The most significant increase for typical copyright filers is in traditional paper applications (Form TX, VA, SR, GR). The Copyright Office has enacted a 44% increase in filing by paper — raising the fee from $45 to $65. Critics have intended that this unfairly penalizes copyright authors and owners without Internet access. The new Copyright Office fee structure took effect on August 1, 2009. A chart comparing the current and new copyright registration fees is here on the Arborlaw website.

The Court in Blackwell found that because Excel maintained a ‘master’ of the course pack, gave it to a student to copy, and accepted payment, Excel was the party actually making the photocopies, regardless of the fact that the students were performing a “self-serve checkout” as part of the commercial transaction.  (All of this despite the fact that the course packs in question were assembled under a university license that expressly permitted students to make copies of course pack materials for themselves at no additional cost.  To me, this indicates that the court was, in effect, indirectly interpreting that underlying license to only apply after one copy was purchased.)

Commentators are now hypothesizing that libraries may be next.  Section 108(f) of the US Copyright Act shields libraries from liability for infringing uses of photocopy machines as long as the libraries conspicuously post a sign stating that the user takes responsibility for copyright infringement.  LibraryLaw Blog questions whether this protection for libraries is invalidated by the Blackwell decision (I think this is unlikely, given the clear intent of Section 108 and the fact that the exemption was specifically crafted in the 1976 Act to protect libraries so that they can continue their vital role in disseminating information.)

Via TechDirt

As with every proposed change in copyright regulations, there is a public comment period.  The period for commenting on these proposed regulations closes October 11, 2009. Several industry associations have commented, including the American Society of Media Photographers (ASMP), the Association of American Publishers (AAP), the American Library Association (ALA), the Software and Information Industry Association (SIIA), and the Professional Photographers of America and the Newspaper Association of America.  One concern identified goes to one of the most critical reasons for mandatory deposit:  proof of the work, for purposes of litigation.  In copyright infringement litigation, the mandatory deposit frequently comes into play as evidence of what exactly constituted the work at the time of registration.  Not having a mandatory deposit will greatly increase the possibility that a plaintiff or defendant in an online copyright plagiarism dispute might change the contents of an online work to help its legal case.  Another concern is the Copyright Office’s proposal to require a deposit of all code associated with an online-only publication (including scripts and metadata) raises both technological and digital rights issues.  What constitutes a “complete copy” of the “best edition” of an online work?

The proposed federal regulations to change the copyright mandatory deposit procedure are here [PDF].  Existing public comments on the proposed mandatory deposit regulations are at the Copyright Office site.  I consider this to have far-reaching implications for all websites, bloggers, and online publishers: it’s the most significant change in copyright law for these industries since the DMCA.  The Copyright Office particularly needs feedback on the technological issues.  If you are in the industry, as many of my clients are, you owe it to yourself to read the materials and educate yourself (and possibly the Copyright Office).

Just a few days later, Amazon changed course, announcing that it will allow authors and publishers to decide on a book-by-book basis whether or not to allow text-to-speech functionality.

Apart from making nice and preserving existing business relationships (always good reasons), why would Amazon capitulate?

Contracts, baby, contracts.
As it turns out, the contract language in a few of the existing publishing agreements with Kindle 2 authors was worded broadly enough to cover text-to-speech rights (which meant that Amazon, in relying on the publishers’ ability to pass through the necessary rights to publish on the Kindle 2, was fine). But the majority of the publishers’ agreements with their authors did not contain terms which granted the necessary rights to the publisher, which means that the publisher did not have those rights to pass through to Aamzon. (Further, the majority of those contracts probably contain typical general-purpose copyright agreement language that states that all rights not specifically granted are reserved to the authors. If you are an author doing a book deal, those are magic words). According to the Wall Street Journal update on the Kindle 2 copyright controversy, Paul Aiken, Executive Director of the Authors Guild

said that several major publishers discovered that the contracts they had with authors didn’t give them the right to sell e-books with audio functionality. “It’s possible that the majority of the titles Amazon sells via the Kindle fell into this domain,” he said. Agents, authors and publishers will now have to review contracts and strike new licensing agreements. “It will be a process of amending tens of thousands of book contracts to include text-to-speech rights.”

What’s good about this outcome?
Contracts are good. Contracts are intended to resolve uncertainty. Neither Amazon nor the Author’s Guild will be spending their time and money using the US Federal court system to resolve whether text-to-speech is “fair use” exempted from copyright licensing requirements, or is a “public performance” falling under a copyright owner’s exclusive rights under Section 106 of the US Copyright Act. Those are interesting legal questions, but it’s a far better use of resources for Amazon and the Author’s Guild to jointly spend their money promoting the Kindle 2 and the available titles, and building the e-book market. Going forward, publishers are going to provide for the resolution of this issue in every publishing agreement with every author that they make, and authors and their agents are going to negotiate new book deals with these rights in mind.

Score one for the contract lawyers.

One of the latest features of the Kindle 2 raises a classic copyright issue: What happens when new technology impacts existing licensing deals?

Kindle 2 has a feature which reads text aloud. Authors and publishers contend that this feature creates an audio work under the US Copyright Act.

Under Section 106 of the US Copyright Act, the owner of a copyright has the exclusive rights to do and to authorize any of the following:

(1) to reproduce the copyrighted work in copies or phonorecords;

(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;

(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly;

(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and

(6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.

17 USC s. 106. (Those links in the body of Section 106 all purposely go to the same page: the Definitions section of the US Copyright Act. That’s because the definition of a copyright term is important. The definition of copyright terms of art “as defined in the Act” is controlling — and not the ‘dictionary definition’ that the public may be familiar with.)

They don’t have the right to read a book out loud. That’s an audio right, which is derivative under copyright law.

Harry Potter’s creator J. K. Rowling and her publisher Warner Brothers Entertainment sued RDR and Vander Ark last year to stop publication of the lexicon, claiming that it infringed copyrights in the overwhelmingly popular Harry Potter series of books. Warner Brothers Entertainment, Inc. and J.K. Rowling v. RDR Books et al, (USDC SDNY, Case No. 07-CV-9667). (A copy of the original complaint in the “Harry Potter Lexicon” case can be found here.) US District Court Judge Robert Patterson ruled earlier today that Rowling had proved her case: publication of the “Harry Potter Lexicon” would cause her irreparable harm as a writer.

A lexicon is a glossary or reference work organized like an encyclopedia or dictionary, usually in alphabetical order. In Vander Ark’s case, the “Harry Potter Lexicon” contained entries referencing and defining creatures, characters, place names and spells from the novels, and was a print-based version of his popular website HPL: The Harry Potter Lexicon.

Judge Patterson ruled that the “Harry Potter Lexicon” constituted copyright infringement of Rowling’s works. Even in cases of copyright infringement, a “fair use” defense frequently applies to allow portions of a copyrighted work to be used to facilitate specifically approved purposes — includes educational and teaching use, news reporting, formal literary criticism and inquiry, and parody. The Court found no “fair use” in this case. According to a Yahoo News article, Patterson’s ruled states:

because the Lexicon appropriates too much of Rowling’s creative work for its purposes as a reference guide, a permanent injunction must issue to prevent the possible proliferation of works that do the same and thus deplete the incentive for original authors to create new works.

Stingy minimum damages award speaks volumes
I’m completely underwhelmed by the damages awarded in the case. $750 for each of the seven novels about the boy wizard and $750 each of the two companion books for a total of $6,750. And for good reason: the 1976 Copyright Act now allows for damages of up to $100,000 for each act of infringement. Judge Patterson is certainly sending a message here about the spirit of the law, even if it contradicts his ruling on the letter of the law.

Fair-use reference, or derivative work?
Concordances and lexicons of authors’ works have traditionally been allowed under the fair-use defense to copyright infringement — with some exceptions. But copyright infringement is a highly facts-and-circumstances-dependent legal analysis: discussing copyrighted work and making a “transformative use” of the material is allowed, but cutting and pasting sections of a copyrighted work to assemble them into a reference work arguably could create a “derivative work” under section 101 of the Copyright Act, which is an exclusive right reserved to the copyright owner. Rowling’s lawyers argued against a finding of fair use, stating that the “Harry Potter Lexicon” adds no commentary or criticism, and makes no other transformative use of Rowling’s creation: it “takes too much and does too little.”

Judge Patterson touched upon the distinction between a reference and a derivative work in his ruling.

While the Lexicon, in its current state, is not a fair use of the Harry Potter works, reference works that share the Lexicon’s purpose of aiding readers of literature generally should be encouraged rather than stifled…. [The] Lexicon [however] appropriates too much of Rowling’s creative work for its purposes as a reference guide.

I’ll be analyzing the ruling in Warner Brothers Entertainment and J.K. Rowling v. RDR Books tonight to see what kind of precedent this decision contains about the boundary between reference and derivative work.

Warner Brothers Entertainment, Inc. and J.K. Rowling v. RDR Books et al, (USDC SDNY, Case No. 07-CV-9667).

See Ruling of September 8, 2008 – Warner Brothers Entertainment and J.K. Rowling v. RDR Books et al (the “Harry Potter Lexicon” case) for a copy of the decision in PDF.

Many thanks to Dineen Pashoukos Wasylik for pulling this down off PACER.

Here are some of the questions being discussed:

• Is a license the entire contract, or is a license a subset of the entire contract, where the contract contains other terms and responsibilities? Does a license agreement continue if the license is terminated?
  

• Can a perpetual software license be terminated? If it can be terminated, what does the word ‘perpetual’ mean?

• What’s the difference, if any, between a ‘fully paid-up’ license and a ‘royalty-free’ license?

And my favorite questions of intellectual property law contract interpretation:

• Who is excluded by an “exclusive” software license? and What’s the difference, if any, between an exclusive license and a transfer of ownership? Is an exclusive license the same thing as “I promise not to license to anyone else?”
  

I’m going to write briefly about these last issues.

The term “exclusive license” frequently confuses many software companies licensing their software to multiple clients — and also frequently confuses clients of the software companies. Customers of software developers always want exclusive rights to everything being provided by a software consultant that didn’t come in a box off the shelf at Fry’s.

And sometimes software companies oblige them. Here’s the reasoning: “We won’t give this away to your competitors or anyone else — you will have an exclusive license agreement with us.” And in agreeing to this, the software company has just excluded itself from continuing to use what it thinks it has merely licensed to a single client and promised not to license to anyone else. (In many cases this can have the undesirable effect of putting the software developer in the status of an infringer by continuing to use portions of the materials it developed, in its work for its other clients.)

An exclusive license excludes the licensor
An exclusive software license excludes the licensor as well as the rest of the world. In other words, when the owner of rights in software gives an exclusive license to his customer in a software license agreement — the owner has just excluded himself from whatever rights he just gave to his customer.

To me, this use of “exclusive” is plain dictionary English and is not ambiguous (and this is where I differ from Professor Eric Goldman, who stated in his comments to the AdamsDrafting article that the meaning of “exclusive” can be ambiguous). It’s my professional opinion (and the opinion of many other software licensing attorneys) that “exclusive rights” has a special meaning in the context of a software license agreement and that the term refers to and reflects intellectual property law concepts of “exclusivity.”

All software contains intellectual property (although not all intellectual property in software is protected).

Some software is patentable or contains patents (most does not). All software is copyrightable. And apart from open source software, all software contains trade secrets. In a software license agreement, the ownership of these intellectual properties is not transferred to the customer — the use of them is licensed to the customer, on specific terms, requiring continuing compliance with the terms of the license, or the license will be terminated.

Both the US patent law and the US copyright law provide for the creator of rights (and subsequently any owner of the rights) to enjoy “exclusive” rights. In the copyright law context, the owner’s right to exclude others means that unauthorized use of the owner’s exclusive rights equals copyright infringement (except in the important case where the use is minimal enough to be protected by the law as “fair use” of the copyright). In the patent licensing world, inventors who intend to continue using their technology grant an exclusive license to their customer, but simultaneously reserve a right to use themselves. This type of license language is called a “grantback” clause. Particularly in the last case — a grant coupled with a grantback — it’s obvious that the granting back of a license to the creator is to explicitly avoid cutting off the creator’s rights in the intellectual property.

The law of mutual mistake
I see the “ambiguousness” of the word “exclusive” as maybe a reference to a common problem in dealmaking which is called “mutual mistake” in the law of contracts. Mutual mistake is a doctrine that says that a contract is void if the parties thought they had the same deal in mind, when actually the thing that was the subject of their agreement was not actually the thing they thought it was. Here’s a specific example that comes from a famous 19th century case:

Smith and Jones are farmers. Jones wants to buy a fertile cow, Rose, from Smith; and the price he is willing to pay reflects the fact that the cow is fertile. Jones and Smith make an agreement for Jones to sell Rose to Smith at the agreed-upon price. It turns out that the cow, Rose, is actually not fertile.

Both parties have made a ‘mutual’ mistake. The whole point of their agreement was the transfer of a fertile cow, not just the transfer of Rose the cow. Rose the cow turned out not to be a fertile cow. Jones would not have paid the price he paid, or agreed upon that price, for a non-fertile cow. The court found that this contract was voidable due to “mutual mistake.”

Similarly in the software development context — both the software developer and the software developer’s client may believe that an “exclusive” license only excludes everyone who is not a party to the software license agreement — in other words, that it does not exclude the software developer itself. But they use the terminology “exclusive agreement” or “exclusive software license” when what they really mean is “an exclusive license with a grantback license” or “an exclusive license where the licensor reserves rights to continue use” or more simply: “I promise not to license to anyone else.”

I’ve never seen a software license agreement considered by a court to be voidable for mutual mistake (technically, this is because this is specifically prevented by other language in most contracts which allows a court to rewrite the terms of the agreement to save the contract from being voided — sometimes called a “savings” clause or a “blue pencil” clause). Whether or not a savings clause exists, software developers who carelessly use the term “exclusive license” when they really intend to keep using the technology, are risking a court’s decision that the plain legal meaning of “exclusive license” excludes the licensor.

Careless license language and warranties of title
Now let’s extend this thought further down the line to the next set of adverse consequences.

Software development company ABC Inc. gives an “exclusive license” to their client XYZ Inc. for software developed and implemented at XYZ under the Software License Agreement between the parties. Both of them intend simply that ABC will not license this particular implementation of the software to anyone other than XYZ. However, the software license agreement doesn’t say that. Now ABC goes on to the next client and signs an agreement with FGH Inc. in which ABC “represents and warrants” that it has the ownership rights necessary to grant an exclusive license” to FGH (this is called a “warranty of title”), and the software being exclusively licensed by ABC to FGH includes the core development tools that ABC licensed to XYZ and which ABC uses in its development projects for every client.

ABC no longer has any rights to legally give away to FGH, because it transferred them all by contract to XYZ. In this case, ABC starts out from Day One in its software license agreement with FGH in breach of the contract — it is saying that it can give away rights that it does not have. If this contract lands in a court dispute, FGH will probably be able to get back every dollar paid to the software developer ABC.

“I promise not to license to anyone else”
Moral of the story: “I promise not to license this to anyone else” IS NOT the same thing as “I grant you an exclusive license.”

I get about two calls a month about contract interpretation from a software development company or a customer licensing custom developed software.

The person on the other end of the phone has typically picked up a form document called “License Agreement” from some place on the Internet like docstoc.com or has been handed a form prepared by a business attorney inexperienced in software development and intellectual property license terminology.

If questions are now being raised and a contract has already been negotiated — or signed — the answers to those questions are almost never good.

Software development is an expensive proposition: it’s worth spending 5 to 10 percent of the value of the contract (or if you are a developer, the fees from a couple of customer licenses) as “insurance” to make sure that the software license agreement says what the developer and customer think it does.

http://williampatry.blogspot.com/

Patry cites the “depressing state of copyright law” and the direction of recent copyright law developments as among his personal and professional reasons for not continuing the blog.

His contributions over the last several years to copyright scholarship from a private practice point of view have been valuable and unique and will be missed. Several of us are trying to persuade him to maintain his archive of over 800 thoughtful and incisive posts on key developments (which he has removed).

If anyone is inclined, he or she should add opinions to the comments section.