1. Class 15 Copyright, Winter, 2010 Fair Use: Transaction Costs Randal C. Picker Leffmann Professor of Commercial Law The Law School The University of Chicago 773.702.0864/r-picker@uchicago.edu Copyright © 2005-10 Randal C. Picker. All Rights Reserved.

2. September 2, 2015Copyright © 2010 Randal C. Picker2 101: Computer Program n A “computer program” is u a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result.

3. September 2, 2015Copyright © 2010 Randal C. Picker3 117: Limitations on exclusive rights: Computer programs n (a) Making of additional copy or adaptation by owner of copy. u 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:

4. September 2, 2015Copyright © 2010 Randal C. Picker4 117: Limitations on exclusive rights: Computer programs u (1) that such a 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 u (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.

5. September 2, 2015Copyright © 2010 Randal C. Picker5 Sega v. Accolade n 977 F.2d 1510 (9 th Cir. 1992) n Core Facts u Sega builds game console (Genesis) u Licenses copyrighted computer code and trademarks to third-party game makers u Seems to require that licensees manufacture cartridges themselves through Sega

6. September 2, 2015Copyright © 2010 Randal C. Picker6 Sega v. Accolade u Accolade doesn’t license; buys console and games and reverse engineers w That means that it produces a printout of the copyrighted source code w Accolade took that information and produced a manual with functional descriptions of how to interact with the Genesis console u Accolade produced its own games

7. September 2, 2015Copyright © 2010 Randal C. Picker7 Sega v. Accolade n What is going on here u economically? u from the perspective of copyright?

8. September 2, 2015Copyright © 2010 Randal C. Picker8 Intermediate Copying n Hypo u Like the case, I copy the work to learn something functional about the work u I distill that learning into a work that we will assume isn’t a copy of the original work u I destroy my copy n Copyright infringement?

9. September 2, 2015Copyright © 2010 Randal C. Picker9 Controlling Functionality Through Copyright n How does 102(b) play into this? u In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.

10. September 2, 2015Copyright © 2010 Randal C. Picker10 The Fair Use Analysis n How do the four factor’s apply to Accolade’s use? u The purpose and character of the use? u The nature of the copyrighted work? u The amount used? u The effect on the potential market or value of the copyrighted work?

11. September 2, 2015Copyright © 2010 Randal C. Picker11 107. Limitations on exclusive rights: Fair use n Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, u including such use w by reproduction in copies or phonorecords or w by any other means specified by that section,

12. September 2, 2015Copyright © 2010 Randal C. Picker12 107. Limitations on exclusive rights: Fair use n for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, n is not an infringement of copyright.

13. September 2, 2015Copyright © 2010 Randal C. Picker13 Classroom Guidelines n Negotiated Guidelines that are reprinted in the House Report on the 1976 Copyright Act n Parties u Ad Hoc Committee of Educational Institutions and Organizations on Copyright Law Revision u Authors League of American, Inc. u Association of American Publishers, Inc. n See Circular 21 from the US Copyright Office See

14. September 2, 2015Copyright © 2010 Randal C. Picker14 Classroom Guidelines n Single Copying for Teachers u A single copy may be made of any of the following by or for a teacher at his or her individual request for his or her scholarly research or use in teaching or preparation to teach a class: w A. A chapter from a book; w B. An article from a periodical or newspaper; w C. A short story, short essay or short poem, whether or not from a collective work; w D. A chart, graph, diagram, drawing, cartoon or picture from a book, periodical, or newspaper;

15. September 2, 2015Copyright © 2010 Randal C. Picker15 Classroom Guidelines n Multiple Copies for Classroom Use u Multiple copies (not to exceed in any event more than one copy per pupil in a course) may be made by or for the teacher giving the course for classroom use or discussion; provided that: w A. The copying meets the tests of brevity and spontaneity as defined below; and, w B. Meets the cumulative effect test as defined below; and, w C. Each copy includes a notice of copyright

16. September 2, 2015Copyright © 2010 Randal C. Picker16 Classroom Guidelines n Brevity: Prose u (a) Either a complete article, story or essay of less than 2,500 words, or (b) an excerpt from any prose work of not more than 1,000 words or 10% of the work, whichever is less, but in any event a minimum of 500 words.

17. September 2, 2015Copyright © 2010 Randal C. Picker17 Classroom Guidelines n Spontaneity u The copying is at the instance and inspiration of the individual teacher, and u The inspiration and decision to use the work and the moment of its use for maximum teaching effectiveness are so close in time that it would be unreasonable to expect a timely reply to a request for permission.

18. September 2, 2015Copyright © 2010 Randal C. Picker18 Classroom Guidelines n Cumulative Effect u (i) The copying of the material is for only one course in the school in which the copies are made. u (ii) Not more than one short poem, article, story, essay or two excerpts may be copied from the same author, nor more than three from the same collective work or periodical volume during one class term. u (iii) There shall not be more than nine instances of such multiple copying for one course during one class term.

19. September 2, 2015Copyright © 2010 Randal C. Picker19 Classroom Guidelines u The limitations stated in “ii” and “iii” above shall not apply to current news periodicals and newspapers and current news sections of other periodicals.

20. September 2, 2015Copyright © 2010 Randal C. Picker20 Classroom Guidelines n Additional Prohibitions u Notwithstanding any of the above, the following shall be prohibited: w (A) Copying shall not be used to create or to replace or substitute for anthologies, compilations or collective works. Such replacement or substitution may occur whether copies of various works or excerpts therefrom are accumulated or reproduced and used separately.

21. September 2, 2015Copyright © 2010 Randal C. Picker21 Classroom Guidelines w (C) Copying shall not: (a) substitute for the purchase of books, publishers’ reprints or periodicals; (b) be directed by higher authority; (c) be repeated with respect to the same item by the same teacher from term to term.

22. September 2, 2015Copyright © 2010 Randal C. Picker22 108. Reproduction by libraries and archives n (a) u Except as otherwise provided in this title and notwithstanding the provisions of section 106, it is not an infringement of copyright for a library or archives, or any of its employees acting within the scope of their employment, to reproduce no more than one copy or phonorecord of a work, except as provided in subsections (b) and (c), or to distribute such copy or phonorecord, under the conditions specified by this section, if ‑‑

23. September 2, 2015Copyright © 2010 Randal C. Picker23 108 (Cont.) w (1) the reproduction or distribution is made without any purpose of direct or indirect commercial advantage; w (2) the collections of the library or archives are (i) open to the public, or (ii) available not only to researchers affiliated with the library or archives or with the institution of which it is a part, but also to other persons doing research in a specialized field; and

24. September 2, 2015Copyright © 2010 Randal C. Picker24 108 (Cont.) w (3) the reproduction or distribution of the work includes a notice of copyright that appears on the copy or phonorecord that is reproduced under the provisions of this section, or includes a legend stating that the work may be protected by copyright if no such notice can be found on the copy or phonorecord that is reproduced under the provisions of this section.

25. September 2, 2015Copyright © 2010 Randal C. Picker25 108(b) n (b) u The rights of reproduction and distribution under this section apply to three copies or phonorecords of an unpublished work duplicated solely for purposes of preservation and security or for deposit for research use in another library or archives of the type described by clause (2) of subsection (a), if ‑‑

26. September 2, 2015Copyright © 2010 Randal C. Picker26 108(b) w (1) the copy or phonorecord reproduced is currently in the collections of the library or archives; and w (2) any such copy or phonorecord that is reproduced in digital format is not otherwise distributed in that format and is not made available to the public in that format outside the premises of the library or archives.

27. September 2, 2015Copyright © 2010 Randal C. Picker27 108(c) n (c) u The right of reproduction under this section applies to three copies or phonorecords of a published work duplicated solely for the purpose of replacement of a copy or phonorecord that is damaged, deteriorating, lost, or stolen, or if the existing format in which the work is stored has become obsolete, if ‑‑

28. September 2, 2015Copyright © 2010 Randal C. Picker28 108(c) u (1) the library or archives has, after a reasonable effort, determined that an unused replacement cannot be obtained at a fair price; and u (2) any such copy or phonorecord that is reproduced in digital format is not made available to the public in that format outside the premises of the library or archives in lawful possession of such copy.

29. September 2, 2015Copyright © 2010 Randal C. Picker29 108(c) u For purposes of this subsection, a format shall be considered obsolete if the machine or device necessary to render perceptible a work stored in that format is no longer manufactured or is no longer reasonably available in the commercial marketplace.

30. September 2, 2015Copyright © 2010 Randal C. Picker30 108(d) n (d) u The rights of reproduction and distribution under this section apply to a copy, made from the collection of a library or archives where the user makes his or her request or from that of another library or archives, of no more than one article or other contribution to a copyrighted collection or periodical issue, or to a copy or phonorecord of a small part of any other copyrighted work, if ‑‑

31. September 2, 2015Copyright © 2010 Randal C. Picker31 108(d) w (1) the copy or phonorecord becomes the property of the user, and the library or archives has had no notice that the copy or phonorecord would be used for any purpose other than private study, scholarship, or research; and w (2) the library or archives displays prominently, at the place where orders are accepted, and includes on its order form, a warning of copyright in accordance with requirements that the Register of Copyrights shall prescribe by regulation.

32. September 2, 2015Copyright © 2010 Randal C. Picker32 108(e) n (e) u The rights of reproduction and distribution under this section apply to the entire work, or to a substantial part of it, made from the collection of a library or archives where the user makes his or her request or from that of another library or archives, if the library or archives has first determined, on the basis of a reasonable investigation, that a copy or phonorecord of the copyrighted work cannot be obtained at a fair price, if ‑‑

33. September 2, 2015Copyright © 2010 Randal C. Picker33 108(e) u (1) the copy or phonorecord becomes the property of the user, and the library or archives has had no notice that the copy or phonorecord would be used for any purpose other than private study, scholarship, or research; and u (2) the library or archives displays prominently, at the place where orders are accepted, and includes on its order form, a warning of copyright in accordance with requirements that the Register of Copyrights shall prescribe by regulation.

34. September 2, 2015Copyright © 2010 Randal C. Picker34 108(f) n (f) u Nothing in this section ‑‑ w (1) shall be construed to impose liability for copyright infringement upon a library or archives or its employees for the unsupervised use of reproducing equipment located on its premises: Provided, That such equipment displays a notice that the making of a copy may be subject to the copyright law;

35. September 2, 2015Copyright © 2010 Randal C. Picker35 108(f) w (2) excuses a person who uses such reproducing equipment or who requests a copy or phonorecord under subsection (d) from liability for copyright infringement for any such act, or for any later use of such copy or phonorecord, if it exceeds fair use as provided by section 107;

36. September 2, 2015Copyright © 2010 Randal C. Picker36 108(f) w (3) shall be construed to limit the reproduction and distribution by lending of a limited number of copies and excerpts by a library or archives of an audiovisual news program, subject to clauses (1), (2), and (3) of subsection (a); or

37. September 2, 2015Copyright © 2010 Randal C. Picker37 108(f) w (4) in any way affects the right of fair use as provided by section 107, or any contractual obligations assumed at any time by the library or archives when it obtained a copy or phonorecord of a work in its collections.

38. September 2, 2015Copyright © 2010 Randal C. Picker38 Copying n Hypo u Prof checks out a journal from the library u Prof stands in front of the copier and make a copy n Copyright violation?

39. September 2, 2015Copyright © 2010 Randal C. Picker39 Four Factors n Basics u Non-transformative u Copy of entire work u Item copied is academic article

40. September 2, 2015Copyright © 2010 Randal C. Picker40 Assessing the Fourth Factor n Harper & Row (1985) u “Finally, the Act focuses on ‘the effect of the use upon the potential market for or value of the work.’ This last factor is undoubtedly the single most important element of fair use.”

41. September 2, 2015Copyright © 2010 Randal C. Picker41 Assessing the Fourth Factor n But See Campbell (1994) u “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.”

42. September 2, 2015Copyright © 2010 Randal C. Picker42 Assessing the Fourth Factor n Defining Markets u In Harper, effect on first serial rights u In Campbell, effect on market for licensed rap version of Pretty Woman

43. September 2, 2015Copyright © 2010 Randal C. Picker43 Understanding the Fourth Factor n What is the right market u The market for each of the books in question? u The market for permission fees for selections from the books? n Circularity? u If you can use without paying, you can’t sell it (free beats fee)

44. September 2, 2015Copyright © 2010 Randal C. Picker44 Understanding the Fourth Factor n Does the copyright holder control fair use? u If the copyright holder offers the use for a fee, if free beats fee, copyright holder can’t sell and then fair use impairs market n Do we need to know something about the selection rules for content? u If profs won’t assign work with permission fees, free (fair) use doesn’t result in loss of fees

45. September 2, 2015Copyright © 2010 Randal C. Picker45 Allocating the Burden of Proof n Sony (US, 1984) u If use is commercial, infringer bears burden on fourth factor u If use is noncommercial, copyright holder bears burden

46. September 2, 2015Copyright © 2010 Randal C. Picker46 Consent and Fair Use n Scope of Permissible Photocopying u What role does the copyright holder’s consent play in this?

47. September 2, 2015Copyright © 2010 Randal C. Picker47 [SC: CCC]

48. September 2, 2015Copyright © 2010 Randal C. Picker48 JLE: Consent Code © 2005 by The University of Chicago. All rights reserved. 0022-2186/2005/4801-0002$01.50

49. September 2, 2015Copyright © 2010 Randal C. Picker49 Copying and Agents n Hypo u Prof checks out a journal from the library u Prof asks her research assistant to make a copy n Copyright violation? Who is liable for it?

50. September 2, 2015Copyright © 2010 Randal C. Picker50 Copying and Professional Agents n Hypo u Prof checks out a journal from the library u Prof asks Kinkos to make a copy n Copyright violation? Who is liable for it?

51. September 2, 2015Copyright © 2010 Randal C. Picker51 Assigned Reading n Hypo u Prof assembles reading list u Prof puts original versions of readings on two-hour reserve at school library u Students check out readings and copy them u Each student gets one copy n Copyright violation?

52. September 2, 2015Copyright © 2010 Randal C. Picker52 Assigned Reading n Hypo u Prof assembles reading list u Prof copies original of journal article and distributes copy to each student u Each student gets one copy n Copyright violation?

53. September 2, 2015Copyright © 2010 Randal C. Picker53 Assigned Reading n Hypo u Prof assembles reading list u Prof has Kinkos make copies u Each student get one copy n Copyright violation? Who is liable?

54. September 2, 2015Copyright © 2010 Randal C. Picker54 JLE n Copyright Beyond Fair Use u “The code on the first page of an article in this journal indicates the copyright owner’s consent that copies of the article may be made beyond those permitted by Sections 107 or 108 of the U.S. Copyright Law provided that copies are made only for personal or internal use or for the personal or internal use of specific clients and provided that the copier pay the stated per-copy fee through Copyright Clearance Center, Inc. …

55. September 2, 2015Copyright © 2010 Randal C. Picker55 JLE u To request permission for other kinds of copying, such as copying for general distribution, for advertising or promotional purposes, for creating new collective works, or for resale, kindly write to the managing editor ….”

56. September 2, 2015Copyright © 2010 Randal C. Picker56 Copying and Watermarking n Hypo u A technology is developed such that a paper can be imprinted with a copying consent code u Photocopying machines could recognize that code and copy or not copy accordingly n Would the existence of this technology alter the fair use analysis?

57. September 2, 2015Copyright © 2005 Randal C. Picker57 Screen Capture Slide Link