Ivan Hoffman[/caption]Much has been written (and will continue to be) about the recent decision in the Napster case (the United States Court of Appeals for the Ninth Circuit decision). A particular area that holds interest for me (and that may have significant implications for those even beyond the music and recording industries) is the thorough analysis the Court did regarding the copyright concept known as "fair use." (For a basic understanding of this concept, read the article titled "Fair Use".) Napster contended that its service was "fair use" under three different theories: (1) sampling (in which users in general made temporary copies of the various works before purchasing); (2) space-shifting (in which users merely accessed a sound recording through the system even though they already owned the recording in audio CD format); and (3) permissive distribution of recordings. The Court first reviewed the requirements of the fair use statute (see the above article for that information).

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The Purpose & Character of Use

The issue in this area is whether or not the new work merely replaces the original work. In other words, if it merely copies portions of that original work, or whether the new work uses that original work for some new and different character. Often the word used to describe this legal concept is "transformative." Examples of what might be deemed transformative uses are when a portion of a work is used in some sort of parody, or to serve to make a larger or different point, such as using a quoted portion to explain a different idea of the new author. In this instance, however, the Court found that there was no such transformative use, since the original works (songs and recordings) were merely copied in whole. Thus the new work merely replaced the old. Cases were cited involving the mere retransmission of a copyrighted broadcast or the creation of an MP3 format version from an audio CD. Moreover, while this legal test also involves a determination of whether or not the new use is commercial or non-commercial, a mere finding of commerciality, standing alone, will not defeat the claim of fair use. The Court concluded that even though there was no money that changed hands, the use of the service by Napster users was commercial in that it was not the same as making a copy for a friend. Those users got something for free that they would otherwise have had to pay for. "Direct economic benefit is not required to demonstrate a commercial use. Rather, repeated and exploitative copying of copyrighted works, even if the copies are not offered for sale, may constitute a commercial use. See Worldwide Church of God v. Philadelphia Church of God, 227 F.3d 1110, 1118 (9th Cir. 2000) (stating that church that copied religious text for its members ‘unquestionably profit[ed]’ from the unauthorized ‘distribution and use of [the text] without having to account to the copyright holder’)…"

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The "Nature" of the Use

Courts have routinely held that works that are "creative in nature" are more deserving of protection than more "fact-based works." (As a nonfiction writer, I would, of course, disagree.) Because the songs and recordings were thus more creative in nature, the Court found that under this test, the fair use defense failed.

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The Portion of the Original Work Used

While copying the entirety of a work does not conclusively defeat the fair use defense, the more of a work that is taken, the less likely it is that the defense will prevail. Given that in each instance the entirety of the original recording and song was taken by users, the Court found that such type of use was not "fair use." However, the Court did acknowledge, that while the entirety of a work is taken, this may still be a "fair use" given other circumstances.

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Effect on the Market

The effect on the market was perhaps the most significant aspect of the discussion of fair use, and while it seems self-evident that if users can get for free what they would otherwise have to pay for, that this would have a deleterious effect on the market, the discussion is worthwhile. Indeed, every use of a copyrighted work, by definition, has some effect on the market for that work, so it is important to understand where the line falls–even though that line is in constant motion. "[T]he importance of this [fourth] factor will vary, not only with the amount of harm, but also with the relative strength of the showing on the other factors." (citing to Campbell vs. Acuff-Rose) The Court went on to say: "A challenge to a noncommercial use of a copyrighted work requires proof either that the particular use is harmful, or that if it should become widespread, it would adversely affect the potential market for the copyrighted work. . . . If the intended use is for commercial gain, that likelihood [of market harm] may be presumed. But if it is for a noncommercial purpose, the likelihood must be demonstrated." (citing the Sony case, Sony Corp. v. Universal Studios, Inc.) The Court found that the Napster program harms the market for the protected works of the publishers and recording companies in that "it reduces audio CD sales among college students and it ‘raises barriers to plaintiffs’ entry into the market for the digital downloading of music.’ " This last phrase about raising the barriers to a copyright proprietor’s possible entry into a market is quite important. The Court cited a number of cases in support, and the rationale, of course, is that merely because a user does not make money from the infringement does not mean that it is not harmful to the copyright proprietors, since it prevents those proprietors from exploiting their rights. The Court noted that the record companies and publishers had already expended considerable funds to exploit their music and recordings via the Internet. The Court then discussed the issues raised by Napster, within the scope of "fair use" dealing with sampling and space-shifting.

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Sampling

Napster contended that its users downloaded MP3 files to "sample" the music in order to decide whether to purchase the recording. And that, among other points, such "sampling" was "fair use" because it was akin to a personal use. They also argued that this did not adversely affect the market for the copyrighted works. The Court agreed with the trial court that sampling remains a commercial use even if some users eventually purchase the music. "The record supports a finding that free promotional downloads are highly regulated by the record company plaintiffs and that the companies collect royalties for song samples available on retail Internet sites. Evidence relied on by the district court demonstrates that the free downloads provided by the record companies consist of thirty-to-sixty second samples or are full songs programmed to ‘time out,’ that is, exist only for a short time on the downloader’s computer. In comparison, Napster users download a full, free and permanent copy of the recording." Another point: I often hear from those who want to take others’ intellectual property that if that intellectual property is used (even if without permission and in contravention of the owner’s rights), that this is further "exposure" for the protected work and that the owner ought, somehow, to be grateful for that! "Napster further argues that the district court erred in rejecting its evidence that the users’ downloading of ‘samples’ increases or tends to increase audio CD sales. The district court, however, correctly noted that ‘any potential enhancement of plaintiffs’ sales would not tip the fair use analysis conclusively in favor of defendant.’ Id. at 914. We agree that increased sales of copyrighted material attributable to unauthorized use should not deprive the copyright holder of the right to license the material." And the Court added: "Nor does positive impact in one market, here the audio CD market, deprive the copyright holder of the right to develop identified alternative markets, here the digital download market."

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Space-Shifting

Napster also argued that the decision in the case involving the Diamond Rio player (which held that that player was not an infringing device) applied here. The Court said that that case and the Sony case referred to above were inapplicable since neither of those "players" (the Diamond Rio player and the VCR) involved the simultaneous distribution of copyrighted materials. That any "time" or "space-shifting" was only for the convenience of the owner of the player.

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Conclusion

This case is not yet over, since it was remanded for revision of the lower court’s orders. However, such revision seems unlikely to affect the important discussion of fair use. As I have previously written, fair use should never be relied on since it is, by definition, a defense to be raised when you are sued. And no one on the face of the planet can ever say with any assurance that a given use will be deemed a fair use. Thus the lesson here is: license all uses both on- and off-line. See also "Screen Shot Liability for Computer Book Authors" on my site for a further discussion of the benefits of licensing. Click on "Articles for Writers and Publishers," and then look under "Articles about Copyright."

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