, however, Congress expanded derivative-work protection against infringement well beyond dumb shows and similar works; it dropped any requirement of a copy for works derivative of books and other literary works, despite the absence of any expression of felt need for such expansion. Thus, unauthorized preparation of a derivative work is infringement regardless of whether the defendant stores the derivative work in a permanent memory.

2. Are the two sentences of the definition independent of one another? Are they even at cross purposes? A work consisting of editorial revisions, annotations, elaborations, or other modifications is unlikely to be a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, or art reproduction (it might be an abridgement or condensation but such works are hardly important enough to deserve mention). The first sentence is more of a definition in terms of characteristics: a derivative work is a transormation of another work, but then the first sentence closes with a catalog of known forms of transformation.

3. Does the use of the word “work” here imply that there must be a work of authorship in the constitutional sense? That is, must a derivative work have some minimum of originality so that its creator is an author per Article I, section 8, clause 8? The Batlin decision in the Second Circuit (L. Batlin & Son, Inc. v. Snyder, 537 F.2d 486 (2d Cir. 1976)) holds that it does — for copyright protection to attach to a derivative work. But Annie Lee in the Seventh Circuit says that it is unresolved whether the same rule applies for a claim of infringement to prevail against a supposed derivative work, and reasons on the basis of the assumption (arguendo) that a set of non-original derivative works may exist.

4. The second sentence of the definition simply enumerates a few examples of editorial modifications, and then ends the catalog with the statement that these and other editorial modifications qualify as derivative works if they are original. But saying that these examples qualify if they are original does not necessarily mean that others (such as the items listed in the first sentence) cannot qualify unless also original. About all that one can get out of this mess is that a subsequent work based on an earlier work is a derivative work if it is a transformation of the first work or is an editorial modification that possesses enough originality for it to be a work of authorship itself. What is a transformation? Is it ejusdem generis or diffrerent in kind from a recasting or adaptation, also mentioned at the end of the first sentence?

Consider a language translation done by a computer program, such as the translation program associated with Google. It is a work, but is it a work of authorship? It satisfies the first sentence of the definition, and it may even be "recast" within the meaning of the first sentence, last few words. Can it be original? Doubtful, given the machine authorship. Is this an example of a non-original derivative work? 5. Which, if any, of the following kinds of conduct amount to preparation of a derivative work?

• Item B is placed next to item A.
  
  • See status bar demo. (Look at bottom of browser screen.)
    
  • See verbose status bar demo.
    
  • See framing demo. (The framed work, A, is the Web page at right center. All the rest of the boxes exemplify B.)
  
  
• Item B is sequenced to appear immediately after item A appears, on a monitor screen. Each image fills an entire screen.
  
  
• Item B is placed on top of item A, so that B obscures or covers up some part of A to make it at least partially invisible. (Pop-up blockers prevent these displays.)
  
  • See flying box 1.
  • See flying box 2.
  
  
• Item B is a filter placed over item A, changing its apparent colors or adding coloring to a black and white image A. See Mona Goes Psychedelic.
  
  
• Item B is an irregular lens placed over item A, distorting its shape. See Warped Mona Lisa.

Blazon, Inc. v. De Luxe Games Corp.
United States District Court
268 F. Supp. 416 (S.D.N.Y. 1965)

Tenney, District Judge.

[The defendant bought a copy of the plaintiff's hobby horse toy War Cloud, painted it another color, and put it on display in the defendant's showroom under the name Thunder.]

Plaintiff moves herein for a preliminary injunction to restrain defendant from further infringing plaintiff's copyrighted work. The alleged infringing item is defendant's hobby horse named Thunder which plaintiff asserts infringes upon its copyrighted hobby horse War Cloud.

Plaintiff's complaint is predicated on the assumption that the horse displayed in defendant's showroom and seized pursuant to a writ is the alleged infringing item. It is clear, however, that the seized and displayed item is in fact plaintiff's own horse, admittedly bought by defendant and displayed by it in its showroom.

It is further not disputed that defendant repainted plaintiff's item and in the process painted over the copyright notice, and, in addition, it appears that plaintiff's trademark was replaced with its own. While that much is not disputed, there is much dispute as to the reasons for defendant's actions, the use to which the item was put, and statements made by defendant's salesmen with respect to the item.

Insofar as the horse seized and displayed is concerned, it is clear that plaintiff cannot, based on that use of the item, ground an action for copyright infringement.

It is clear that before there can be infringement there must be both an averment and some proof of copying, and as a matter of logic there can be no copying in the case at bar where the horse seized and alleged to copy War Cloud is in fact War Cloud, nor is there an infringement upon any of plaintiff's other protected rights by reason of the display of the copyrighted work.

The Copyright Act grants to the copyright proprietor the exclusive right to reprint, publish, copy and vend the copyrighted work, but it gives him no further right of control over the use or disposition of the individual copies of the work once he has sold or otherwise disposed of them.

The use of a copyrighted work is not an infringing act if such use does not fall within the scope of those rights expressly granted to the copyright proprietor. In the case at bar, the rights reserved to the plaintiff include the right to “print, reprint, publish, copy and vend the copyrighted work.”

There clearly is no infringement herein by defendant on the right to print or reprint the copyrighted work. The only possible rights infringed upon are those of copying, vending and/or publishing. [The statute then in effect, the 1909 Copyright Act, did not expressly refer to derivative works.]

The statute includes the right to vend and publish as a protected right, as a complement to the preservation of the right to copy. However, once the item has been lawfully obtained, as in the case at bar, the “first sale” doctrine would apply and the proprietor thereafter loses his right to control its subsequent vending and/or publication.

Similarly, insofar as the right to copy is concerned, there is no tangible object that is a reproduction of the original work; in fact there has been no reproduction whatsoever.

Accordingly, there has been no infringement of any rights reserved to plaintiff as a result of the display by defendant of a lawfully-acquired model of plaintiff's hobby horse. See also Scarves By Vera, Inc. v. American Handbags, Inc., 188 F. Supp. 255 (S.D.N.Y. 1960), wherein the defendants purchased plaintiff's copyrighted towels and incorporated them into their ladies’ handbags, without infringement.

Notes

1. This case was decided under the 1909 Act, which did not expressly single out preparing derivative works as a separate kind of infringing act. The issue instead was whether the accused copyist made or reproduced a copy of the protected work. In Blazon, repainting a copyright-protected product was held not to constitute making or reproducing a copy. In Scarves By Vera, sewing a number of copyright-protected towels together to form a handbag was similarly held not to constitute making or reproducing a copy. As the Blazon court said, “ there is no tangible object that is a reproduction of the original work; in fact there has been no reproduction whatsoever.” Would you expect the same result under the current act? In Precious Moments v. a Infantil, 971 F. Supp. 66 (D.P.R. 1997), the court refused injunctive relief to a copyright owner that had licensed its art works to a fabric manufacturer; the licensee then sold fabric bearing the art work to the defendant, which then made baby bedding from it.

2. What would the defendant have to have done to the copy of the work that it bought to be liable? Would fastening a top hat on War Cloud’s head and dressing it up in a tuxedo suffice? Would placing it on a merry-go-round together with a lion and unicorn work?

3. This case is representative of a doctrine that making de minimis changes to a copy of the work that previously emanated from the copyright owner does not constitute an act of infringement. For a case involving sufficient alteration to the underlying work to establish infringement, see Peker v. Masters Collection, 96 F.Supp.2d 216 (E.D.N.Y. 2000). In Peker the defendant bought poster prints emanating from the plaintiff for about $5, painted over them to make them appear to be oil paintings, and sold the resulting products for several hundred dollars. The court described the process as follows:

To make each oil painting replica, Masters treats a poster with a thin coat of acrylic paint, allowing the poster's ink layer to be separated from its paper backing without ruining the image. The acrylic layer, now bearing the poster's ink image, is then mounted on a canvas. Once mounted, Masters employs specially trained artists to apply oil paint in brush strokes to the image, attempting to match the color and style of the original painting. After applying the brush strokes, a thin veneer of protective varnish is applied, similar to the type of varnish used for oil paintings. The new oil painting replica, complete with tangible "bumps" where the paint has been applied, is then placed in a museum quality frame and sold.

The court held the resulting product to be an infringing reproduction but not a derivative work. The court said that the product lacked sufficient originality to be a derivative work. It is arguable that the latter ruling failed to take into account the limited quantum of originality required for a derivative work. 17 U.S.C. § 101 gives art reproductions as examples of derivative works, and in Alfred Bell & Co. v. Catalda Fine Arts, Inc.,191 F.2d 99 (2d Cir. 1951), the court held mezzotint reproductions of paintings in the public domain to be copyright-protected against copying. On the other hand, a later decision of the same court held that "mere reproduction of a work of art in a different medium" is not of itself enough to satisfy the requirement of originality in a derivative work; "there must be at least some substantial variation, not merely trivial variation such as may occur in the translation to a different medium." L. Batlin & Son, Inc. v. Snyder, 536 F.2d 486 (2d Cir.) (en banc), cert. denied, 429 U.S. 857 (1976) (plastic replicas of cast iron "Uncle Sam" banks held unoriginal under 1909 Act and therefore not protected against infringement). See also Durham Indus., Inc. v. Tomy Corp., 630 F.2d 905 (2d Cir. 1980) (similar ruling under 1976 Act as to plastic Mickey Mouse and Donald Duck toys made by two competing Disney licensees).

Paramount Pictures Corp. v.
Video Broadcasting Systems, Inc.
United States District Court
724 F.Supp. 808 (D. Kan. 1989)

Crow, District Judge.

The case comes before the court on the plaintiff's motion for a preliminary injunction.

Paramount Pictures Corporation (Paramount), for over 75 years, has been in the business of producing and distributing motion pictures. In 1979, Paramount began its home video business through its wholly-owned subsidiary, Paramount Home Video (PHV). PHV owns and obtains rights to reproduce and distribute videocassettes of motion pictures and programs recently produced by Paramount or independent producers, as well as videocassettes of those motion pictures held in Paramount's library of films. Many of Paramount's sales are to distributors who then sell the videocassettes to retailers who, in turn, rent or sell the videocassettes to the public.

Paramount became the first motion picture studio to include commercials at the beginning of its produced videocassettes. PHV has placed Pepsi commercials on six videocassettes of Paramount pictures. Under its contract with Pepsi, PHV retains the authority to "reasonably approve" the content of Pepsi's video advertisement, and PHV is precluded from placing paid advertisements other than Pepsi's on the videocassette.

Paramount holds certain copyrights in motion pictures and videocassettes as author and owner, author and licensee, or as licensee. Paramount places on the recorded videotape portion and the plastic cartridge an "FBI Copyright Warning" that states the videocassette can only be used for non-commercial private exhibition in homes and any public performance or copying of it is prohibited by copyright laws.

Defendant Tim Mead is the sole executive officer of defendant Video Broadcasting Systems, Inc. (VBS). Defendant Video Broadcasting System of St. Louis is apparently a division of VBS. VBS is in the business of selling, producing and placing advertisements on the blank or lead-in tape of videocassettes rented or sold by the video retail stores to the public. VBS charges its advertising clients a fee for each videocassette upon which the advertisement is recorded. The video retail stores are in turn paid a fee for those advertisements placed upon their videocassettes.

As of June 9, 1989, VBS had forty-four active advertising clients, and their advertisements appear on videocassettes rented by twenty video retailers in Wichita, Kansas. It is VBS' policy to record the advertisements only on the blank tape preceding the FBI warning.

VBS has recorded advertisements on videocassettes containing Paramount motion pictures and bearing Paramount's trademarks. Paramount did not authorize or consent to the placement of these advertisements, some of which displayed Coca-Cola products.

Plaintiff seeks to enjoin generally defendants from altering Paramount videocassettes by the addition of unauthorized advertisements, from creating and distributing derivative works from works in which plaintiff owns or is the exclusive licensee of the copyright, from interfering with plaintiff's prospective contractual relations for authorized advertisements, and from "shipping, delivering, holding for sale, distributing, returning, transferring, or otherwise moving or disposing of in any manner" videocassettes protected by plaintiff's copyright which have been altered by defendants prior to rental or sale.

As one of its copyright claims, plaintiff alleges that defendants' addition of the unauthorized advertisements constitutes unauthorized editing of a copyrighted work and, therefore, a copyright infringement. Plaintiff does not ground this claim on the infringement of any right found in 17 U.S.C. § 106, and instead relies upon the following decisions: WGN Continental Broadcasting Co. v. United Video, 693 F.2d 622 (7th Cir.1982); Gilliam v. American Broadcasting Co., 538 F.2d 14 (2d Cir. 1976); National Bank of Commerce v. Shaklee Corp., 503 F.Supp. 533 (W.D. Tex. 1980).

Aware of the role and stature of these decisions in the general field of copyright law, this court is reluctant to extend their holdings beyond their controlling facts. The court considers its approach appropriate, since the Supreme Court has stated that a person does not infringe a copyright when he makes an unauthorized use of the protected work but in a manner outside the scope of any of the copyright holder's exclusive rights. Twentieth Century Corp. v. Aiken, 422 U.S. 151, 155 (1975).

In WGN, defendant did not retransmit WGN's teletext and instead substituted teletext supplied by another customer. In deciding whether WGN's copyright on the television program included the teletext in the vertical blanking period, the Seventh Circuit began with considering the Copyright Act's definition of "audiovisual work" as "a series of related images which are intrinsically intended to be shown by the use of machines...." United Video conceded that WGN's copyright for the program also covered the teletext as one of its related images.

The Seventh Circuit, nevertheless, stated in dicta that even if the blanking intervals were not used by WGN that United Video could not use them without WGN's permission, citing the Shaklee case as authority. The Seventh Circuit offered no reasoning for this statement other than the analogy of a book publisher leaving the inside covers blank and the book seller placing the Lord's Prayer on them to increase sales.

The pertinent ruling of the Second Circuit in the Gilliam case is that a licensee infringes a copyright where it publishes the protected work after making extensive, unauthorized changes which impair the integrity of the original work. This court has already observed that the significant editing changes made by ABC to the "Monty Python" programs far exceed in scope and effect the defendants' addition of a local advertisement to the front of a videocassette.

The Shaklee case involved a book written by Heloise, a newspaper columnist, who wrote about household hints and also collected them for her books. During her career, Heloise never endorsed a specific product and maintained a policy of referring to all products by their generic name. Shaklee contracted with Benjamin Company, owner of the paperback publishing rights of Heloise's books, to purchase a number of Heloise's books adapting them into a special Shaklee edition. Among the changes, the front cover identified it as a special edition and the back cover outlined the categories of Shaklee products. Scattered throughout the inside of the book were sixteen advertisements for Shaklee products, including advertisements at the end of each chapter. All of these changes were made without the consent of Heloise. Because there was "very little authority relevant to the question whether Shaklee's addition of advertisements to the printed text of Heloise's book constitutes copyright infringement," the district court of Texas relied upon the reasoning in Gilliam in finding an infringement.

This court is not persuaded that the case sub judice comes within the circumstances and teachings of these three decisions. Paramount does not allege that defendants were granted certain rights in the motion pictures which they exceeded or abused. This is not a case where the substance of the protected work is significantly altered and its quality and integrity compromised by a licensee or grantee who oversteps his authority. This is not a case where the equities so obviously favor the copyright owner that the court must struggle with the notion of "moral rights." What emerged in Gilliam, was applied in Shaklee, and later noted in dicta of WGN is the right to check distortion or truncation of a copyrighted work. This court is not satisfied that the result of defendants' addition is the distortion of plaintiff's motion picture.

Plaintiff next claims that by adding the advertisements to the videocassette the defendants have created unauthorized derivative works. The Copyright Act defines a derivative work as a work "based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted."

A work will be considered a derivative work only if it would be considered an infringing work if the material which it has derived from a preexisting work had been taken without the consent of a copyright proprietor of such preexisting work. The plaintiff has not presented any authority to support the conclusion that the mere addition of a commercial to the front of a videocassette recasts, transforms, or adapts the motion picture into what could represent an "original work of authorship."

The instant case does not resemble in any way the removing of a page from an artwork book and mounting it onto a tile as a separate piece of art for sale. Mirage Editions, Inc. v. Albuquerque A.R.T. Co., 856 F.2d 1341 (9th Cir.1988), cert. denied, 109 S.Ct. 1135 (1989). Nor can the court appreciate any comparison to the decision of Midway Mfg. Co. v. Artic Intern., Inc., 704 F.2d 1009 (7th Cir.), cert. denied, 464 U.S. 823 (1983), where the court held that defendant's circuit board which speeded up the play of plaintiff's video game was a derivative work, because it was a "substantially different product from the original game" in making the game more challenging and exciting. In both cases, the derivative work transformed, adapted or recast the original work into a new and different one.

While defendants' advertisement is an original work, the court does not recognize the addition of it to a videocassette in any way recasting, transforming or adapting the motion picture. The result is not a new version of the motion picture.

Plaintiff's final copyright claim is the unlawful distribution of mutilated versions or derivative works. This claim depends upon the success of either of the prior two claims regarding mutilation of a copyrighted work or the preparation of a derivative work. Since the court has found little likelihood of success on both of these claims, the distribution claim also fails to carry the day. Furthermore, in the absence of a derivative work, the plaintiff's distribution claim is barred by the first sale doctrine which provides that when a copyright owner parts with title to a particular copy of his copyrighted work, he divests himself of his exclusive right to vend that particular copy. Plaintiff has not shown a substantial likelihood of success on any of its copyright claims.

Plaintiff's motion for a preliminary injunction is denied.

Notes

1. This decision helpfully rounds up most of the usual suspects, summarizes them, and thus lets you use it like Cliff Notes so that you don't need to read the actual decisions. Like Blazon, but under the current (1976) Act, it finds the changes made too insubstantial to involve preparation of an unauthorized derivative work.

2. I sell small decorative statuettes for home decoration purposes. One is a bust of J.S. Bach, which you buy for your shop Barocco, which caters to lovers of baroque and classical music who detest anything written after 1805. I have affixed to the bottom of this bust a label urging purchasers of the bust to buy some of my other great music busts, Wagner, Tchaikovsky, Borodin, and John Cage. You remove the labels before placing the Mozart busts in your shop. Copyright infringement under § 106(2)?

Then, to add insult to injury, you put your own labels on the bust, advertising your bumper stickers that state: "Go for Barocco, spurn Romantico trasho." Unauthorized preparation of a derivative work? Is that like what happened in Shaklee?

Midway Mfg. Co. v. Artic International, Inc.
United States Court of Appeals
704 F.2d 1009 (7th Cir.), cert. denied, 464 U.S. 823 (1983)

Cummings, Chief Judge.

This appeal involves questions regarding the scope of protection video games enjoy under the 1976 Copyright Act.

Plaintiff manufactures video game machines. Inside these machines are printed circuit boards capable of causing images to appear on a television picture screen and sounds to emanate from a speaker when an electric current is passed through them. On the outside of each machine are a picture screen, sound speaker, and a lever or button that allows a person using the machine to alter the images appearing on the machine's picture screen and the sounds emanating from its speaker. Each machine can produce a large number of related images and sounds. These sounds and images are stored on the machine's circuit boards – how the circuits are arranged and connected determines the set of sounds and images the machine is capable of making. When a person touches the control lever or button on the outside of the machine he sends a signal to the circuit boards inside the machine which causes them to retrieve and display one of the sounds and images stored in them. Playing a video game involves manipulating the controls on the machine so that some of the images stored in the machine's circuitry appear on its picture screen and some of its sounds emanate from its speaker.

Defendant sells printed circuit boards for use inside video game machines. One of the circuit boards defendant sells speeds up the rate of play – how fast the sounds and images change – of one of plaintiff's video games, when inserted in place of one of the Galaxian machine's circuit boards. Another of defendant's circuit boards stores a set of images and sounds almost identical to that stored in the circuit boards of plaintiff's “PacMan” video game machine so that the video game people play on machines containing defendant's circuit board looks and sounds virtually the same as plaintiff's Pac-Man game.

Plaintiff sued defendant, alleging that defendant's sale of these two circuit boards infringes its copyrights in its Galaxian and Pac-Man video games. The district court granted plaintiff's motion for a preliminary injunction and denied defendant's motion for summary judgment. The district court's order enjoins defendant from manufacturing or distributing circuit boards that can be used to play video games substantially similar to those protected by plaintiffs copyrights. Defendant appeals from that order on the ground that plaintiff has not shown a likelihood of succeeding on the merits of its claim of copyright infringement. We affirm for the reasons that follow.

Plaintiff claims that its Pac-Man and Galaxian video games are “audiovisual works” protected under the 1976 Copyright Act. Section 101 of that Act defines audiovisual works as works that consist of a series of related images which are intrinsically intended to be shown by the use of machines or devices such as projectors, viewers, or electronic equipment, together with accompanying sounds, if any, regardless of the nature of the material objects, such as films or tapes, in which the works are embodied.

It is not immediately obvious that video games fall within this definition. The phrase “series of related images” might be construed to refer only to a set of images displayed in a fixed sequence. Construed that way, video games do not qualify as audiovisual works. Each time a video game is played, a different sequence of images appears on the screen of the video game machine – assuming the game is not played exactly the same way each time. But the phrase might also be construed more broadly to refer to any set of images displayed as some kind of unit. That is how we construed it in WGN Continental Broadcasting Co. v. United Video, Inc., 693 F.2d 622 (7th Cir. 1982), where we held that a news program and a thematically related textual display (“teletext”) transmitted on the same television signal, but broadcast on different television channels, constituted a single audiovisual work. We see no reason to construe it more narrowly here. As we noted there, the legislative history of the Copyright Act of 1976 suggests that “Congress probably wanted the courts to interpret the definitional provisions of the new act flexibly, so that it would cover new technologies as they appeared, rather than to interpret those provisions narrowly and so force Congress periodically to update the act.”

There is a second difficulty that must be overcome if video games are to be classified as audiovisual works. Strictly speaking, the particular sequence of images that appears on the screen of a video game machine when the game is played is not the same work as the set of images stored in the machine's circuit boards. The person playing the game can vary the order in which the stored images appear on the screen by moving the machine's control lever. That makes playing a video game a little like arranging words in a dictionary into sentences or paints on a palette into a painting. The question is whether the creative effort in playing a video game is enough like writing or painting to make each performance of a video game the work of the player and not the game's inventor.

We think it is not. Television viewers may vary the order of images transmitted on the same signal but broadcast on different channels by pressing a button that changes the channel on their television. In the WGN case, we held that the creative effort required to do that did not make the sequence of images appearing on a viewer's television screen the work of the viewer and not of the television station that transmitted the images. Playing a video game is more like changing channels on a television than it is like writing a novel or painting a picture. The player of a video game does not have control over the sequence of images that appears on the video game screen. He cannot create any sequence he wants out of the images stored on the game's circuit boards. The most he can do is choose one of the limited number of sequences the game allows him to choose. He is unlike a writer or a painter because the video game in effect writes the sentences and paints the painting for him; he merely chooses one of the sentences stored in its memory, one of the paintings stored in its collection.

Defendant suggests another reason why plaintiffs video games are not copyrightable – because the printed circuit boards in which the games are fixed are patentable. We reject this argument for the same reason District Judge Decker rejected it. Plaintiff claims copyrights in audiovisual works – the distinctive set of images and sounds stored in its circuit boards. It does not claim copyrights in the design of those circuit boards, so it matters not that those designs may be patentable. Recording images and sounds in circuit boards does not destroy their copyrightability any more than does recording them on rolls of celluloid film.

The final argument of defendant's that we address is that selling plaintiff's licensees circuit boards that speed up the rate of play of plaintiff's video games is not an infringement of plaintiff's copyrights. Speeding up the rate of play of a video game is a little like playing at 45 or 78 revolutions per minute (“RPMs”) a phonograph record recorded at 33 RPMs. If a discotheque licensee did that, it would probably not be an infringement of the record company's copyright in the record. One might argue by analogy that it is not a copyright infringement for video game licensees to speed up the rate of play of video games, and that it is not a contributory infringement for the defendant to sell licensees circuit boards that enable them to do that.

There is this critical difference between playing records at a faster than recorded speed and playing video games at a faster than manufactured rate: there is an enormous demand for speeded-up video games but there is little if any demand for speeded-up records. Not many people want to hear 33-RPM records played at 45 and 78 RPMs, so that record licensors would not care if their licensees play them at that speed. But there is a big demand for speeded-up video games. Speeding up a video game's action makes the game more challenging and exciting and increases the licensee's revenue per game. Speeded-up games end sooner than normal games and consequently if players are willing to pay an additional price-per-minute in exchange for the challenge and excitement of a faster game, licensees will take in greater total revenues. Video game copyright owners would undoubtedly like to lay their hands on some of that extra revenue and therefore it cannot be assumed that licensees are implicitly authorized to use speeded-up circuit boards in the machines plaintiff supplies.

Among a copyright owner's exclusive rights is the right “to prepare derivative works based upon the copyrighted work.” 17 U.S.C. § 106(2). If, as we hold, the speeded-up Galaxian game that a licensee creates with a circuit board supplied by the defendant is a derivative work based upon Galaxian, a licensee who lacks the plaintiff's authorization to create a derivative work is a direct infringer and the defendant is a contributory infringer through its sale of the speeded-up circuit board.

Section 101 of the 1976 Copyright Act defines a derivative work as “a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted.”

It is not obvious from this language whether a speeded-up video game is a derivative work. A speeded-up phonograph record probably is not. But that is because the additional value to the copyright owner of having the right to market separately the speeded-up version of the recorded performance is too trivial to warrant legal protection for that right.

A speeded-up video game is a substantially different product from the original game. As noted, it is more exciting to play and it requires some creative effort to produce. For that reason, the owner of the copyright on the game should be entitled to monopolize it on the same theory that he is entitled to monopolize the derivative works specifically listed in § 101.

The current rage for video games was not anticipated in 1976, and like any new technology the video game does not fit with complete ease the definition of derivative work in § 101 of the 1976 Act.

But the amount by which the language of § 101 must be stretched to accommodate speeded-up video games is, we believe, within the limits within which Congress wanted the new Act to operate. Affirmed.

Notes

1. Artic's speed-up kit is a device for creating unauthorized derivative works. Playing 33-RPM records at 78 RPM is not unauthorized conduct because few people are interested in hearing 33-RPM records play at 78 RPM. In contrast, many people want speeded-up games. Therefore, the conduct is unauthorized and infringing. Explain that.

2. The court rests its legal analysis of unauthorized preparation of a derivative work on the premise that “video game copyright owners would undoubtedly like to lay their hands on some of that extra revenue” generated by operating games with a speed-up kit. Explain how the court's legal analysis — the laying hands on doctrine — applies more broadly.

Consider first the case of Banks v. Willie Sutton, in which an answer was sought to the question of why Willie Sutton kept visiting banks, where he was unwelcome. Consider next the case of King David v. Uriah (aff'd sub nom. In re Uriah's Wife Bathsheba). What result would Artic support in those cases?

Returning to Midway v. Artic, do you suppose that Artic or the purchasers and owners of Galaxian machines (so-called video game operators) would like to lay their hands on some of that extra revenue? How should the court determine which laying-on of hands shall have precedence?

3. Is playing the Galaxian video game with a speed-up kit more like (a) speeding a 33-RPM record up to 78 RPM, (b) painting a moustache on the Mona Lisa, (c) painting War Cloud blue, or (d) writing notes in the margins of the instant work (or putting question marks in the margins)?

Explain the utility of this form of legal analysis and dispute-resolution to a hypothetical foreign visitor or student, or to a non-lawyer relative (e.g., your mother or spouse). What result? What inference?

How would you suggest the determination be made whether supplying speed-up kits is copyright infringement?

4. Suppose that I create a computer program Accelerate!, which speeds up the operation of word processor, spreadsheet, and database programs. Is running one of those programs with Accelerate! a copyright infringement?

Suppose that I create a computer program UF Interface, which supersedes the ugly, unfriendly, difficult user interfaces of other programs and provides, instead, a warm, cute, easy to use, user friendly user interface. Same question.

What are the likely economic consequences in the software industry if the foregoing conduct is not held copyright infringement? If it is? Assess the trade-offs.

Foresight Resources Corp. v. Pfortmiller
United States District Court
719 F. Supp. 1006 (D. Kan. 1989)

O'Connor, U.S.D.J.

This matter is before the court on plaintiff's motion for a preliminary injunction. Plaintiff seeks an injunction prohibiting defendant Pfortmiller from altering any versions of the HK Digitizer, NeoCAD/EuroCAD or Advanced Designer.

Defendant Pfortmiller testified, that, beginning with the plaintiff's copyrighted Drafix 1+ program, he added five files of his own creation to produce the HK Digitizer. Analysis of the text strings of Drafix 1+ and the HK Digitizer revealed that approximately 90% of the strings were identical. Hall-Kimbrell uses the HK Digitizer only in its asbestos removal consulting business. It does not sell computer software and has not attempted to sell either plaintiff's program or defendant's enhancement thereof.

Title 17, United States Code, section 117 states:

Notwithstanding the provisions of section 106, it is not an infringement for the owner of a copy of a computer program to make or authorize the making of another copy or adaptation of that computer program provided:

(1) that such new copy or adaptation is created as an essential step in the utilization of the computer program in conjunction with a machine and that it is used in no other manner, or

(2) that such new copy or adaptation is for archival purposes only and that all archival copies are destroyed in the event that continued possession of the computer program should cease to be rightful.

Any exact copies prepared in accordance with the provisions of this section may be leased, sold, or otherwise transferred, along with the copy from which such copies were prepared, only as part of the lease, sale, or other transfer of all rights in the program. Adaptations so prepared may be transferred only with the authorization of the copyright owner.

There is no question that Hall-Kimbrell is the lawful owner of a copy of the Drafix 1+ program. The resulting HK Digitizer is used solely in-house by Hall-Kimbrell and has not been released to any other purchaser of plaintiff's products. Whether defendant Pfortmiller's enhancement of the Drafix 1+ constituted an infringement of plaintiff's copyright, therefore, depends upon whether said enhancement was an "adaptation" within the meaning of § 117 and whether defendant Pfortmiller was "authorized" to make any adaptation to Hall-Kimbrell's copy of plaintiff's program.

There is a dearth both of legislative history and case law interpreting the word "adaptation," as used in § 117. As to the legislative history, the House Report accompanying § 117 states that the law "embodies the recommendations of the Commission on New Technological Uses of Copyrighted Works ["the Commission"] with respect to clarifying the law of copyright of computer software." H.R.Rep No. 96-1307 (Part I), reprinted in 1980 U.S. Code Cong. and Ad. News 6460, 6482. Indeed, several courts have relied upon the Commission's report in interpreting § 117's provisions. See, e.g., Vault Corp. v. Quaid Software Ltd., 847 F.2d 255 (5th Cir. 1988); Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d 1240 (3d Cir. 1983), cert. dismissed, 464 U.S. 1033. According to the Commission Report:

The conversion of a program from one higher-level language to another to facilitate use would fall within this right [of adaptation], as would the right to add features to the program that were not present at the time of rightful acquisition. These rights would necessarily be more private in nature than the right to load a program by copying it and could only be exercised so long as they did not harm the interests of the copyright proprietor.

Unlike the exact copies authorized as described above, this right of adaptation could not be conveyed to others along with the licensed or owned program without the express authorization of the owner of the copyright in the original work. Preparations of adaptations could not, of course, deprive the original proprietor of copyright in the underlying work. The adaptor could not vend the adapted program, under the proposed revision of the new law, nor could it be sold as the original without the author's permission.

Again, it is likely that many transactions involving copies of programs are entered into with full awareness that users will modify their copies to suit their own needs, and this should be reflected in the law. The comparison of this practice to extensive marginal note-taking in a book is appropriate: note-taking is arguably the creation of a derivative work, but unless the note-taker tries to copy and vend that work, the copyright owner is unlikely to be very concerned. Should proprietors feel strongly that they do not want rightful possessors of copies of their programs to prepare such adaptations, they could of course, make such desires a contractual matter.

Final Report of the National Commission on New Technological Uses of Copyrighted Works 13-14 (1978) (emphasis supplied, footnotes omitted).

With respect to the case law, there is no clear precedent to guide the court in this suit. Some courts have given § 117 a comparatively narrow interpretation. See, e.g., Micro-Sparc, Inc. v. Amtype Corp., 592 F. Supp. 33 (D. Mass. 1984); Midway Mfg. Co. v. Strohon, 564 F. Supp. 741 (N.D. Ill. 1983); Hubco Data Prods. Corp. v. Management Assistance, Inc., 219 U.S.P.Q. 450 (D. Idaho 1983). However, those cases are distinguishable on the grounds that they involved situations where the defendant's alterations to the plaintiff's software were designed for widespread marketing to third parties.

Moreover, the weight of the more recent cases and scholarly commentary is on the side of reading § 117 broadly, in conformity with the apparent intent of the Commission. See, e.g., Vault, supra; RAV Communications, Inc. v. Philipp Bros, Inc., No. 87 CIV 3366 (LLS) (S.D.N.Y. April 13, 1988), and Richard H. Stern, Section 117 of the Copyright Act: Charter of Software Users' Rights or an Illusory Promise?, 7 W. New Eng. L. Rev. 459 (1985).

Construing § 117 to cover the enhancements defendant made to Hall-Kimbrell's copy of plaintiff's program, in these circumstances, would serve two important goals of the copyright laws. On the one hand, allowing sophisticated software users to enhance copies of copyrighted programs they have purchased eliminates the need to choose between either buying the latest version of a program owner's copyright. At the same time, allowing such enhancements to be used only in-house preserves the market for improvements made by the copyright holder.

Like what constitutes an “adaptation,” there is some question as to the nature of the “authorization” that will suffice to bring an adaptation within the exception carved out by § 117. Again, scholarly commentary suggests that § 117 should not be restricted to prohibit owners from authorizing custom-made enhancements to their copies of copyrighted programs:

A large number of computer program owners, perhaps the overwhelming majority, are not capable of making their own adaptations to their computer programs. Typically, such users are not computer programmers, and they lack the skills and equipment necessary to make adaptations to existing computer programs. In the few cases involving vicarious activity that have been decided under section 117 to date, the courts have held that it is copyright infringement for a third party to adapt or copy a computer program for the owner of a computer program. The effect is to make the adaptation right under section 117 an illusory promise.

Richard H. Stern, Section 117 of the Copyright Act: Charter of Software Users' Rights or an Illusory Promise?, 7 W. New Eng. L. Rev. 459, 468 (1985) (footnote omitted).

In sum, the court holds that plaintiff has failed to demonstrate a substantial likelihood of success on the merits of its claim that the HK Digitizer violates plaintiff's copyright.

Notes

1. Section 117 is seldom invoked to justify a derivative-work computer program. The statute remains largely unexplored.

2. The next several cases involve non-computer, non-Internet works. They have been very influential, however, given the scarcity of appellate rulings on modifications of computer programs and Web materials. As you read these decisions, try to extrapolate from them to computer programs and Web materials.

Mirage Editions, Inc. v. Albuquerque A.R.T. Co.
United States Court of Appeals
856 F.2d 1341 (9th Cir. 1988), cert. denied, 489 U.S. 1018 (1989)

Brunetti, Circuit Judge

Albuquerque A.R.T. (appellant or A.R.T.) appeals the district court's granting of summary judgment in favor of appellees Mirage, Dumas, and Van Der Marck (Mirage). The district court, in granting summary judgment, found that appellant had infringed Mirage's copyright and issued an order enjoining appellant from further infringing Mirage's copyright.

Patrick Nagel was an artist whose works appeared in many media including lithographs, posters, serigraphs, and as graphic art in many magazines, most notably Playboy. Nagel died in 1984. His widow Jennifer Dumas owns the copyrights to the Nagel art works which Nagel owned at the time of his death. Mirage is the exclusive publisher of Nagel's works and also owns the copyrights to many of those works. Dumas and Mirage own all of the copyrights to Nagel's works. No one else holds a copyright in any Nagel work. Appellee Alfred Van Der Marck Editions, Inc. is the licensee of Dumas and Mirage and the publisher of the commemorative book entitled Nagel: The Art of Patrick Nagel (“the book”), which is a compilation of selected copyrighted individual art works and personal commentaries.

Since 1984, the primary business of appellant has consisted of: (1) purchasing artwork prints or books including good quality artwork page prints therein; (2) gluing each individual print or page print onto a rectangular sheet of black plastic material exposing a narrow black margin around the print; (3) gluing the black sheet with print onto a major surface of a rectangular white ceramic tile; (4) applying a transparent plastic film over the print, black sheet and ceramic tile surface; and (5) offering the tile with artwork mounted thereon for sale in the retail market. It is undisputed, in this action, that appellant did the above process with the Nagel book. The appellant removed selected pages from the book, mounted them individually onto ceramic tiles and sold the tiles at retail.

Mirage, Dumas and Van Der Marck brought an action alleging infringement of registered copyrights in the artwork of Nagel and in the book. Mirage also alleged trademark infringement and unfair competition under the Lanham Act and the state law of unfair competition.

Appellant moved for summary judgment on the Lanham Act and Copyright Act causes of action. The district court granted summary judgment as to the Lanham Act cause of action but denied summary judgment on the copyright cause of action. Mirage then moved for summary judgment on the copyright claim which was granted. The court also enjoined appellants from removing individual art images from the book, mounting each individual image onto a separate tile and advertising for sale and/ or selling the tiles with the images mounted thereon.

The Copyright Act confers upon the copyright holder exclusive rights to make several uses of his copyright. Among those rights are: (1) the right to reproduce the copyrighted work in copies, 17 U.S.C. § 106(1); (2) the right to prepare derivative works based upon the copyrighted work, 17 U.S.C. § 106(2); (3) the right to distribute copies of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease or lending, 17 U.S.C. § 106(3); and (4) in the case of literary, pictorial, graphic and sculptural works, including individual images, the right to display the copyrighted work publicly. The district court concluded appellant infringed the copyrights in the individual images through its tile-preparing process and also concluded that the resulting products comprised derivative works.

Appellant contends that there has been no copyright infringement because (1) its tiles are not derivative works, and (2) the “first sale” doctrine precludes a finding of infringement.

The Copyright Act, 17 U.S.C. § 101 defines a derivative work. The protection of derivative rights extends beyond mere protection against unauthorized copying to include the right to make other versions of, perform, or exhibit the work. What appellant has clearly done here is to make another version of Nagel's art works, and that amounts to preparation of a derivative work. By borrowing and mounting the preexisting, copyrighted individual art images without the consent of the copyright proprietors – Mirage and Dumas as to the art works and Van Der Marck as to the book – appellant has prepared a derivative work and infringed the subject copyrights.

Appellant's contention that since it has not engaged in “art reproduction” and therefore its tiles are not derivative works is not fully dispositive of this issue. Appellant has ignored the disjunctive phrase “or any other form in which a work may be recast, transformed or adapted.” The legislative history of the Copyright Act of 1976 indicates that Congress intended that for a violation of the right to prepare derivative works to occur “the infringing work must incorporate a portion of the copyrighted work in some form.” 1976 U.S. Code Cong. & Admin. News 5659, 5675. The language “recast, transformed or adapted” seems to encompass other alternatives besides simple art reproduction. By removing the individual images from the book and placing them on the tiles, perhaps the appellant has not accomplished reproduction. We conclude, though, that appellant has certainly recast or transformed the individual images by incorporating them into its tile-preparing process.

The “first sale” doctrine, which appellant also relies on in its contention that no copyright infringement has occurred, appears at 17 U.S.C. § 109(a). We recognize that, under the “first sale” doctrine as enunciated at 17 U.S.C. § 109(a) appellant can purchase a copy of the Nagel book and subsequently alienate its ownership in that book. However, the right to transfer applies only to the particular copy of the book which appellant has purchased and nothing else. The mere sale of the book to the appellant without a specific transfer by the copyright holder of its exclusive right to prepare derivative works, does not transfer that right to appellant. The derivative works right, remains unimpaired and with the copyright proprietors.

As we have previously concluded that appellant's tile-preparing process results in derivative works and as the exclusive right to prepare derivative works belongs to the copyright holder, the “first sale” doctrine does not bar the appellees’ copyright infringement claims.

Notes

1. Consider the following statement from The Ninth Circuit’s opinion:

What appellant has clearly done here is to make another version of Nagel's art works, and that amounts to preparation of a derivative work. By borrowing and mounting the preexisting, copyrighted individual art images without the consent of the copyright proprietors – Mirage and Dumas as to the art works and Van Der Marck as to the book – appellant has prepared a derivative work and infringed the subject copyrights.

What kind of copyright does Van Der Marck have in the book? How did A.R.T infringe that copyright? Is extraction of a data item (e.g., the atomic weight of iron) from a computer database preparation of a derivative work in violation of the database copyright owner's rights under the copyright law?

2. Is framing a picture the preparation of a derivative work? Suppose that it is a really ugly frame. Does that alter the case? Does the fact that you cut the picture out of a book before framing it alter the case? Is cutting the picture out, without framing it, preparation of a derivative work? Would you conclude that cutting a picture out of a book and framing it, as in this case, is more or is less of a recasting and transformation of the (pictorial) work than was painting War Cloud (a sculptural work) in the Blazon case?

3. Section 101 defines a derivative work as “a work based upon one or more preexisting works such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation or any other form in which a work may be recast, transformed, or adapted.” Must a work not listed in the enumeration, which is alleged to be covered by the catch-all clause at the end (“or any other form in which a work may be recast, transformed, or adapted”), be ejusdem generis with the things in the enumeration? Is framing a picture ejusdem generis with translation, musical arrangement, dramatization, fictionalization, etc.?

4. A buys copies of B’'s set of five diskettes comprising an integrated office package – word processor, spreadsheet, database manager, accounting, and communications. A cuts open the packages of five diskettes, repackages each one in a separate box, and sells the diskettes as individual items. The separate boxes are labelled, in plain lettering, B’s word processor program, B’s spreadsheet program, B’s database manager, B’s accounting program, and B’s communications program. Is this copyright infringement? Compare Burke & Van Heusen, Inc. v. Arrow Drug, 233 F. Supp. 881 (E.D. Pa. 1964). What would the Mirage court rule if B sued A for copyright infringement? If it decided Arrow Drug?

5. A buys copies of B’s word processor WordDaemon 5.2 and repackages the product with several disks of WD 5.2 “macros.” (Macros are short programs that permit a sequence of program operations that a user might want to carry out – such as italicizing a word, “cutting” a passage of text out and “pasting” it someplace else, taking the inside address from a letter and using it to address an envelope to the addressee, etc. – by a single keystroke such as ALT-I or by a short mnemonic.) A sells the new combination as a package. Is that copyright infringement under Mirage? Compare Fawcett Pub., Inc. v. Elliot Pub. Co., 46 F. Supp. 717 (S.D.N.Y. 1942).

6. WordDaemon Corp. sells its word processors in several grades or editions, including student and office grades, which sell for $49.99 and $399.99, respectively. The student-grade program lacks several features of the more expensive office-grade program. WD sells the student-grade program at a low price primarily to entice and habituate potential users, and also because it has benevolent motives in regard to impecunious students. WD offers an upgrade to the office edition of the program for $369.99, permitting purchasers of the student-grade product to turn in their old student-edition program diskettes for new office-grade diskettes.

A studies the WD program and prepares a program (original, noninfringing code), UpScaler, which when used in conjunction with the WD student grade program provides the user with many of the functions of the WD office grade program. A markets UpScaler two ways: (a) in a combination package including a copy of the student edition of WD, and (b) as a single unit, which the customer must combine with the customer’s own, previously purchased copy of the student edition. UpScaler sells for $125 as a single unit, and the combination package's price is $175.

Under Mirage, does A’s marketing the combination involves unauthorized preparation of a derivative work? Is A’s selling the single unit inducement of copyright infringement or contributory copyright infringement?

Annie Lee v. A.R.T. Co.
United States Court of Appeals for the Seventh Circuit
125 F.3d 580 (7th Cir. 1997)

Before Bauer, Easterbrook, and Diane P. Wood, Circuit Judges. Easterbrook, Circuit Judge.

Annie Lee creates works of art, which she sells through her firm Annie Lee & Friends. Deck the Walls, a chain of outlets for modestly priced art, is among the buyers of her works, which have been registered with the Register of Copyrights. A Deck the Walls store sold some of Lee's notecards and small lithographs to A.R.T. Company, which mounted the works on ceramic tiles (covering the art with transparent epoxy resin in the process) and resold the tiles.

Lee contends that these tiles are derivative works, which under 17 U.S.C. § 106(2) may not be prepared without the permission of the copyright proprietor. She seeks both monetary and injunctive relief. Her position has the support of two cases holding that A.R.T.'s business violates the copyright laws. Munaz v.Albuquerque A.R.T. Co., 38 F.3d 1218 (9th Cir. 1994), affirming without published opinion, 829 F. Supp. 309 (D. Alas. 1993); Mirage Editions, Inc. v. Albuquerque A.R.T. Co., 856 F.2d 1341 (9th Cir.1988). Mirage Editions, the only full appellate discussion, dealt with pages cut from books and mounted on tiles; the Ninth Circuit's brief order in Munaz concludes that the reasoning of Mirage Editions is equally applicable to works of art that were sold loose. Our district court disagreed with these decisions and entered summary judgment for the defendant.

Now one might suppose that this is an open and shut case under the doctrine of first sale, codified at 17 U.S.C. § 109(a). A.R.T. bought the work legitimately, mounted it on a tile, and resold what it had purchased. Because the artist could capture the value of her art's contribution to the finished product as part of the price for the original transaction, the economic rationale for protecting an adaptation as “derivative” is absent. See William M. Landes & Richard A. Posner, An Economic Analysis of Copyright Law, 17 J. Legal Studies 325, 353-57 (1989). An alteration that includes (or consumes) a complete copy of the original lacks economic significance. One work changes hands multiple times, exactly what § 109(a) permits, so it may lack legal significance too.

But § 106(2) creates a separate exclusive right, to “prepare derivative works,” and Lee believes that affixing the art to the tile is “preparation,” so that A.R.T. would have violated § 106(2) even if it had dumped the finished tiles into the Marianas Trench. For the sake of argument we assume that this is so and ask whether card-on-a-tile is a “derivative work” in the first place.

The district court concluded that A.R.T.'s mounting of Lee's works on tile is not an “original work of authorship” because it is no different in form or function from displaying a painting in a frame or placing a medallion in a velvet case. No one believes that a museum violates § 106(2) every time it changes the frame of a painting that is still under copyright, although the choice of frame or glazing affects the impression the art conveys, and many artists specify frames (or pedestals for sculptures) in detail. Munaz and Mirage Editions acknowledge that framing and other traditional means of mounting and displaying art do not infringe authors' exclusive right to make derivative works. Nonetheless, the Ninth Circuit held, what A.R.T. does creates a derivative work because the epoxy resin bonds the art to the tile.

Our district judge thought this a distinction without a difference, and we agree. If changing the way in which a work of art will be displayed creates a derivative work, and if Lee is right about what “prepared” means, then the derivative work is “prepared” when the art is mounted; what happens later is not relevant, because the violation of the § 106(2) right has already occurred. If the framing process does not create a derivative work, then mounting art on a tile, which serves as a flush frame, does not create a derivative work.

What is more, the Ninth Circuit erred in assuming that normal means of mounting and displaying art are easily reversible. A painting is placed in a wooden “stretcher” as part of the framing process; this leads to some punctures (commonly tacks or staples), may entail trimming the edges of the canvas, and may affect the surface of the painting as well. Works by Jackson Pollock are notoriously hard to mount without damage, given the thickness of their paint. As a prelude to framing, photographs, prints, and posters may be mounted on stiff boards using wax sheets, but sometimes glue or another more durable substance is employed to create the bond.

Lee wages a vigorous attack on the district court's conclusion that A.R.T.'s mounting process cannot create a derivative work because the change to the work “as a whole” is not sufficiently original to support a copyright. Cases such as Gracen v. The Bradford Exchange, Inc., 698 F.2d 300 (7th Cir. 1983), show that neither A.R.T. nor Lee herself could have obtained a copyright in the card-on-a-tile, thereby not only extending the period of protection for the images but also eliminating competition in one medium of display. After the Ninth Circuit held that its mounting process created derivative works, A.R.T. tried to obtain a copyright in one of its products; the Register of Copyrights sensibly informed A.R.T. that the card-on-a-tile could not be copyrighted independently of the note card itself.

But Lee says that this is irrelevant – that a change in a work's appearance may infringe the exclusive right under § 106(2) even if the alteration is too trivial to support an independent copyright. Pointing to the word “original” in the second sentence of the statutory definition, the district judge held that “originality” is essential to a derivative work. See, e.g., L. Batlin & Son, Inc. v. Snyder, 536 F.2d 486 (2d Cir. 1976). Pointing to the fact that the first sentence in the statutory definition omits any reference to originality, Lee insists that a work may be derivative despite the mechanical nature of the transformation. See, e.g., Lone Ranger Television, Inc. v. Program Radio Corp., 740 F.2d 718, 722 (9th Cir. 1984).

Fortunately, it is not necessary for us to choose sides. Assume for the moment that the first sentence recognizes a set of non-original derivative works. To prevail, then, Lee must show that A.R.T. altered her works in one of the ways mentioned in the first sentence. The tile is not an “art reproduction”; A.R.T. purchased and mounted Lee's original works. That leaves the residual clause: “any other form in which a work may be recast, transformed, or adapted.” None of these words fits what A.R.T. did. Lee's works were not “recast” or “adapted.” “Transformed” comes closer and gives the Ninth Circuit some purchase for its view that the permanence of the bond between art and base matters.

Yet the copyrighted note cards and lithographs were not “transformed” in the slightest. The art was bonded to a slab of ceramic, but it was not changed in the process. It still depicts exactly what it depicted when it left Lee's studio.

If mounting works a “transformation,” then changing a painting's frame or a photograph's mat equally produces a derivative work. Indeed, if Lee is right about the meaning of the definition's first sentence, then any alteration of a work, however slight, requires the author's permission. We asked at oral argument what would happen if a purchaser jotted a note on one of the note cards, or used it as a coaster for a drink, or cut it in half, or if a collector applied his seal (as is common in Japan). Lee's counsel replied that such changes prepare derivative works, but that as a practical matter artists would not file suit. A definition of derivative work that makes criminals out of art collectors and tourists is jarring despite Lee's gracious offer not to commence civil litigation.

If Lee (and the Ninth Circuit) are right about what counts as a derivative work, then the United States has established through the back door an extraordinarily broad version of authors' moral rights, under which artists may block any modification of their works of which they disapprove. No European version of droit moral goes this far. Until recently it was accepted wisdom that the United States did not enforce any claim of moral rights; even bowdlerization of a work was permitted unless the modifications produced a new work so different that it infringed the exclusive right under § 106(2). See Gilliam v. American Broadcasting Companies, Inc., 538 F.2d 14, 24 (2d Cir. 1976).

It would not be sound to use § 106(2) to provide artists with exclusive rights Congress deliberately omitted from § 106. We therefore decline to follow Munaz and Mirage Editions.

Notes

1. L. Batlin & Son, Inc. v. Snyder, 536 F.2d 486 (2d Cir. 1976), which the Seventh Circuit cited in this opinion, involved a contest between two licensees of the Disney characters Mickey Mouse, Donald Duck, and so on. The plaintiff claimed that the defendant’s toy was too similar to its version. Since the underlying copyrights, licensed to both parties, did not belong to the plaintiff it had to base its claim of infringement on its putative ownership of a derivative work copyright in its version of the toy. The court held that the plaintiff's toy was too similar to the original Disney work to embody the originality needed to support a second copyright. The variations from the original were de minimis and thus incapable of investing a derivative work copyright in the plaintiff. How was that issue different from that of this case?

2. Does it make good sense to have a different standard of originality for copyright to attach than for infringement liability to attach?

3. How did the Seventh Circuit decide that no transformation occurred here? Did the Ninth Circuit decide that a transformation occurred in Mirage? How? Can you harmonize the two decisions? How do you recognize a transformation when you see it? Is it like Jacobellis v. Ohio, 376 U.S. 184, 197 (1964) Stewart, J.: I know it when I see it.)?

4. Is there any significant difference between saying that what the defendant did to the plaintiff's work was de minimis and that it was not transformative? Or that there was no originality or authorship in it?

5. This is a link to a site selling some "authorized" Annie Lee tiles, one of which is shown at the right.

Campbell v. Acuff-Rose Music, Inc.
United States Supreme Court
510 U.S. 569 (1994)

Souter, J., delivered the opinion for a unanimous Court.

We are called upon to decide whether 2 Live Crew's commercial parody of Roy Orbison's song, “Oh, Pretty Woman,” may be a fair use within the meaning of the Copyright Act of 1976, 17 U.S.C. § 107. Although the District Court granted summary judgment for 2 Live Crew, the Court of Appeals reversed, holding the defense of fair use barred by the song's commercial character and excessive borrowing. Because we hold that a parody's commercial character is only one element to be weighed in a fair use enquiry, and that insufficient consideration was given to the nature of parody in weighing the degree of copying, we reverse and remand.

I

In 1964, Roy Orbison and William Dees wrote a rock ballad called “Oh, Pretty Woman” and assigned their rights in it to respondent Acuff-Rose Music, Inc. Acuff-Rose registered the song for copyright protection.

Petitioners Luther R. Campbell, Christopher Wongwon, Mark Ross, and David Hobbs, are collectively known as 2 Live Crew, a popular rap music group. In 1989, Campbell wrote a song entitled “Pretty Woman,” which he later described in an affidavit as intended, “through comical lyrics, to satirize the original work....” On July 5, 1989, 2 Live Crew's manager informed Acuff-Rose that 2 Live Crew had written a parody of “Oh, Pretty Woman,” that they would afford all credit for ownership and authorship of the original song to Acuff-Rose, Dees, and Orbison, and that they were willing to pay a fee for the use they wished to make of it. Enclosed with the letter were a copy of the lyrics and a recording of 2 Live Crew's song.

Acuff-Rose's agent refused permission, stating that “I am aware of the success enjoyed by `The 2 Live Crews', but I must inform you that we cannot permit the use of a parody of `Oh, Pretty Woman.'” Nonetheless, in June or July 1989, 2 Live Crew released records, cassette tapes, and compact discs of “Pretty Woman” in a collection of songs entitled “As Clean As They Wanna Be.” The albums and compact discs identify the authors of “Pretty Woman” as Orbison and Dees and its publisher as Acuff-Rose.

Almost a year later, after nearly a quarter of a million copies of the recording had been sold, Acuff-Rose sued 2 Live Crew and its record company, Luke Skywalker Records, for copyright infringement. The District Court granted summary judgment for 2 Live Crew, reasoning that the commercial purpose of 2 Live Crew's song was no bar to fair use; that 2 Live Crew's version was a parody, which “quickly degenerates into a play on words, substituting predictable lyrics with shocking ones” to show “how bland and banal the Orbison song” is; that 2 Live Crew had taken no more than was necessary to “conjure up” the original in order to parody it; and that it was “extremely unlikely that 2 Live Crew's song could adversely affect the market for the original.”

The District Court weighed these factors and held that 2 Live Crew's song made fair use of Orbison's original.

The Court of Appeals for the Sixth Circuit reversed and remanded. Although it assumed for the purpose of its opinion that 2 Live Crew's song was a parody of the Orbison original, the Court of Appeals thought the District Court had put too little emphasis on the fact that “every commercial use....is presumptively....unfair,” Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417, 451 (1984), and it held that “the admittedly commercial nature” of the parody “requires the conclusion” that the first of four factors relevant under the statute weighs against a finding of fair use. Next, the Court of Appeals determined that, by “taking the heart of the original and making it the heart of a new work,” 2 Live Crew had, qualitatively, taken too much. Finally, after noting that the effect on the potential market for the original (and the market for derivative works) is “undoubtedly the single most important element of fair use,” Harper & Row, Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 566 (1985), the Court of Appeals faulted the District Court for “refus[ing] to indulge the presumption” that “harm for purposes of the fair use analysis has been established by the presumption attaching to commercial uses.” In sum, the court concluded that its “blatantly commercial purpose...prevents this parody from being a fair use.”

We granted certiorari, to determine whether 2 Live Crew's commercial parody could be a fair use.

II

It is uncontested here that 2 Live Crew's song would be an infringement of Acuff-Rose's rights in “Oh, Pretty Woman,” under the Copyright Act of 1976, 17 U.S.C. § 106, but for a finding of fair use through parody. From the infancy of copyright protection, some opportunity for fair use of copyrighted materials has been thought necessary to fulfill copyright's very purpose, “[t]o promote the Progress of Science and useful Arts....” U.S. Const., Art. I, §8, cl. 8. For as Justice Story explained, “[i]n truth, in literature, in science and in art, there are, and can be, few, if any, things, which in an abstract sense, are strictly new and original throughout. Every book in literature, science and art, borrows, and must necessarily borrow, and use much which was well known and used before.” Similarly, Lord Ellenborough expressed the inherent tension in the need simultaneously to protect copyrighted material and to allow others to build upon it when he wrote, “while I shall think myself bound to secure every man in the enjoyment of his copyright, one must not put manacles upon science.” In copyright cases brought under the Statute of Anne of 1710, English courts held that in some instances “fair abridgements” would not infringe an author's rights, and although the First Congress enacted our initial copyright statute in 1790 without any explicit reference to “fair use,” as it later came to be known, the doctrine was recognized by the American courts nonetheless.

In Folsom v. Marsh, Justice Story distilled the essence of law and methodology from the earlier cases: “look to the nature and objects of the selections made, the quantity and value of the materials used, and the degree in which the use may prejudice the sale, or diminish the profits, or supersede the objects, of the original work.” Thus expressed, fair use remained exclusively judge-made doctrine until the passage of the 1976 Copyright Act, in which Story's summary is discernible.

Congress meant § 107 “to restate the present judicial doctrine of fair use, not to change, narrow, or enlarge it in any way” and intended that courts continue the common law tradition of fair use adjudication. The fair use doctrine thus “permits [and requires] courts to avoid rigid application of the copyright statute when, on occasion, it would stifle the very creativity which that law is designed to foster.” Stewart v. Abend, 495 U.S. 207, 236 (1990).

The task is not to be simplified with bright-line rules, for the statute, like the doctrine it recognizes, calls for case-by-case analysis. The text employs the terms “including” and “such as” in the preamble paragraph to indicate the “illustrative and not limitative” function of the examples given, § 101; see Harper & Row,which thus provide only general guidance about the sorts of copying that courts and Congress most commonly had found to be fair uses. Nor may the four statutory factors be treated in isolation, one from another. All are to be explored, and the results weighed together, in light of the purposes of copyright.¹⁰

10.     Because the fair use enquiry often requires close questions of judgment as to the extent of permissible borrowing in cases involving parodies (or other critical works), courts may also wish to bear in mind that the goals of the copyright law, “to stimulate the creation and publication of edifying matter,” are not always best served by automatically granting injunctive relief when parodists are found to have gone beyond the bounds of fair use. See 17 U.S.C. § 502(a) (court “may...grant...injunctions on such terms as it may deem reasonable to prevent or restrain infringement”); while in the “vast majority of cases, [an injunctive] remedy is justified because most infringements are simple piracy,” such cases are “worlds apart from many of those raising reasonable contentions of fair use” where “there may be a strong public interest in the publication of the secondary work [and] the copyright owner's interest may be adequately protected by an award of damages for whatever infringement is found”); Abend v. MCA, Inc., 863 F.2d 1465, 1479 (CA 9 1988) (finding “special circumstances” that would cause “great injustice” to defendants and “public injury” were injunction to issue), aff'd sub nom. Stewart v. Abend, 495 U.S. 207 (1990).

A

The first factor in a fair use enquiry is “the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes.” § 107(1). The enquiry here may be guided by the examples given in the preamble to § 107, looking to whether the use is for criticism, or comment, or news reporting, and the like, see § 107. The central purpose of this investigation is to see, in Justice Story's words, whether the new work merely “supersede[s] the objects” of the original creation, Folsom v. Marsh; accord, Harper & Row (“supplanting” the original), 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.” Although such transformative use is not absolutely necessary for a finding of fair use, Sony, supra, at 455, n. 40, the goal of copyright, to promote science and the arts, is generally furthered by the creation of transformative works. Such works thus lie at the heart of the fair use doctrine's guarantee of breathing space within the confines of copyright, and the more transformative the new work, the less will be the significance of other factors, like commercialism, that may weigh against a finding of fair use.

This Court has only once before even considered whether parody may be fair use, and that time issued no opinion because of the Court's equal division. Benny v. Loew's Inc., 239 F. 2d 532 (CA9 1956), aff'd sub nom. Columbia Broadcasting System, Inc. v. Loew's Inc., 356 U. S. 43 (1958). Suffice it to say now that parody has an obvious claim to transformative value, as Acuff-Rose itself does not deny. Like less ostensibly humorous forms of criticism, it can provide social benefit, by shedding light on an earlier work, and, in the process, creating a new one. We thus line up with the courts that have held that parody, like other comment or criticism, may claim fair use under § 107. See, e.g., Fisher v. Dees, 794 F.2d 432 (CA9 1986) (“When Sonny Sniffs Glue,” a parody of “When Sunny Gets Blue,” is fair use); Elsmere Music, Inc. v. National Broadcasting Co., 482 F. Supp. 741 (SDNY), aff'd, 623 F. 2d 252 (CA2 1980) (“I Love Sodom,” a “Saturday Night Live” television parody of “I Love New York” is fair use).

Here, the District Court held, and the Court of Appeals assumed, that 2 Live Crew's “Pretty Woman” contains parody, commenting on and criticizing the original work, whatever it may have to say about society at large. While we might not assign a high rank to the parodic element here, we think it fair to say that 2 Live Crew's song reasonably could be perceived as commenting on the original or criticizing it, to some degree. 2 Live Crew juxtaposes the romantic musings of a man whose fantasy comes true, with degrading taunts, a bawdy demand for sex, and a sigh of relief from paternal responsibility. The later words can be taken as a comment on the naivete of the original of an earlier day, as a rejection of its sentiment that ignores the ugliness of street life and the debasement that it signifies. It is this joinder of reference and ridicule that marks off the author's choice of parody from the other types of comment and criticism that traditionally have had a claim to fair use protection as transformative works.

The Court of Appeals, however, immediately cut short the enquiry into 2 Live Crew's fair use claim by confining its treatment of the first factor essentially to one relevant fact, the commercial nature of the use. The court then inflated the significance of this fact by applying a presumption ostensibly culled from Sony, that “every commercial use of copyrighted material is presumptively...unfair....” Sony, 464 U.S., at 451. In giving virtually dispositive weight to the commercial nature of the parody, the Court of Appeals erred.

The language of the statute makes clear that the commercial or nonprofit educational purpose of a work is only one element of the first factor enquiry into its purpose and character. Section 107(1) uses the term “including” to begin the dependent clause referring to commercial use, and the main clause speaks of a broader investigation into “purpose and character.” As we explained in Harper & Row, Congress resisted attempts to narrow the ambit of this traditional enquiry by adopting categories of presumptively fair use, and it urged courts to preserve the breadth of their tradition ally ample view of the universe of relevant evidence. Accordingly, the mere fact that a use is educational and not for profit does not insulate it from a finding of infringement, any more than the commercial character of a use bars a finding of fairness. If, indeed, commerciality carried presumptive force against a finding of fairness, the presumption would swallow nearly all of the illustrative uses listed in the preamble paragraph of § 107, including news reporting, comment, criticism, teaching, scholarship, and research, since these activities “are generally conducted for profit in this country.” Harper & Row, supra, at 592 (Brennan, J., dissenting). Congress could not have intended such a rule, which certainly is not inferable from the common-law cases, arising as they did from the world of letters in which Samuel Johnson could pronounce that “[n]o man but a blockhead ever wrote, except for money.”

Sony itself called for no hard evidentiary presumption. There, we emphasized the need for a “sensitive balancing of interests,” noted that Congress had “eschewed a rigid, bright-line approach to fair use,” and stated that the commercial or nonprofit educational character of a work is “not conclusive,” but rather a fact to be “weighed along with other[s] in fair use decisions.” The Court of Appeals's elevation of one sentence from Sony to a per se rule thus runs as much counter to Sony itself as to the long common-law tradition of fair use adjudication.

B

The second statutory factor, “the nature of the copyrighted work,” § 107(2), draws on Justice Story's expression, the “value of the materials used.” This factor calls for recognition that some works are closer to the core of intended copyright protection than others, with the consequence that fair use is more difficult to establish when the former works are copied.

C

The third factor asks whether “the amount and substantiality of the portion used in relation to the copyrighted work as a whole,” § 107(3) (or, in Justice Story's words, “the quantity and value of the materials used,” are reasonable in relation to the purpose of the copying. Here, attention turns to the persuasiveness of a parodist's justification for the particular copying done, and the enquiry will harken back to the first of the statutory factors, for, as in prior cases, we recognize that the extent of permissible copying varies with the purpose and character of the use. The facts bearing on this factor will also tend to address the fourth, by revealing the degree to which the parody may serve as a market substitute for the original or potentially licensed derivatives.

The District Court considered the song's parodic purpose in finding that 2 Live Crew had not helped themselves overmuch. The Court of Appeals disagreed, stating that “[w]hile it may not be inappropriate to find that no more was taken than necessary, the copying was qualitatively substantial.... We conclude that taking the heart of the original and making it the heart of a new work was to purloin a substantial portion of the essence of the original.”

The Court of Appeals is of course correct that this factor calls for thought not only about the quantity of the materials used, but about their quality and importance, too. In Harper & Row, for example, the Nation had taken only some 300 words out of President Ford's memoirs, but we signalled the significance of the quotations in finding them to amount to “the heart of the book,” the part most likely to be newsworthy and important in licensing serialization. We also agree with the Court of Appeals that whether “a substantial portion of the infringing work was copied verbatim” from the copyrighted work is a relevant question, for it may reveal a dearth of transformative character or purpose under the first factor, or a greater likelihood of market harm under the fourth; a work composed primarily of an original, particularly its heart, with little added or changed, is more likely to be a merely superseding use, fulfilling demand for the original.

Where we part company with the court below is in applying these guides to parody, and in particular to parody in the song before us. Parody presents a difficult case. Parody's humor, or in any event its comment, necessarily springs from recognizable allusion to its object through distorted imitation. Its art lies in the tension between a known original and its parodic twin. When parody takes aim at a particular original work, the parody must be able to “conjure up” at least enough of that original to make the object of its critical wit recognizable. What makes for this recognition is quotation of the original's most distinctive or memorable features, which the parodist can be sure the audience will know. Once enough has been taken to assure identification, how much more is reasonable will depend, say, on the extent to which the song's overriding purpose and character is to parody the original or, in contrast, the likelihood that the parody may serve as a market substitute for the original. But using some characteristic features cannot be avoided.

We think the Court of Appeals was insufficiently appreciative of parody's need for the recognizable sight or sound when it ruled 2 Live Crew's use unreasonable as a matter of law. Copying does not become excessive in relation to parodic purpose merely because the portion taken was the original's heart. Suffice it to say here that, as to the lyrics, we think the Court of Appeals correctly suggested that “no more was taken than necessary,” but just for that reason, we fail to see how the copying can be excessive in relation to its parodic purpose, even if the portion taken is the original's “heart.” As to the music, we express no opinion whether repetition of the bass riff is excessive copying, and we remand to permit evaluation of the amount taken, in light of the song's parodic purpose and character, its transformative elements, and considerations of the potential for market substitution sketched more fully below.

D

The fourth fair use factor is “the effect of the use upon the potential market for or value of the copyrighted work.” § 107(4). It requires courts to consider not only the extent of market harm caused by the particular actions of the alleged infringer, but also “whether unrestricted and widespread conduct of the sort engaged in by the defendant...would result in a substantially adverse impact on the potential market” for the original. The enquiry “must take account not only of harm to the original but also of harm to the market for derivative works.”

Since fair use is an affirmative defense, its proponent would have difficulty carrying the burden of demonstrating fair use without favorable evidence about relevant markets. In moving for summary judgment, 2 Live Crew left themselves at just such a disadvantage when they failed to address the effect on the market for rap derivatives, and confined themselves to uncontroverted submissions that there was no likely effect on the market for the original. They did not, however, thereby subject themselves to the evidentiary presumption applied by the Court of Appeals. In assessing the likelihood of significant market harm, the Court of Appeals quoted from language in Sony that “`[i]f the intended use is for commercial gain, that likelihood may be presumed. But if it is for a noncommercial purpose, the likelihood must be demonstrated.'” The court reasoned that because “the use of the copyrighted work is wholly commercial,...we presume a likelihood of future harm to Acuff-Rose exists.” In so doing, the court resolved the fourth factor against 2 Live Crew, just as it had the first, by applying a presumption about the effect of commercial use, a presumption which as applied here we hold to be error.

No “presumption” or inference of market harm that might find support in Sony is applicable to a case involving something beyond mere duplication for commercial purposes. Sony's discussion of a presumption contrasts a context of verbatim copying of the original in its entirety for commercial purposes, with the non-commercial context of Sony itself (home copying of television programming). In the former circumstances, what Sony said simply makes common sense: when a commercial use amounts to mere duplication of the entirety of an original, it clearly “supersede[s] the objects” of the original and serves as a market replacement for it, making it likely that cognizable market harm to the original will occur. But when, on the contrary, the second use is transformative, market substitution is at least less certain, and market harm may not be so readily inferred. Indeed, as to parody pure and simple, it is more likely that the new work will not affect the market for the original in a way cognizable under this factor, that is, by acting as a substitute for it (“supersed[ing] [its] objects”). This is so because the parody and the original usually serve different market functions.

We do not, of course, suggest that a parody may not harm the market at all, but when a lethal parody, like a scathing theater review, kills demand for the original, it does not produce a harm cognizable under the Copyright Act. Because “parody may quite legitimately aim at garroting the original, destroying it commercially as well as artistically,” B. Kaplan, An Unhurried View of Copyright 69 (1967), the role of the courts is to distinguish between “[b]iting criticism [that merely] suppresses demand [and] copyright infringement[, which] usurps it.”

This distinction between potentially remediable displacement and unremediable disparagement is reflected in the rule that there is no protectable derivative market for criticism. The market for potential derivative uses includes only those that creators of original works would in general develop or license others to develop. Yet the unlikelihood that creators of imaginative works will license critical reviews or lampoons of their own productions removes such uses from the very notion of a potential licensing market. Thus, to the extent that the opinion below may be read to have considered harm to the market for parodies of “Oh, Pretty Woman,” the court erred.

In explaining why the law recognizes no derivative market for critical works, including parody, we have, of course, been speaking of the later work as if it had nothing but a critical aspect (i.e., “parody pure and simple”). But the later work may have a more complex character, with effects not only in the arena of criticism but also in protectable markets for derivative works, too. In that sort of case, the law looks beyond the criticism to the other elements of the work, as it does here. 2 Live Crew's song comprises not only parody but also rap music, and the derivative market for rap music is a proper focus of enquiry. Evidence of substantial harm to it would weigh against a finding of fair use, because the licensing of derivatives is an important economic incentive to the creation of originals. See 17 U.S.C. § 106(2) (copyright owner has rights to derivative works). Of course, the only harm to derivatives that need concern us, as discussed above, is the harm of market substitution. The fact that a parody may impair the market for derivative uses by the very effectiveness of its critical commentary is no more relevant under copyright than the like threat to the original market.

Although 2 Live Crew submitted uncontroverted affidavits on the question of market harm to the original, neither they, nor Acuff-Rose, introduced evidence or affidavits addressing the likely effect of 2 Live Crew's parodic rap song on the market for a non-parody, rap version of “Oh, Pretty Woman.” And while Acuff-Rose would have us find evidence of a rap market in the very facts that 2 Live Crew recorded a rap parody of “Oh, Pretty Woman” and another rap group sought a license to record a rap derivative, there was no evidence that a potential rap market was harmed in any way by 2 Live Crew's parody, rap version. The fact that 2 Live Crew's parody sold as part of a collection of rap songs says very little about the parody's effect on a market for a rap version of the original, either of the music alone or of the music with its lyrics. The District Court essentially passed on this issue, observing that Acuff-Rose is free to record “whatever version of the original it desires.” The Court of Appeals went the other way by erroneous presumption. Contrary to each treatment, it is impossible to deal with the fourth factor except by recognizing that a silent record on an important factor bearing on fair use disentitled the proponent of the defense, 2 Live Crew, to summary judgment. The evidentiary hole will doubtless be plugged on remand.

III

It was error for the Court of Appeals to conclude that the commercial nature of 2 Live Crew's parody of “Oh, Pretty Woman” rendered it presumptively unfair. No such evidentiary presumption is available to address either the first factor, the character and purpose of the use, or the fourth, market harm, in determining whether a transformative use, such as parody, is a fair one. The court also erred in holding that 2 Live Crew had necessarily copied excessively from the Orbison original, considering the parodic purpose of the use. We therefore reverse the judgment of the Court of Appeals and remand for further proceedings consistent with this opinion.

It is so ordered.

Appendix A

“Oh, Pretty Woman” by Orbison and Dees

Pretty Woman, walking down the street,
Pretty Woman, the kind I like to meet,
Pretty Woman, I don't believe you,
You're not the truth,
No one could look as good as you
Mercy

Pretty Woman, won't you pardon me,
Pretty Woman, I couldn't help but see,
Pretty Woman, that you look lovely as can be
Are you lonely just like me?

Pretty Woman, stop a while,
Pretty Woman, talk a while,
Pretty Woman give your smile to me
Pretty woman, yeah, yeah, yeah

Pretty Woman, look my way,
Pretty Woman, say you'll stay with me
`Cause I need you, I'll treat you right
Come to me baby, Be mine tonight

Pretty Woman, don't walk on by,
Pretty Woman, don't make me cry,
Pretty Woman, don't walk away,
Hey, O. K.
If that's the way it must be, O. K.

I guess I'll go on home, it's late
There'll be tomorrow night, but wait!
What do I see
Is she walking back to me?
Yeah, she's walking back to me!
Oh, Pretty Woman

Appendix B

"Pretty Woman" as Recorded by 2 Live Crew

Pretty woman walkin' down the street
Pretty woman girl you look so sweet
Pretty woman you bring me down to that knee
Pretty woman you make me wanna beg please
Oh, pretty woman

Big hairy woman you need to shave that stuff
Big hairy woman you know I bet it's tough
Big hairy woman all that hair it ain't legit
`Cause you look like `Cousin It'
Big hairy woman

Bald headed woman girl your hair won't grow
Bald headed woman you got a teeny weeny afro
Bald headed woman you know your hair could look nice
Bald headed woman first you got to roll it with rice
Bald headed woman here, let me get this hunk of biz for ya

Ya know what I'm saying you look better than rice a roni
Oh bald headed woman
Big hairy woman come on in
And don't forget your bald headed friend
Hey pretty woman let the boys
Jump in

Two timin' woman girl you know you ain't right
Two timin' woman you's out with my boy last night
Two timin' woman that takes a load off my mind
Two timin' woman now I know the baby ain't mine
Oh, two timin' woman
Oh pretty woman

Notes

1. Does the Supreme Court's opinion in this case give you a better idea of what constitutes a transformative use? Thus far, this is the only opinion of the Court to consider transformativeness, albeit in the context of parodic fair use rather than that of the Copyright Act's definition of derivative work. But you will have to take what you can get.

2. The Court's emphasis on transformativeness appears to have been instigated by Judge Pierre Leval's 1990 article in Harvard on fair use. Judge Leval said:

I believe the answer to the question of justification turns primarily on whether, and to what extent, the challenged use is transformative. The use must be productive and must employ the quoted matter in a different manner or for a different purpose from the original. A quotation of copyrighted material that merely repackages or republishes the original is unlikely to pass the test; in Justice Story's words, it would merely "supersede the objects" of the original. If, on the other hand, the secondary use adds value to the original — if the quoted matter is used as raw material, transformed in the creation of new information, new aesthetics, new insights and understandings — this is the very type of activity that the fair use doctrine intends to protect for the enrichment of society. [Footnotes omitted.]

You will see more about this concept when we reach the Ninth Circuit's ArribaSoft decision.

3. An audio comparison of the original work, Oh, Pretty Woman, and the parodic derivative work, Pretty Woman/Big Hairy Woman, is available at a Columbia University Law Library Web site along with commentary on the Supreme Court opinion.

Lewis Galoob Toys, Inc. v. Nintendo of America, Inc.
United States Court of Appeals for the Ninth Circuit
964 F.2d 965 (9th Cir. 1992), cert. denied, 113 S. Ct. 1582 (1993)

Farris, Circuit Judge

Nintendo appeals the district court's judgment following a bench trial (1) declaring that Galoob's Game Genie does not violate any Nintendo copyrights and dissolving a temporary injunction and (2) denying Nintendo's request for a permanent injunction enjoining Galoob from marketing the Game Genie. We affirm.

Facts

The Nintendo Entertainment System is a home video game system marketed by Nintendo. To use the system, the player inserts a cartridge containing a video game that Nintendo produces or licenses others to produce. By pressing buttons and manipulating a control pad, the player controls one of the game's characters and progresses through the game. The games are protected as audiovisual works under § 102(a)(6).

The Game Genie is a device manufactured by Galoob that allows the player to alter features of a Nintendo game. For example, the Game Genie can increase the number of lives of the player's character, increase the speed at which the character moves, and allow the character to float above obstacles. The player controls the changes made by the Game Genie by entering codes provided by the Game Genie Programming Manual and Code Book. The player also can experiment with variations of these codes.

The Game Genie functions by blocking the value for a single data byte sent by the game cartridge to the central processing unit in the Nintendo Entertainment System and replacing it with a new value. If that value controls the character's strength, for example, then the character can be made invincible by increasing the value sufficiently. The Game Genie is inserted between a game cartridge and the Nintendo Entertainment System. The Game Genie does not alter the data that is stored in the game cartridge. Its effects are temporary.

Discussion

1. Derivative work

The Copyright Act of 1976 confers upon copyright holders the exclusive right to prepare and authorize others to prepare derivative works based on their copyrighted works. See § 106(2). Nintendo argues that the district court erred in concluding that the audiovisual displays created by the Game Genie are not derivative works. The court's conclusions of law are reviewed de novo. Its findings of fact are reviewed for clear error.

A derivative work must have “form” or permanence. The Copyright Act (§ 101) defines a derivative work as follows:

A “derivative work” is a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship, is a “derivative work.”

The examples of derivative works provided by the Act all physically incorporate the underlying work or works. The Act's legislative history similarly indicates that “the infringing work must incorporate a portion of the copyrighted work in some form.” See also Mirage Editions, Inc. v. Albuquerque A.R.T. Co., 856 F.2d 1341, 1343-44 (9th Cir. 1988) (discussing same), cert. denied, 489 U.S. 1018 (1989).

Our analysis is not controlled by the Copyright Act's definition (§ 101) of “fixed.” The Act defines copies as “material objects, other than phonorecords, in which a work is fixed by any method.” The Act's definition of “derivative work,” in contrast, lacks any such reference to fixation. See id. Further, we have held in a copyright infringement action that “it makes no difference that the derivation may not satisfy certain requirements for statutory copyright registration itself.” A derivative work must be fixed to be protected under the Act, see 17 U.S.C. § 102(a), but not to infringe.

The argument that a derivative work must be fixed because “a ‘derivative work’ is a work,” 17 U.S.C. § 101, and “a work is ‘created’ when it is fixed in a copy or phonorecord for the first time,” id., relies on a misapplication of the Act's definition of “created”:

A work is “created” when it is fixed in a copy or phonorecord for the first time; where a work is prepared over a period of time, the portion of it that has been fixed at any particular time constitutes the work as of that time, and where the work has been prepared in different versions, each version constitutes a separate work.

Id. The definition clarifies the time at which a work is created. If the provision was a definition of “work,” it would not use that term in such a casual manner. The Act does not contain a definition of “work.” Rather, it contains specific definitions: “audiovisual works,” “literary works,” and “pictorial, graphic and sculptural works,” for example. The definition of “derivative work” does not require fixation.

The district court's finding that no independent work is created is supported by the record. The Game Genie merely enhances the audiovisual displays (or underlying data bytes) that originate in Nintendo game cartridges. The altered displays do not incorporate a portion of a copyrighted work in some form. Nintendo argues that the Game Genie's displays are as fixed in the hardware and software used to create them as Nintendo's original displays. Nintendo's argument ignores the fact that the Game Genie cannot produce an audiovisual display; the underlying display must be produced by a Nintendo Entertainment System and game cartridge. The Game Genie's display has no form. Even if we were to rely on the Copyright Act's definition of “fixed,” we would similarly conclude that the resulting display is not “embodied,” see 17 U.S.C. § 101, in the Game Genie. It cannot be a derivative work.

Mirage Editions, supra, is illustrative. Albuquerque A.R.T. transferred artworks from a commemorative book to individual ceramic tiles. See Mirage Editions, 856 F.2d at 1342. We held that “by borrowing and mounting the preexisting, copyrighted individual art images without the consent of the copyright proprietors ... [Albuquerque A.R.T.] has prepared a derivative work and infringed the subject copyrights.” Id. at 1343. The ceramic tiles physically incorporated the copyrighted works in a form that could be sold. Perhaps more importantly, sales of the tiles supplanted purchasers’ demand for the underlying works. Our holding in Mirage Editions would have been much different if Albuquerque A.R.T. had distributed lenses that merely enabled users to view several artworks simultaneously.

Nintendo asserted at oral argument that the existence of a $150 million market for the Game Genie indicates that its audiovisual display must be fixed. We understand Nintendo's argument; consumers clearly would not purchase the Game Genie if its display was not “sufficiently permanent or stable to permit it to be perceived ... for a period of more than transitory duration.” 17 U.S.C. § 101. But Nintendo's reliance on the Act's definition of “fixed” is misplaced. Nintendo's argument also proves too much; the existence of a market does not, and cannot, determine conclusively whether a work is an infringing derivative work. For example, although there is a market for kaleidoscopes, it does not necessarily follow that kaleidoscopes create unlawful derivative works when pointed at protected artwork. The same can be said of countless other products that enhance, but do not replace, copyrighted works.

Nintendo relies heavily on Midway Mfg. Co. v. Artic Int’Sl, Inc., 704 F.2d 1009 (7th Cir.), cert. denied, 464 U.S. 823 (1983). Midway can be distinguished. The defendant in Midway, Artic International, marketed a computer chip that could be inserted in Galaxian video games to speed up the rate of play. The Seventh Circuit held that the speeded-up version of Galaxian was a derivative work. Id. at 1013-14. Artic's chip substantially copied and replaced the chip that was originally distributed by Midway. Purchasers of Artic's chip also benefited economically by offering the altered game for use by the general public. The court acknowledged that the Copyright Act's definition of “derivative work” “must be stretched to accommodate speeded-up video games.” Id. at 1014. Stretching that definition further would chill innovation and fail to protect “society's competing interest in the free flow of ideas, information, and commerce.” Sony Corp. of America v. Universal Studios, Inc., 464 U.S. 417, 429 (1984).

In holding that the audiovisual displays created by the Game Genie are not derivative works, we recognize that technology often advances by improvement rather than replacement. Some time ago, for example, computer companies began marketing spell-checkers that operate within existing word processors by signalling the writer when a word is misspelled. These applications, as well as countless others, could not be produced and marketed if courts were to conclude that the audiovisual display of a word processor and spell-checker combination is a derivative work based on the display of the word processor alone. The Game Genie is useless by itself; it can only enhance, and cannot duplicate, a Nintendo game's output. Such innovations rarely will constitute derivative works under the Copyright Act.

2. Fair use

“The doctrine of fair use allows a holder of the privilege to use copyrighted material in a reasonable manner without the consent of the copyright owner.” Narell v. Freeman, 872 F.2d 907, 913 (9th Cir. 1989) (citations omitted). The district court concluded that, even if the audiovisual displays created by the Game Genie are derivative works, Galoob is not liable under 17 U.S.C. § 107 because the displays are a fair use of Nintendo's copyrighted displays. “Whether a use of copyrighted material is a ‘fair use’ is a mixed question of law and fact. If the district court found sufficient facts to evaluate each of the statutory factors, the appellate court may decide whether defendants may claim the fair use defense as a matter of law.” Abend v. MCA, Inc., 863 F.2d 1465, 1468 (9th Cir. 1988), aff'd sub nom. Stewart v. Abend, 495 U.S. 207 (1990).

Section 107 codifies the fair use defense:

In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include –

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole;

(4) the effect of the use upon the potential market for or value of the copyrighted work.

The factors are nonexclusive, and section 107 does not indicate how much weight should be ascribed to each.

Much of the parties’ dispute regarding the fair use defense concerns the proper focus of the court's inquiry: (1) Galoob or (2) consumers who purchase and use the Game Genie. Nintendo's complaint does not allege direct infringement, nor did it try the case on that theory. The complaint, for example, alleges only that “Galoob's marketing advertising [sic], promoting and selling of Game Genie has and will contribute to the creation of infringing derivatives of Nintendo's copyrighted ... games.” (Emphasis added.) Contributory infringement is a form of third party liability. The district court properly focused on whether consumers who purchase and use the Game Genie would be infringing Nintendo's copyrights by creating (what are now assumed to be) derivative works.

Nintendo emphasizes that the district court ultimately addressed its direct infringement by authorization argument. The court concluded that, “because the Game Genie does not create a derivative work when used in conjunction with a copyrighted video game, Galoob does not ‘authorize the use of a copyrighted work without actual authority from the copyright owner.’” Although infringement by authorization is a form of direct infringement, this does not change the proper focus of our inquiry; a party cannot authorize another party to infringe a copyright unless the authorized conduct would itself be unlawful.

The district court concluded that “a family's use of a Game Genie for private home enjoyment must be characterized as a non-commercial, nonprofit activity.” Nintendo argues that Game Genie users are supplanting its commercially valuable right to make and sell derivative works. Nintendo's reliance on Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 562 (1985), is misplaced. The commercially valuable right at issue in Harper & Row was the right of first publication; Nation Enterprises intended to publish the copyrighted materials for profit. Game Genie users are engaged in a non-profit activity. Their use of the Game Genie to create derivative works therefore is presumptively fair. See Sony.

The district court also concluded that “the [Nintendo] works’ published nature supports the fairness of the use.” Nintendo argues that it has not published the derivative works created by the Game Genie. This argument ignores the plain language of section 107: “the factors to be considered shall include ... the nature of the copyrighted work.” Nintendo's argument would make the fair use defense unavailable in all cases of derivative works, including “criticism, comment, news reporting, teaching scholarship, or research.” § 107. A commentary that incorporated large portions of For Whom the Bell Tolls, for example, would be undeserving of fair use protection because the incorporated portions would constitute an unpublished derivative work. This cannot be the law.

The district court further concluded that the amount of the portion used in relation to the copyrighted work as a whole “cannot assist Nintendo in overcoming the presumption of fair use.” The video tape recorders at issue in Sony allowed consumers to tape copyrighted works in their entirety. The Supreme Court nevertheless held that, “when one considers...that [video tape recording] merely enables a viewer to see such a work which he had been invited to witness in its entirety free of charge, the fact that the entire work is reproduced does not have its ordinary effect of militating against a finding of fair use.” Consumers are not invited to witness Nintendo's audiovisual displays free of charge, but, once they have paid to do so, the fact that the derivative works created by the Game Genie are comprised almost entirely of Nintendo's copyrighted displays does not militate against a finding of fair use.

Nintendo would distinguish Sony because it involved copying copyrighted works rather than creating derivative works based on those works. In other words, the consumers in Sony could lawfully copy the copyrighted works because they were invited to view those works free of charge. Game Genie users, in contrast, are not invited to view derivative works based on Nintendo's copyrighted works without first paying for that privilege. Sony cannot be read so narrowly. It is difficult to imagine that the Court would have reached a different conclusion if Betamax purchasers were skipping portions of copyrighted works or viewing denouements before climaxes. Sony recognizes that a party who distributes a copyrighted work cannot dictate how that work is to be enjoyed. Consumers may use a Betamax to view copyrighted works at a more convenient time. They similarly may use a Game Genie to enhance a Nintendo Game cartridge's audiovisual display in such a way as to make the experience more enjoyable.

“The fourth factor is the ‘most important, and indeed, central fair use factor.’” The district court concluded that “Nintendo has failed to show any harm to the present market for its copyrighted games and has failed to establish the reasonable likelihood of a potential market for slightly altered versions of the games at suit.” Nintendo's main argument on appeal is that the test for market harm encompasses the potential market for derivative works. Because the Game Genie is used for a noncommercial purpose, the likelihood of future harm may not be presumed. See Sony. , 464 U.S. at 451. Nintendo must show “by a preponderance of the evidence that some meaningful likelihood of future harm exists.”Id.

Nintendo's argument is supported by case law. Although the Copyright Act requires a court to consider “the effect of the use upon the potential market for or value of the copyrighted work,” 17 U.S.C. § 107(4) (emphasis added), we held in Abend that “although the motion picture will have no adverse effect on bookstore sales of the [underlying] novel – and may in fact have a beneficial effect – it is ‘clear that [the film's producer] may not invoke the defense of fair use.’” We explained: “If the defendant's work adversely affects the value of any of the rights in the copyrighted work...the use is not fair even if the rights thus affected have not as yet been exercised by the plaintiff.’” The Supreme Court specifically affirmed our finding that the motion picture adaptation “impinged on the ability to market new versions of the story.”

Still, Nintendo's argument is undermined by the facts. The district court considered the potential market for derivative works based on Nintendo game cartridges and found that: (1) “Nintendo has not, to date, issued or considered issuing altered versions of existing games,” and (2) Nintendo “has failed to show the reasonable likelihood of such a market.” The record supports the court's findings. According to Stephen Beck, Galoob's expert witness, junior or expert versions of existing Nintendo games would enjoy very little market interest because the original version of each game already has been designed to appeal to the largest number of consumers. Mr. Beck also testified that a new game must include new material or “the game player is going to feel very cheated and robbed, and [the] product will have a bad reputation and word of mouth will probably kill its sales.” Howard Lincoln, Senior Vice President of Nintendo of America, acknowledged that Nintendo has no present plans to market such games.

The district court also noted that Nintendo's assertion that it may wish to re-release altered versions of its game cartridges is contradicted by its position in various other lawsuits:

In those actions, Nintendo opposes antitrust claims by using the vagaries of the video game industry to rebut the impact and permanence of its market control, if any. Having indoctrinated this Court as to the fast pace and instability of the video game industry, Nintendo may not now, without any data, redefine that market in its request for the extraordinary remedy sought herein .... While board games may never die, good video games are mortal.

The existence of this potential market cannot be presumed. See Sony. The fourth and most important fair use factor also favors Galoob.

Nintendo's most persuasive argument is that the creative nature of its audiovisual displays weighs against a finding of fair use. The Supreme Court has acknowledged that “fair use is more likely to be found in factual works than fictional works.” Stewart, 495 U.S. at 237. This consideration weighs against a finding of fair use, but it is not dispositive. See Sony, 464 U.S. at 448 (fair use defense is an equitable rule of reason).

The district court could properly conclude that Game Genie users are making a fair use of Nintendo's displays.

3. Temporary and permanent injunction

Galoob has not violated the Copyright Act. Nintendo therefore is not entitled to a temporary or permanent injunction.

Notes

1. How the Game Genie works can be illustrated in terms of one of the video games that it modifies, “Super Mario Bros.” As in other video games, Super Mario Bros. has a protagonist (here, Mario) whom the player causes to move across the display screen. The computer system causes obstacles and enemies to be displayed, which Mario must overcome. The player pushes buttons and manipulates controls to cause Mario to jump over obstacles, evade dangers, kill enemies, and traverse a series of “worlds,” at the end of which Mario may, if successful, rescue a princess from an ogre. Mario's abilities are limited by programmed-in constraints. He can jump only so high and so far. He has only so many missiles to hurl at enemies. His speed is limited. To the extent that the player's abilities are insufficient, given the programmed-in constraints, to overcome the dangers Mario succumbs and dies. After a predetermined number (3) of deaths (also termed “lives”), the player loses and the game ends.

Some players find this game too frustrating to enjoy, because they are not able to react quickly and remember all of the expedients a player must master. To aid such players, and of course to make a profit by doing so, Galoob marketed a video game accessory called the “Game Genie Video Game Enhancer.” The Game Genie fits between a video game cartridge and the socket for the cartridge on Nintendo's game console, and it modifies some of the electronic signals passing between the console and cartridge. The Game Genie temporarily inserts code segments into the computer program for the game as the program is being processed. For example, suppose that an instruction of the computer program is to the effect – “continue game for i = 1 to 3, where i = number of times Mario dies.” The Game Genie, in this hypothetical case, would intercept the relevant signal and make the 3 become, in effect, a 6.

The Game Genie thus allows a user to change the constraints of the game, for example, make Mario run faster, jump higher, hurl more missiles, and/or increase the number of deaths that Mario can incur before the game ends (the upper limit is 4, so that Mario effectively becomes immortal). The Game Genie similarly modifies the play of other video games.

However, the changes are only temporary. They are not rewritten into the game's read-only memory chip (ROM) in the cartridge. The changes occur only in temporary memory (RAM) in the console. When the particular game session ends and the game is turned off, the changes disappear the way the light disappears when you turn off the switch for a light bulb. As a result, Galoob's device does not reproduce a copy of the work in tangible form. The modified version of the program exists temporarily in RAM and then disappears. The modified version of the visual display exists only temporarily on the screen and then disappears. Neither one is preserved in ROM or any other tangible, non-transitory medium. (But see MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511 (9th Cir. 1993), cert. dism'd, 114 S. Ct. 671 (1994).)

2. The district court held (in the alternative) that the Game Genie does not create a derivative work because there was no fixed, permanent form to the modified audiovisual work (or, by the same token, computer program). The court of appeals (correctly) rejected the theory that a derivative work must be fixed. Nonetheless, it held that the result of what the Game Genie did was not a derivative work. On what legal rationale did the court of appeals proceed?

3. The court of appeals said, “A derivative work must have ‘form’ or permanence.” Then it quoted the statutory definition of derivative work, which refers to dramatizations, condensations, and “any other form in which a work may be recast, transformed, or adapted.” How does the second sentence of this paragraph help us to equate form with permanence? The legislative history says that to be held a copyright infringement, a work accused of being an unauthorized derivative work “must incorporate a portion of the copyrighted work in some form.” What does that mean? Does it mean a tangible, physical form? Does it mean that the accused work is an infringement only if it takes protected expression from the original?

The House Report, the most substantial source of legislative history for the current Copyright Act, states that there is no requirement that the accused infringer have made a copy in the case of infringing preparation of a derivative work (in violation of § 106(2)), as contrasted with infringing reproduction (in violation of § 106(1)) and infringing distribution (in violation of § 106(3)) of copies of a work. The report says that otherwise infringers could escape liability for basing ballets, pantomimes, and improvised performances on copyrighted works. How does the legislative history comport with the reasoning of the court in this case?

4. Explain how the fact that “the Game Genie is useless by itself; it can only enhance, and cannot duplicate, a Nintendo game's output” helps to support the conclusion that the Game Genie does not cause preparation of a derivative work.

5. The district court held (in the alternative to ruling that there was no preparation of a derivative work) that the use of the Game Genie was fair, and the court of appeals agreed. The fair use defense of § 107 is set out in the opinion. It requires the court to consider and balance (or make a weighted average of) four factors. Are the factors commensurable? What follows? Consider the following statement:

There may well have been a fair use. But the court's legal analysis of fair use is flawed by its overstatement of the case. Unfortunately, such overstatement is to be expected in any fair use analysis. The legal standard for determining whether a use is fair calls for a balance of four incommensurable factors, in the form:

Fair use = apples + oranges + lemons + grapes.

The only way the [district] court in the Galoob case felt that it could successfully balance the factors against one another was to say that none of them favored the losing party. Otherwise the court would have been compelled to decide whether apples carried more legal weight than oranges – a daunting task.

Comment, The Game Genie Case: Copyright in Derivative Works versus Users’ Rights, 3 Enter. L. Rev. 104, 108 (1992).

6. The court of appeals said, as is generally agreed, that the fourth of the fair use factors is most important. This factor looks to the effect of the accused use on the potential market for the copyrighted work. Generally, this involves a determination of whether the accused product is supplanting the copyrighted products in the marketplace. It is generally recognized, as the court of appeals suggested, that such an inquiry should take into account variant or potential forms of the copyrighted work. Nevertheless, the court found Nintendo's position undermined by the facts of this case:

The district court considered the potential market for derivative works based on Nintendo game cartridges and found that: (1) “Nintendo has not, to date, issued or considered issuing altered versions of existing games,” and (2) Nintendo “has failed to show the reasonable likelihood of such a market.” The record supports the court's findings.

Consider the following additional facts that the district court relied upon in rejecting Nintendo's argument that allowing unsupervised game modification (by Galoob's Game Genie) would trash the good will of Nintendo, as embodied in the so-called “Nintendo Culture”: Nintendo markets a magazine and equipment that permits users to make game modifications that are not very different from those of the Game Genie. Nintendo markets Nintendo Power magazine, which publishes “passwords” or “secret codes” for users to enter, which make it possible for users to skip parts of the game or give Mario (or other game protagonists) additional lives. Nintendo sells a Nintendo NES Advantage device, which provides slow-motion play and extra fire power. How do these facts square with the court's determination that the Game Genie wasn't hurting Nintendo's finances (or opportunity fully to exploit the copyrighted work)?

7. Nintendo's marketing personnel and expert claimed at trial that the “Nintendo culture” was “the apex of Nintendo's marketing strategy ... a [customer] mind-set intentionally created by Nintendo.” Part of the Nintendo culture is existence of rivalry among players in which a player gains prestige by achieved a higher score than that of the player's peers in playing a given video game. The player proves the score by photographing a display screen showing the high score. If everyone could get high scores by using the Game Genie, Nintendo said, then “this socially reinforcing practice would fall by the wayside,” and Nintendo would lose future sales. The district court refused to believe this theory because Nintendo was itself marketing the NES Advantage device and Nintendo Power magazine, as described above, which aided or instructed players in modifying the play of the games in a manner analogous (although different) to that of the Game Genie.

Do you suppose that Nintendo would have been more successful in this case if it had not asserted that it needed to suppress the Game Genie as a defensive measure, because the product harmed Nintendo's goodwill, and instead simply asserted that 17 U.S.C. § 106(2) gave Nintendo the exclusive right to make a profit from making changes in “Super Mario Bros.” and other copyrighted Nintendo games? How do you account for Nintendo's choice of litigation strategy?

8. Consider whether the following legal doctrines and arguments are feasible candidates for the Galoob court, or a court in a similar type of suit, to have reached the result reached here under the “no derivative work” and “fair use” rubrics:

a. Section 109(a) of the Copyright Act, which codifies the “first sale” rule or “exhaustion doctrine.” Section 109(a) provides that, notwithstanding a copyright owner's exclusive distribution right under 17 U.S.C. § 106(3), a purchaser is free to resell and otherwise dispose of copyrighted goods purchased from the copyright owner or its licensee. But see Red Baron-Franklin Park, Inc. v. Taito Corp., 883 F.2d 275 (4th Cir. 1989), cert denied, 110 S. Ct. 869 (1990), temporarily overruled by now-expired 17 U.S.C. § 109(e).

b. The doctrine of implied license. Under patent law, a purchaser of a patented product has an implied license to modify the product to increase its economic value to the purchaser. For example, the purchaser is entitled to make a patented machine provide greater total output or provide a different size of finished product. See Wilbur-Ellis Co. v. Kuther, 377 U.S. 422 (1964). The implication of license is apparently by action of law, not something inferred from the surrounding facts on a case-by-case basis. Does that suggest that an attempted disclaimer of the implied license would be effective or ineffective? Apparently, the license is constructive.

c. Estoppel. A seller is “estopped” from preventing its customer from getting the benefit of the use of the purchased product. There appears to be no difference of substance between estoppel and implied license; “estoppel” is just another name for the idea that by selling a product to a customer, the seller has acted in a manner inconsistent with preventing the customer from getting all of the benefit of the sale.

d. The doctrine against derogation from a grant. See British Leyland Motor Corp. v Armstrong Patents Co., [1986] 1 All Eng. Rep. 852 (H.L.).

What are the pros and cons of the different approaches? How may they play out differently?

9. This case preceded the Supreme Court's decision in the Two Live Crew case. Suppose it hadn't. Do you think that the Ninth Circuit would have found the Game Genie to be transformative?

10. Are these cases moving toward a rule that says there is no infringement liability if the accused work has either a great deal of transformativeness or a de minimis quantum of transformation — liability can occur only in the middle zone?

11. If a device (e.g., TiVo) or computer program makes it possible for you to skip TV commercials, either by blanking the audio (like the "mute" button on the remote control) and/or the video for a preset interval or by fast forwarding past them on a videotape, are you preparing a derivative work without authorization? Is the seller of the device or program a contributory infringer? Do you recall Judge Posner's view in the Aimster case: "Commercial-skipping ... amounted to creating an unauthorized derivative work ... namely a commercial-free copy that would reduce the copyright owner's income from his original program ...." Would a TV broadcaster have a contributory infringement action against sellers of TV remotes under Judge Posner's theory?

What would Judge Posner say about marketing a program that let a user push a button to blank the audio (or video too) for 30 seconds, say the average length of a TV commercial? See these accounts of an undocumented hack of TiVo that facilitates a 30-second skip of TV commercials, and an electronic device known as TV Blanket. Some TV network officials think that by skipping commercials a consumer breaches the social contract (since it is well understood that "free" programing is financed by advertising revenue) between viewer and advertiser (or TV station), or such a consumer even "steals" programming. What of channel flipping during commercial breaks? Going to the bathroom? Are they actionable as breach of contract? The moral equivalent of theft? What if your friend starts talking to you during a commercial, so that you are distracted and fail to watch the commercial – is the result an unauthorized preparation of a derivative work? Did the friend commit tortious inducement of breach of contract? See this complaint in Paramount Pictures Corp. v. ReplayTV, Inc. Related case links: 1; 2.

Say you fast-forward over some of the cases as you read your homework assignment from a casebook for one of your other courses (or down the screen display in the materials for this course). Do you prepare a derivative work without authorization? Has the copyright owner an infringement action against you?

On Add-On Programs
Adapted from R. Stern, Copyright Infringement by
Add-On Software: Going Beyond Deconstruction of the
Mona Lisa Moustache Paradigm and Not Taking Video
Game Cases Too Seriously, 31 Jurimetrics J. 205 (1991)

What Add-On Programs Do

It is common for computer program end users, and persons who market programs designed to meet such end users’ needs, to modify the computer programs after their purchase, in order to enhance the utility, of the original program. Sometimes the modifications are direct, in that the code of the original program is rewritten in part or “patched.” Frequently, a second program – termed an “add-on” program – is written that interacts with the original program to modify how it operates. Such an add-on program may increase the speed of operation of the program with which it interacts, add new functions to it so that it performs additional tasks, provide a user interface that is easier to learn to use and remember, and may otherwise interact with a pre-existing program to give users features that the users want, but which the vendor of the underlying program failed or chose not to provide. The Galoob court referred to spell checkers in this connection.

Often, owners of copyrights in underlying programs do not object to add-on programs. Because add-on programs add to the utility of the underlying programs, they can increase demand for them and thus increase their sales. There are circumstances conceivable, however, in which the owner of the copyright in an underlying program might be displeased with, and therefore want to suppress, an add-on program. One man's idea of a product improvement may be another's idea of “trashing” the goodwill of the product. (That was what some Nintendo personnel thought of the Game Genie.) Or an add-on program seller's idea of enhancing utility to users may conflict with the marketing program of the owner of copyright in the underlying program.

Much of what the Galoob court said can be carried over to add-on programs. How a Game Genie modifies how video game computer programs work is much like how an add-on program modifies how an applications program (for example, a database management program or even an operating system) works. First, the modified code exists only temporarily in RAM and is not written into ROM or other nonvolatile memory. More important, in both situations the modification occurs for the benefit of an end user who has already purchased a copy of the underlying copyrighted computer program. By the same token, the copyright owner has already been paid once for the right to use the program. Finally, it may be asserted that the use of the add-on program will not divert sales away from the copyright owner, since the end user must first purchase a copy of the original unmodified program. These factors, on balance, would seem to suggest that the verdict in an add-on copyright infringement suit should be against the copyright owner and in favor of end user rights. Probably, the Galoob court would so rule.

WordSuperlative v. WordDaemon

The Notes to the Galoob decision referred to the doctrines of implied (i.e., constructive) license, estoppel, and derogation from grants. How would these doctrines apply to add-on computer programs, which end user purchasers of underlying programs desire to use to improve the programs’ utility? Consider as an illustrative hypothetical case a notional word-processing program, “WordSuperlative,” which an add-on program, “WordDaemon,” makes easier and faster to use. Would a U.S. court conclude that purchasers of “WordSuperlative” had an implied license to improve the utility of the program or that the seller was estopped from trying to deny them the benefit gained by concurrent use of the program and “WordDaemon”?

What would the House of Lords say? Does denying customers the privilege of using “WordDaemon” with their “WordSuperlative” computer program property impose “added expense or inconvenience” on the customers as in the Leyland case? If so, would that be a derogation from the grant to them of title in their copies of “WordSuperlative”? Must the seller's interest, if there is one, in requiring users to purchase only licensed add-on programs must give way to the customers’ rights of property? What if the use of “WordDaemon” damages the integrity of the “WordSuperlative Culture”? Would that interest be considered a weightier or less weighty interest of the copyright owner than Leyland's interest in the integrity of its tail pipe revenues?

What if the seller of “WordSuperlative” used a “shrink wrap” license that purported to reserve title to the product and simply granted customers a license, profit à prendre, or the like? At the same time, the copyright owner might make it a condition of the license (or a reservation of rights) that no unauthorized add-on should be used with the copyright owner's licensed property. Then there would appear to be no grant of title from which the condition (or reservation) would derogate. Would that change the case?

The case is now less clear, but perhaps only slightly so. In Leyland Lord Templeman expressly stated that the car manufacturer could not effectively reserve or withhold from the first, or any subsequent, purchaser the right to buy spare parts from any source. Will a transaction that has the ordinary incidents of a sale outright be turned into a license or something else different from a sale outright, simply by use of fancy language? What do you suppose would be the House of Lords’ ruling in Leyland II, after Leyland stops “selling” cars and starts “licensing” them, with a provision in the license that customers must obtain their spare parts only from the licensor.

The Copyright Owner's Tale

The Galoob and Leyland opinions do not describe any substantial interests of a copyright owner which are to be balanced against the interests of customers. The trial court's opinion in Galoob may give the impression that the copyright owner in that case is acting simply out of pique or, at best, feelings about droit moral. Leyland gives the impression that the copyright owner in that case simply wants to mulct unwary car buyers. Is there nothing ever to be said for the copyright owner when one extrapolates from those cases to add-on programs in general? Are there no circumstances in which she has a legitimate objection, or at least one that is not simply irrational? Has she no arguments but the kultur argument and similar frivolities?

At this point, let us set estoppel, derogation from grants, and other legal doctrine aside. What purports, however, to be a balancing procedure may be suspect when, as in the Galoob case, it appears that no rational basis exists for the conduct on one side of the case. Let the copyright owner's tale be considered.

A very clear case may be extrapolated from Nintendo's magazine and device sales. An owner of a copyright in an underlying applications program may have his own add-on program to sell, which would make for direct and immediate competition between the parties. In effect, that resembles the fact pattern of the Leyland case, in which both parties wanted to sell spare parts to the same customers. How should copyright law deal with such situations? Here, does a fair-use analysis get you to the same place that an analysis based on implied license or nonderogation does?

Another fact possibility, although perhaps a rare one, is the case of a low-power version of a program sold cheaply for the low-price market and a high-power version sold upmarket. What if an add-on program cheaply converts the cheap model to perform the tasks of the upmarket model? (Something of that general kind occurred in Hubco Data Prods. Corp. v Management Assistance Inc., 219 U.S.P.Q. 450 (D. Idaho 1983). The copyright owner sold different versions of a computer program designed to serve computer systems having different amounts of memory. It charged a higher price as the amount of memory handled increased. It also sold upgrade services. The infringer, engaged in a competing upgrade service (not the sale of an add-on program as such), by modifying the code of installed programs to make them serve more memory.)

Certainly, a copyright owner should be entitled to maximize total profit by marketing, at different prices and to different submarkets, differentiated products using its copyright. This may be regarded as a species of permissible price discrimination designed to maximize revenue. But it does not follow that, because the copyright owner is entitled to maximize revenue through price discrimination, the copyright law, (the power of the state acting through the judicial system) must enforce the effectiveness of the marketing program when the copyright owner demands that state do so. The state need not take sides.

It would seem that an analysis of the consequences to the public, in the long run and short run, must be studied before it can be decided whether the rights of a copyright owner should extend so far as to enlist the state. Part of that analysis would include the impact on incentives to create – in terms of the benefits the public gains both from the efforts of creators of underlying programs and from creators of add-on enhancement programs.

To translate that into very concrete terms, using for that purpose the persona of the Galoob case even though its facts may not correspond to those of the case just posited: does the public gain in overall ex ante incentive effect on software creation more: (a) by giving Nintendo greater rewards (by using Nintendo to have a right to suppress the Game Genie); or (b) by allowing Galoob to market its Game Genie without interference from Nintendo? Part of that analysis would involve a comparison of which regime will cause a greater level of innovation, given the probable motivations and circumstances of the various parties. For example, it may well appear that regime (b) will give a person in Galoob's position substantial incentives without substantially decreasing the ex ante incentives of a person in Nintendo's position, because of the difference in timing of their respective creative efforts. On the other hand, regime (a) will take almost all creative incentive away from someone in Galoob's position.

The results of such an analysis may be fact-specific to each case, which would be very burdensome or even administratively infeasible in copyright litigation. On the other hand, the analysis may be sufficiently general to apply broadly enough to support a general rule or at least a presumption.

Another possible basis for a copyright owner's objecting to an add-on program may occur if the add-on program shows users the inadequacies of the underlying program. That may occur if the add-on program provides improvements that the copyright owner has refused to be bothered to make. That may pave the way to causing customers to migrate to another product. This appears to have occurred in the case of database add-on programs. The marketers of “dBase” add-on programs eventually followed them up with competing stand-alone programs having the features added by the add-on programs, as well as still additional improvements. When that happened, sales of the original, underlying Dbase programs declined. The owner of copyright in such an underlying program might well want to suppress such an add-on program before the camel got its nose, so to speak, too far underneath the edge of the tent.

In a related vein, an add-on program may diminish the market for later, improved versions of an underlying program. Suppose that an early version of an operating system lacks a graphic user interface, a decent “help” facility, an “undelete” feature, and an ability to recall and edit a series of previous command entries. (All that could have been said about Microsoft's MS-DOS 3, a dominant operating system for personal computers in the United States.) Suppose, then, that add-on programs are created that provide such features (again, as occurred in the United States with regard to MS-DOS). At this point, perhaps, the business plan of the seller of the operating system will call for marketing an upgraded version that provides these features (as recently occurred for MS-DOS, version 5).

To the extent that user demand for these functions has already been met by add-on programs, however, users may not be motivated to buy the upgrade. Yet, it may not have been consistent with the business interests of the seller of the operating system to market an upgrade until the demand for the earlier version was saturated (or its potential revenue stream was fully extracted). For that reason, an owner of copyright in the operating system might well want to suppress the add-on programs. On the other hand, the interests of users might be opposite.

It is thus seen that possible fact patterns do exist that suggest that copyright owners may oppose marketing of add-on programs without being motivated by irrationality or notions of droit moral. Rather, their motivation may simply be to maximize their financial gain. This does not mean to say that the law is obliged to defer to that interest. But if some type of balancing test is used to reach a result in these cases, it would be wrong to assume away need to measure one side of the balance (the copyright owner's) on the ground that it holds nothing but caprice. The competing interests in these hypothetical cases of opposition to add-on programs are those of computer program end users in maximizing the programs’ utility to themselves vs. the financial interests of owners of copyright. Doubtless, one or the other of these interests, depending on one's vantage point, will be identified with the public interest or with overall maximization of software progress.

That there are rational interests on both sides makes the task of striking a proper balance in add-on program cases more difficult (putting doctrinal analysis aside) than the Galoob and Leyland decisions may seem to suggest.

Note

I am transformative. Approach my event horizon at your peril.

The material that follows addresses what is, or was once regarded as, the most famous derivative work in the world, Marcel Duchamp's Mona Lisa with a Moustache, a/k/a L.H.O.O.Q. (for reasons to be explained below). L.H.O.O.Q. is also a parodic work and, despite its apparently quantitatively insubstantial modification of the original (perhaps less than that of the Blazon case), it is highly transformative. It is transformative for reasons requiring an inquiry into its milieu or social and cultural setting — into what it meant in 1919 to the French bourgeoisie and their cult of Jocondisme. The problem with that kind of inquiry for analyzing transformativeness, however, is that every case is sui generis. What does it mean for an addition to a work to be transformative in a qualitative sense other than for the observer to exclaim, "I know it when I see it"? Not only is that test unhelpful for purposes of prediction and rationalization of business activity, but it provides little or no clue for migrating from Duchamp's and 2 Live Crew's program (epater le bougeois) to an examination of framing or otherwise changing the presentation of another person's Web page. As yet, no judicial decision satisfactorily explains that, or tries very hard to do so. Moeover, much of the current commentary on transformation leaves that term without objective substantive content. Indeed, transformativeness appears headed for becoming one of the black holes of copyright law.

The Mona Lisa Paradigm

Larger (270 x 414) LHOOQ graphic

This is the most famous derivative work in the world. For years it was believed to be, as Dadaist Marcel Duchamp (1887-1968) asserted, just a cheap, mass-marketed postcard that he casually purchased in Paris in 1919 and on which he then penciled in a moustache and goatee and the letters L.H.O.O.Q. (In French slang at the time, “Elle a chaud au cul.”) More recent scholarship suggests, however, that Duchamp laboriously altered the postcard before adding the moustache, including merging his own portrait with that of Mona Lisa. This work is sometimes referred to as “Mona Lisa With a Moustache” and sometimes as “L.H.O.O.Q.” Duchamp’s L.H.O.O.Q. has been used in law schools for many years as a paradigm for derivative works.

Why is adding the moustache, beard, and the letters L.H.O.O.Q. to Leonardo’s painting the preparation of a derivative work? Why isn't that so insubstantial a juxtaposition of material that it amounts to no more than painting a hobby horse blue or moving a picture from one wall of a room to another?

In point of fact, Duchamp effected a transformation of the Mona Lisa by his irreverent acts. The explanation requires some digging into French cultural history. The creation of L.H.O.O.Q. profoundly transformed the perception of La Joconde (what the French call the painting, in contrast with the Americans and Germans, who call it the Mona Lisa). In 1919 the cult of Jocondisme was practically a secular religion of the French bourgeoisie and an important part of their self image as patrons of the arts. They regarded the painting with reverence, and Duchamp's salacious comment and defacement was a major stroke of epater le bourgeois (“freaking out” or substantially offending the bourgeois).¹ The transformation of a cult icon into an object of ridicule by adding a small quantum of additional material can readily be preparation of a derivative work, as is illustrated by the American example of what 2 Live Crew did to Pretty Woman.

1.     Justice Scalia addresses contemporary practice in epater le bourgeois in his concurring opinion in NEA v. Finley, and gives some examples in his accompanying footnote 2.

L.H.O.O.Q.

Incidentally, Duchamp was able to make his point with considerably less seeming addition of his own material than 2 Live Crew needed to convert Pretty Woman into Big Hairy Woman. If one ignores the hidden alterations, denied by Duchamp, all that Duchamp apparently did to the Mona Lisa was to layer the moustache, goatee, and letters L.H.O.O.Q. over the original work. By way of contrast, consider the elaborate additions of the accompanying animation, the many layers of which make a parody of the parody.

Shown on a separate page are some other ways to make derivative works based on Mona Lisa. In these derivative works, Mona Lisa is comprehensively distorted rather than suffering imposition of discrete new layers. In all of these further examples, the person responsible for creation of the derivative work commingles in one image file Leonardo’s content and that of the subsequent artist. The taking of the original material thus requires the preparer of the derivative work to reproduce a copy of the underlying work (see 17 U.S.C. § 106(1)), rather than exploit it by directly layering, or causing or encouraging a third party to layer, discrete new material over a copy of the underlying work that its author or licensee provides. What effect does that have on copyright liability? What further issue does the first type of case present that the second does not?

The difference characterizes most Internet-related controversies over derivative works. The author of the original work places it on the author’s Web site, where end users are free (perhaps encouraged) to access it. The accused infringer may then cause or encourage end users to call up to their monitor screens simultaneously the original work and the accused infringer’s obscuring layers. The author of the original work may thus be likened (with a straight face?) to Leonardo while the accused infringer may be likened to Duchamp or to the creator of the animation shown at the left, above. The accused infringer denies any reproduction (the end user did the reproduction! and only transiently!). The accused infringer claims also that the end user had a “right” to commingle the layers with, or superimpose them on, the original work on the user’s monitor screen in the privacy of a home.

Link to next section of this chapter - Hyperlinking

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