Is The Authors Guild Going To Get Screw-gled?

On December 3, 2014, a three-judge panel of the Second Circuit Court of Appeals heard oral arguments in Authors Guild v. Google. (A detailed summary of the oral arguments is available here). The issue before the Court was whether Google’s mass digitization initiative (Google Books), in which Google scanned and digitized millions of literary works, including copyrighted works, constituted fair use. The lower court had found that Google’s uses were “highly transformative” and, therefore, a fair use. The Authors Guild appealed and, although the Second Circuit’s ruling isn’t expected until early next year, it appears the Court is poised to affirm the lower court’s holding. If it does, yet another blow would be dealt to creator rights by digitization and Congress should consider intervening with a legislative response.

At the December 3, 2014, hearing, the Authors Guild made two notable arguments to refute the lower court’s fair use finding. First, that Google’s status as a for-profit entity distinguished its use from the one made in HathiTrust, an earlier digitization case that the Court determined to be fair use. Second, that Google’s digitization project undercut the potential market for a digital licensing database from which authors could participate and profit.

The Second Circuit panel included Judge Pierre Leval, whose 1990 law review article in the Harvard Law Review, “Toward a Fair Use Standard” (available here), spurred the modern emphasis on transformativeness in fair use analysis. And true to his background, at the hearing Judge Leval made several comments that indicated he was not particularly inclined to reverse the lower court’s holding on the non-transformative grounds raised by the Authors Guild.

As to Google’s status as a commercial entity, Judge Leval replied, “The classic fair use cases are commercial. . . I would be surprised if you’re going to win this case by pleading that Google, like the New York Times, is profit [oriented].” Nor did Judge Leval appear convinced that Google Books impaired any value copyright owners could derive from a digital licensing market. Judge Leval remarked that the Guild’s position did not create “a very useful test” since there is always the possibility that someone may be willing to license the work to avoid potential litigation.

For those who have read my views on Fox News v. TVEyes, it should come as no surprise that I believe Judge Leval may have lost sight of the forest for the trees. True, the New York Times is a profit orientated entity, like Google, but the uses made by each stand in stark contrast. The New York Times does not simply repackage a work, or portion thereof, but instead adds its own criticism or news commentary, a practice that clearly falls within the fair uses contemplated by Section 107 of the Copyright Act. To that end, the New York Times limits the amount of a copyrighted work it uses to achieve that aim.

Google Books, to its credit, displays only a “snippet” of content to prevent third parties from easily accessing a full work. But the snippet is not tailored to achieve the third party’s fair use objective (assuming a fair use is being made at all). Because Google’s numerous users will make vastly different uses of the work, Google “needs” to copy an entire work and have the ability to disseminate any portions thereof to satisfy its users’ needs. The problem is that, in any individual case, a particular downstream user may need more or less of the work to achieve their fair use. The fair use analysis in these cases, however, creates a one-size fits all determination and forgoes any case-by-case analysis. Many recognize the burden authors bear in monitoring one’s works against infringing uses, but imagine how difficult the task becomes when the world’s largest database offers access to it for free. The sheer size and scope of potential users utilizing the work is so vast that the task of evaluating which uses are appropriate becomes sisyphean.

Additionally, Judge Leval’s portrayal of the Authors Guild’s market argument creates a red herring. The Guild’s proposed test was never precipitated on the existence of a single “willing licensee.” Rather, it sought to focus on the viability of a digital licensing market that is preempted by Google Books. The degeneration of the discussion was quite disappointing as there are comparable digital licensing schemes abroad, such as Google’s agreements with the French Publishers Association and publishers Hachette Livre and La Martiniere to license their out-of-print works for such a database, that demonstrate the viability of a similar market domestically.

So why hasn’t Congress acted yet to address digitization? Well, it may surprise you to learn that Congress has contemplated doing so for quite some time. As Terry Hart recently highlighted, legislators actually began to consider the broader issue of how copyright law and the use of copyrighted works with computers interact with one another in 1964. The 1964 Copyright Law Revision bill included the right “to reproduce [the copyrighted work] in any form in the programming and operation of an information storage and retrieval system” as one of several exclusive rights conferred to a copyright owner. However, that language was deleted when the 1965 Copyright Law Revision bill was presented to Congress and ultimately omitted from the final version of the Copyright Act of 1976.

According to the then-Register of Copyrights, the provision was deleted because the burgeoning field of computer technology was too new. The Copyright Office believed “it would be a mistake for the statute . . . to include an explicit provision that could later turn out to be too broad or too narrow.” Supplementary Report of the Register of Copyrights on the General Revision of the U.S. Copyright Law: 1965 Revision Bill, 89th Cong., 1st sess., 1965, p. 18. However, the Copyright Office warned,

unless the doctrine of “fair use” is applicable in a particular case, the bill contemplates that certain computer uses would come within the copyright owner’s exclusive rights. It seems clear, for example, that the actual copying of entire works (or substantial portions of them) for “input” or storage in a computer would constitute a “reproduction” under [the Copyright Act], whatever form the “copies” take: punchcards, punched or magnetic tape, electronic storage units, etc. Similarly, at the “output” end of the process, the “retrieval” or “print-out” of an entire work (or a substantial part of it) in tangible copies would also come under copyright control.

Id.

Almost forty years later, Google began to digitize library collections and allow users to search its books database, which led to the current dispute. The Authors Guild and Google have litigated the matter since 2005, and in 2009 it appeared the parties had resolved the matter after reaching a tentative settlement agreement. The proposed settlement would have created an opt-out collective licensing system whereby Google (and only Google) could utilize copyrighted and orphan works and rightsholders would be compensated through a collective registry.

As required, Google and the Authors Guild filed the proposed settlement with the Southern District of New York for final approval. The court, however, denied the proposed settlement in an order authored by Judge Chin. Judge Chin acknowledged that although the digitization project would serve several publicly beneficial goals, it would also fundamentally redefine the relationship of copyright law and technology and alter the exclusive rights conferred by copyright law. In the view of the court, Congress would be the appropriate authority to implement such a profound change to the copyright scheme. No. 05-8136 (S.D.N.Y. March 22, 2011) (order denying motion for final approval of the amended settlement agreement), available here.

The Copyright Office lauded Judge Chin’s decision. It too agreed that digitization could convey appreciable public benefits, but “copyright law may not be usurped as a matter of convenience[.]” Letter on Digitization from James H. Billington, The Librarian of Congress, and Maria A. Pallante, Then-Acting Register of Copyrights, to the Honorable Mr. Patrick Leahy and Mr. Charles Grassey (April 1, 2011).

Later that year, the Copyright Office released its preliminary analysis on mass digitization. In its report, the Copyright Office noted how mass digitization and dissemination would be “difficult to square with fair use.” However, in the three years since the Copyright Office expressed that sentiment, there are now three separate decisions that hold (and presumably will uphold) otherwise: HathiTrust, Fox News v. TVEyes, and Authors Guild v. Google (with varying degrees of persuasiveness).

Although the Second Circuit’s opinion in Authors Guild v. Google is not expected until early 2015, the writing on the wall is clear – the Second Circuit considers digitization to be a transformative use. And, worse, the Court’s earlier decisions are being used to justify digital repackaging for commercial uses. What initially began as a narrow finding to permit a non-commercial digitization venture that offered limited, if any, dissemination of out-of-print works (Hathi Trust) has morphed to allow wholesale copying and reproduction by commercial entities of readily available works (TVEyes). Given these decisions, the prospects of a voluntary licensing market developing are slim.

Even more alarming is that the Second Circuit has essentially created its own mandatory licensing regime. And, unlike the proposed settlement between the Authors Guild and Google, rightsholders are receiving no compensation for the use of their works and are unable to opt-out (or opt-in, for that matter) from participating. Admittedly, the Second Circuit’s regime addresses concerns that the 2009 proposed settlement would have granted Google monopoly power, but the Court has ignored that such a fundamental policy change to a creator’s exclusive rights is best addressed by Congress, not the courts.

At this point, Congressional action is needed now more than ever. Congress should make clear that technological convenience cannot justify the erosion of creator rights. That being said, I do not believe digitization should be outright prohibited. There are very compelling reasons as to why digitization can benefit the public and authors – new audiences, new markets, new sources of income – but, quite simply, there need to be established guidelines and boundaries. To that end, I believe Section 108 should be updated to reflect the current norm of digital consumption. A comprehensive revision of Section 108 could include a clear delineation of what entities can digitize and disseminate copyrighted works to balance the public benefits of digitization with the rights of creators.

In addition, Congress should consider whether to implement a licensing regime for digitizations and the conditions for doing so. For example, should non-commercial, educational uses not require any license? Should commercial uses only be permitted when the parties agree to do so? Further, any discussion of digitization should also include revisiting the issue of orphan works as it would impact any voluntary or opt-in digitization project. It benefits neither the public nor the author to have unidentifiable authors that make a voluntary license impossible to attain. The Copyright Office would be able to offer Congress much guidance as it issued a major report on orphan works in 2006 and continues to study the issue with respect to mass digitization. In addition, with the UK’s recent launch of its orphan works registry, there are a number of models in Europe from which to gather empirical data for Congress to review. In truth, now may be a more ripe time than ever to undertake these various issues and hopefully Congress will.

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Don’t Ditch Cable For Internet TV… Yet.

A Look At The Supreme Court’s Decision In Aereo III, Why Internet TV Is Not Eligible For A Compulsory License Under The Copyright Act, And Why It’s Time To Re-evaluate If It Should Be.

On June 25, 2014, the Supreme Court issued its ruling in American Broadcasting Cos., Inc. v. Aereo, Inc., 134 S. Ct. 2498 (2014) (“Aereo III”) – a two-year long dispute concerning the legality of Internet retransmissions of free over-the-air televised broadcast content to streaming subscribers. The case had gained much notoriety as several amici (including the NFL, MLB, the Department of Justice, and several entertainment and media organizations) submitted briefs to the Court to voice their opinions. In a 6-3 decision, the Court held that Aereo’s activities violate the exclusive right of copyright owners to “perform the copyrighted work publicly.” Id. at 2499-2500, quoting 17 U.S.C. Section 106(4).

But Aereo isn’t going away quietly. It now asserts that, if it does “perform,” it does so as a “cable system” and, therefore, is eligible to make secondary transmissions of the copyrighted works pursuant to Section 111 of the Copyright Act (the “cable compulsory license”). If true, Aereo would be able to continue its operations after submitting the statutorily established license fees. If not, Aereo will need to individually negotiate license agreements with rights’ holders, as no compulsory license exists for Internet retransmissions.

Is Aereo likely to prevail on this argument? Probably not; but it may be time for Congress and the Copyright Office to revisit the merits of a compulsory license for Internet retransmissions. Before addressing those issues, it is worthwhile to review how Aereo’s technology works and the particulars of the Court’s determination in Aereo III.

Aereo offers subscribers broadcast television programming (virtually as it is broadcast) over the Internet, for a monthly fee. To do so, Aereo uses servers, transcoders, and thousands of dime-sized antennas housed in its central warehouse. A subscriber selects a show to watch from Aereo’s website, which lists available local programming. Then, one of Aereo’s servers selects an individual antenna and dedicates it to that subscriber for the duration of the program. Aereo’s servers will tune the antenna to the subscriber’s desired over-the-air broadcast, transcode that signal, and transmit the data over the Internet. Aereo’s servers save the data in a subscriber-specific folder (the subscriber’s “personal” copy) and begin streaming once several seconds of programming are saved. The data streamed to each subscriber is only from each subscriber’s “personal” copy. Aereo III, 134 S. Ct. at 2503.

The question for the Supreme Court was whether Aereo’s transmissions, which consisted of individual transmissions of a unique “performance,” did not constitute a “public performance” of copyrighted works under the Act. Or, instead, was simply “a Rube Goldberg-like contrivance, over-engineered in an attempt to avoid the reach of the Copyright Act and to take advantage of a perceived loophole in the law.” WNET v. Aereo, Inc., 712 F.3d 676, 697 (2d Cir. 2013) (Chin, dissenting).

In the Court’s eyes, the case essentially came down to whether Aereo’s operations were more closely analogous to a cable system or, instead, a copy shop. If it were the former, then Aereo’s operations would run afoul of the Copyright Act because it would be directly infringing the exclusive rights of copyright owners. If the latter, then Aereo’s subscribers, not Aereo, would be the direct infringers and Aereo would not be directly liable. (Ed. Note: For an interesting dissection of Justice Scalia’s dissent and the copy shop argument, check out Devlin Hartline’s blog post).

The majority opinion, penned by Justice Breyer, held that Aereo publicly performs copyrighted works in violation of the “Transmit Clause.” The Court noted that, while the Transmit Clause did not clearly indicate whether an entity that merely supplies equipment performs or transmits themselves, the legislative history behind the provisions made clear that Aereo does “perform” as contemplated by the Act. Aereo III, 134 S. Ct. at 2504.

The Transmit Clause defines publicly perform:

To transmit or otherwise communicate a performance or display of the work . . . to the public, by means of any device or process, whether the members of the public capable or receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.

17 U.S.C. Section 101. But, as the Court indicated, the legislative history behind the provision greatly illuminates its scope and meaning.

“One of Congress’ primary purposes in amending the Copyright Act of 1976 was to overturn th[e Supreme] Court’s determination that community antenna television (CATV) systems (the precursors to modern cable systems) fell outside the Act’s scope.” Id. In Fortnightly Corp. v. United Artists Television, Inc., 392 U.S. 390 (1968), and Teleprompter Corp. v. Columbia Broadcasting System, Inc., 415 U.S. 394 (1974), the Supreme Court had held that CATV systems did not violate copyright owners’ exclusive right to “perform” or “transmit.” In the Court’s view, CATV providers merely “enhanced the viewer’s capacity to receive the broadcaster’s signals,” Fortnightly, 392 U.S. at 399, even though it recognized CATV providers had some discretion over what to transmit and viewers could not likely afford the enhancing equipment themselves. Teleprompter, 415 U.S. at 408-410.

In response, Congress introduced language in the 1976 Act to overturn the Fortnightly and Teleprompter decisions and erase the distinction between a broadcaster and viewer with respect to the right “to perform.” H.R. Rep. No. 94-1476, pp.88-89 (1976). See also S. Rep. No. 94-473, p. 60 (1975) (“Under the definitions of ‘perform,’ ‘display,’ ‘publicly,’ and ‘transmit’ in Section 101 . . . a cable system is performing when it retransmits the broadcast to its subscribers[.]”).

While Aereo portrayed itself as merely furnishing its subscribers with equipment that emulated the operation of a home antenna or DVR device, the Court found that Aereo’s activities were those Congress sought to target by enacting the Transmit Clause. Aereo III, 134 S. Ct. at 2506 (“Aereo’s activities are substantially similar to those of the CATV companies that Congress amended the Act to reach.”). “The [Transmit] Clause makes clear that an entity that acts like a CATV [or modern cable] system itself performs, even when it simply enhances viewers’ ability to receive broadcast television signals.” Id. “Given Aereo’s overwhelming likeness to the cable companies targeted by the 1976 amendments,” Aereo did infringe others’ copyrights when it retransmitted broadcast content. Id. at 2507.

Consistent with its findings, the Court reversed the Second Circuit’s ruling and remanded the case. To avoid having its services enjoined, Aereo has now attempted to tender statutory license fees to the Copyright Office to obtain a compulsory license to the copyrighted works as a “cable service” under Section 111 of the Copyright Act. However, the Copyright Office informed Aereo that, while it would provisionally accept the license fees Aereo tendered, it would not process its license request because:

In the view of the Copyright Office, internet retransmissions of broadcast television fall outside the scope of the Section 111 license. Significantly, in WPIX, Inc. v. ivi, Inc., 691 F. 3d 275 (2d Cir. 2012), the Second Circuit deferred to and agreed with the Office’s interpretation of Section 111. As explained in that case, Section 111 is meant to encompass “localized retransmission services” that are “regulated as cable systems by the FCC.” We do not see anything in the Supreme Court’s recent decision in American Broadcasting Cos. v. Aereo, Inc., 134 S. Ct. 2498 (2014), that would alter this conclusion.

Letter of Jacqueline C. Charlesworth, General Counsel and Associate Register of Copyrights, to Mr. Matthew Calabro of Aereo, Inc. (July 16, 2014). (Internal citations omitted). Now, Aereo is again before the Second Circuit, seeking to persuade the court that it is a “cable system” under the Copyright Act.

In support of its claim, Aereo advances two arguments. First, pursuant to Aereo III (and various comments from the Justices), Aereo is a cable system eligible for a Section 111 compulsory license. Aereo, Inc.’s Opposition to Plaintiffs’ Memorandum in Support of Preliminary Injunction (“Aereo’s Opposition”) at 1. Second, prior precedent (namely, the Second Circuit’s decision in WPIX, Inc. v. ivi, Inc. [“ivi”] and the Copyright Office’s position on Internet retransmissions) is inapplicable as Aereo only engages in localized retransmission services. Id. at 15. Aereo, however, is unlikely to prevail on these arguments.

First, Aereo III did not address whether Aereo was a cable system eligible for a compulsory license under Section 111. The only questions before the Court were (1) are Aereo’s transmissions “performances” of copyrighted works and, if so, (2) whether that performance(s) is “to the public.” Aereo III, 134 S. Ct. at 2500-2503. In fact, the opinion itself only cites to Section 111 three times, in a paragraph detailing Congress’ response to Fortnightly and Teleprompter. Id. at 2506.

Furthermore, the Court’s opinion makes clear that the Transmit Clause be read expansively, as an entity that “acts like a CATV system itself performs.” Id. That reading is supported by the clear language of the clause, which states that a transmission may be accomplished “by any device or process” – not only by a cable system. 17 U.S.C. Section 101. By comparison, Section 111(f)(3) defines a “cable system” as:

A facility, located in any State, territory, trust territory, or possession of the United States, that in whole or in part receives signals transmitted or programs broadcast by one or more television broadcast stations licensed by the Federal Communications Commission, and makes secondary transmissions of such signals or programs by wires, cables, microwave, or other communications channels to subscribing members of the public who pay for such service.

Although an argument could be made that “or other communications channels” also be read expansively, the remainder of the provision is itself narrowly constructed. Moreover, the legislative history surrounding Congress’ creation of a satellite compulsory license, discussed infra, supports a narrow interpretation of “or other communications channels.” Otherwise, the phrase could even include a retransmission made by two cans and a string. (Ed. Note: I thought the broadcasters made this argument in their request for an injunction, but I could not locate or source the “two cans and a string” analogy. Please let me know if you know who originally asserted this position.). The Court took great care to describe how Aereo’s transmissions emulated a cable system, but avoided stating Aereo is a cable system.

In addition, Aereo’s reliance on statements made by Justices Sotomayor and Breyer is misplaced. In its opposition, Aereo quotes Justice Sotomayor stating, “We say they’re a c[]able company, they get the compulsory license.” Aereo’s Opposition at p. 7, quoting S. Ct. Tr. at 5:2-5:4. However, Aereo provides no context for the quote – Justice Sotomayor was actually posing a question to counsel about whether Aereo should be eligible for the cable compulsory license. In addition, while Justice Breyer expressed an interest in the question, he ultimately remarks that it might be a question best left to be addressed on remand. S. Ct. Tr. at 6:25. The opinion itself makes no determination as to Aereo’s status as a cable system under the Act. It is clear that the Court, at most, thought this question may warrant further review, not that Aereo is a cable system eligible for a compulsory license under Section 111.

Second, given the limited scope of the Court’s ruling, the Second Circuit is bound by res judicata to find that Aereo is not eligible for the cable compulsory license, as ivi remains good law. In ivi, the Second Circuit addressed whether a service that streamed copyrighted television programming live and over the Internet constituted a cable system under Section 111 of the Act. ivi, 691 F. 3d at 279. Based on the statutory text alone, it was not clear whether ivi utilized a “facility” or received and retransmitted signals as required to be a cable system under Section 111(f)(3). Id. at 280. Because the text was unclear, the Second Circuit turned to the legislative history for the provision and found:

Congress enacted Section 111 to enable cable systems to continue providing greater geographical access to television programming while offering some protection to broadcasters to incentivize the continued creation of broadcasting television programming. . . . In 1991, the Eleventh Circuit held that a satellite carrier was a cable system covered by Section 111’s compulsory licensing scheme. In 1998, rather than incorporate satellite technology as a communications channel under Section 111, Congress responded to the Eleventh Circuit’s decision by codifying a separate statutory license for satellite carriers under Section 119 of the Copyright Act. . . . Finally, in 1994, Congress expressly included “microwave” as an acceptable communications channel for retransmissions. Congress has not codified a statutory provision for Internet retransmissions, nor has it included the “Internet” as an acceptable communication channel under Section 111.

Id. at 281-82. (Internal citations omitted). “[I]f Congress had intended to extend Section 111’s compulsory license to internet retransmissions, it would have done so expressly – either through the language of Section 111 as it did for microwave transmissions or by codifying a separate statutory provision as it did for satellite carriers.” Id. at 282.

The Second Circuit also gave significant deference to the Copyright Office’s opinion on the question. “The Copyright Office has consistently concluded that Internet retransmission services are not cable systems and do not qualify for Section 111 compulsory licenses.” Id. at 283; see also 57 Fed. Reg. 3284, 3292 (Jan. 29, 1992) (“. . . the [Section 111] compulsory license applies only to retransmission services regulated as cable systems by the FCC.”). According to the Copyright Office, “the [S]ection 111 license does not and should not apply to Internet retransmissions.” Copyright Broadcast Programming on the Internet: Hearing Before the Subcomm. on Courts and Intellectual Property of the Comm. on the Judiciary, 106th Cong. 25-26 (2000) (statement of Marybeth Peters, The Register of Copyrights) (quoting Letter of Marybeth Peters, Register of Copyrights, to the Honorable Howard Coble (Nov. 10, 1999)). Although Aereo asserts that, unlike ivi, it only utilizes localized transmissions like a regulated cable system, the Copyright Office’s recent response to Aereo’s attempt to secure a compulsory license demonstrates the Office’s position has not significantly changed.

In my opinion, Aereo should not be considered a cable system pursuant to Section 111. Congress enacted a complex licensing regime that clearly differentiates between content transmission services. Compare 17 U.S.C. Section 111 with Section 119. Allowing Internet retransmissions to be eligible under Section 111 would effectively disregard the delicate balancing act Congress engaged in when establishing the appropriate license amount and requirements – wholly ignoring the technological capabilities and limitations of cable systems as compared to Internet retransmission services. In fact, Congress’ legislative response to the Eleventh Circuit’s determination that satellite services qualify for a Section 111 compulsory license should dissuade courts from construing a cable system too broadly. Accordingly, if Aereo wants to retransmit televised broadcast content, it must negotiate a license to do so with the contents’ owners.

Given changes in the media industry and advances in technology, it may be time for Congress and the Copyright Office to revisit the question of whether there should be a separate compulsory license for Internet retransmissions of televised broadcast content.

“The Copyright Office has long been a critic of compulsory licensing for broadcast transmissions” because a compulsory license derogates a copyright owner’s exclusive right to perform and “prevents the marketplace from deciding the fair value of copyright works through government-set price controls.” Copyright Broadcast Programming on the Internet: Hearing Before the Subcomm. on Courts and Intellectual Property of the Comm. on the Judiciary, 106th Cong. 26 (2000) (statement of Marybeth Peters, The Register of Copyrights). Despite those objections, Congress enacted a cable compulsory license in 1976 because it “believed that the transaction costs associated with a cable operator and copyright owners bargaining licenses to all television broadcast programs retransmitted . . . were too high.” Id. at 22. In 1988, Congress created a compulsory license for satellite carriers because “the satellite business was a fledgling industry without market power [and Congress] believed [it] unlikely that satellite carriers could negotiate retransmission licenses with broadcast programming copyright owners.” Id. at 23.

As discussed earlier, there is no compulsory license for Internet retransmissions. Although opposed to compulsory licenses in general, the Copyright Office has considered a compulsory license for Internet retransmissions to be especially ill-advised as (1) cable and satellite have to build delivery platforms, while the Internet retransmission services do not; (2) copyright owners can readily and inexpensively utilize the Internet themselves to make their content available if they so desire; (3) the Internet contains a risk of digital theft and mass dissemination that is not present in cable and satellite services; and (4) it is unclear how retransmissions relayed over the Internet could be limited to their local markets. Id. at 28-31. While the Copyright Office recently reiterated its adherence to those views, the technological landscape has changed drastically since those concerns were first raised.

First, while cable and satellite carriers do need to build and maintain delivery platforms, both industries are now economically stable. The Copyright Office no longer considers a compulsory license economically necessary to ensure the viability of either industry and has openly petitioned Congress to terminate cable’s compulsory license. Id. at 27. However, Congress continues to extend the cable compulsory license and, in order to preserve competitive parity, the satellite license. Id. at 28. (Ed. Note: On June 10, 2014, Senator Patrick Leahy introduced the Satellite Television Access Reauthorization Act of 2014 to extend the current statutory license for satellite carriers until December 31, 2019. Track the bill here.).

The continued existence of a cable and satellite compulsory license may be the most compelling reason for reconsidering an Internet compulsory license. Cable and satellite services offer bundled Internet and television services, which may put them at a competitive advantage compared to any potential Internet retransmission services. While Google has touted its plans to offer high-speed Wi-Fi networks in cities and towns (which may eventually undermine any competitive advantage conferred by bundling services), it is not currently available. But, more importantly, Internet retransmission start-ups likely face a significant uphill battle in negotiating individual licenses at fair rates, especially considering that Comcast (a cable service) has acquired a majority stake in NBC Universal – not an ideal scenario to ensure arms-length bargaining.

With respect to the resources cable and satellite services devote to developing delivery platforms, Congress could fashion an Internet compulsory license to factor in those economic considerations. For example, in addition to a content licensing fee, Congress could require Internet retransmission services to pay a separate premium to be contributed to the Universal Service Fund. Those contributions could be used to develop networks that promote the availability of high-speed services for consumers in rural or high-cost areas – essentially addressing Congress’ initial goal for a cable compulsory license: spreading the availability of local content to under-served consumers. Id.

Second, although there remains a risk of digital theft, technology and encryption measures have progressed significantly since the Copyright Office first expressed its concerns. In 1998, Congress enacted the Digital Millennium Copyright Act (“DMCA”). Section 1201 of the DMCA imposes penalties for individuals that circumvent technological measures that are created to prevent unauthorized access or copying of works. 17 U.S.C Section 1201. Although it would have been difficult to gauge the effectiveness of this provision in 2000, there has been ample opportunity to now evaluate both the effectiveness of technological protection measures and whether the provision acts as a significant deterrent to infringement.

Furthermore, Congress’ success in creating a digital performance right for sound recordings and licensing regime may actually cut against the Copyright Office’s earlier concerns of digital theft. On March 17, 2014, the Copyright Office issued a Notice of Inquiry to study the effectiveness of music licensing under the Copyright Act. Many commenters have credited the statutory license for digital sound recordings with fostering the growth of digital radio and benefiting music creators. See Comments of Screen Actors Guild – American Federation of Television and Radio Artists and American Federation of Musicians of the United States and Canada at 4 (“the Section 114 statutory license [for digital sound recordings] has been the predicate for the development of a healthy and thriving business ecosystem that has delivered the enormous value to large and small recording companies and to the Artists who create the sound recordings.”). In addition, copyright owners have lauded the creation and success of SoundExchange, the licensing entity to oversee and distribute licensing fees, as efficient and successful. Comments of the Recording Industry Association of American at 42-43. Perhaps Congress could model an Internet licensing entity on SoundExchange.

On the other hand, if many televised broadcasters have and continue to place their content on the Internet (or license the content at market price), then there may not be a need for a third-party packager. See Copyright Broadcast Programming on the Internet: Hearing Before the Subcomm. on Courts and Intellectual Property of the Comm. on the Judiciary, supra, 106th Cong. at 29 (citing Hearings Before the Subcomm. on Telecommunications, Trade & Consumer Protection of the House Commerce Committee, 106th Cong. (2000) (statement of Paul Karpowicz). Congress should consider the amount and diversity of broadcast content made available on the Internet, the ease of accessibility and timeliness of the content, and whether independent license negotiations reflect a willing buyer/willing seller price point.

Third, the Copyright Office’s “principal concern” about whether “Internet retransmissions of broadcast signals [could] be controlled geographically” is now technologically addressable. Id. at 30. In its report to Congress, the Copyright Office criticized iCraveTV for its feeble attempt to limit retransmission of Buffalo television stations to Canada by requiring users to enter a Canadian telephone number and certify their presence in Canada. Id. However, web services and mobile devices now regularly utilize location-based authentication techniques, such as IP verification and user geolocation. The Copyright Office should consider soliciting comments on whether these technologies could be utilized to geographically control the availability of Internet retransmissions.

None of this is to say that Congress should necessary create a compulsory license for Internet retransmissions, but it may time to once again solicit comments on the issue. In the meantime, if Aereo plans to continue its operations, it should be prepared to negotiate licenses with copyright owners. (Ed. Note: Aereo has made additional arguments to prevent an injunction of its operations, such as its use as a time-shifting device and eligibility for the DMCA safe harbor, but this post does not evaluate those arguments). I certainly will be keeping my eye on what happens, so be sure to “tune in.”

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* Again, a special thanks goes out to Robert T. Law, Esq. and Devlin Hartline of Law Theories.

 

‘Nuff Said?

A Look At Kirby v. Marvel Characters, Inc. And Works Made For Hire Under The Copyright Act Of 1909.

I’m a comic book fan. Correction, I am a big comic book fan. (Ed. Note: Do yourself a favor and read Saga, Black Science, American Vampire, and Kieron Gillen’s run on Journey Into Mystery). But I’m also a copyright fan (not that the two are mutually exclusive), and there is a potentially monumental case currently going to conference before the Supreme Court on September 29, 2014 – Kirby v. Marvel Characters, Inc.

Jack Kirby is a legend. He’s not only credited with creating some of the most iconic characters in comics – Captain America, the X-Men, Spider-Man, and Groot – he’s often cited as the inspiration for fellow creators and the direction of the medium. It’s no understatement to say that his contributions to the medium continue to impact the entertainment industry and pop culture at-large. However, who is the author of several of his creations, as defined by the Copyright Act, has been the subject of much dispute.

FantasticFour-FF comparison

Between 1958 and 1963, Kirby worked as a freelance artist, creating works and characters he sold to various publishers, including Marvel. Kirby worked out of his basement, using supplies he himself furnished. Kirby frequently worked with Marvel and collaborated with Marvel Editor Stanley Lieber (more popularly known as Stan Lee) on several projects. In those dealings, Kirby would operate under the “Marvel Method,” whereby Lee and Kirby would meet at a “plotting conference” and discuss a brief outline or synopsis Lee had prepared. Kirby would then draw the work based on Lee’s notes and, thereafter, Lee would insert dialogue and captions. According to Lee, Lee could edit and make changes or reject Kirby’s creations, although he often gave Kirby more leeway than other artists. Marvel, in turn, would pay a flat fee for Kirby’s pieces it accepted, but Kirby would not be compensated for any work that was rejected.

On September 16, 2009, Jack Kirby’s heirs served Marvel Comics with termination notices for 45 comics that Marvel published between 1958 and 1963. Kirby’s heirs sought to exercise termination rights under Section 304(c) of the Copyright Act of 1976. That provision grants authors (or certain heirs) an inalienable right to recapture their copyright, notwithstanding any agreement to the contrary, at certain intervals. 17 U.S.C. Section 304. Congress created the termination right (and retroactively extended it to works created under the 1909 Act) to “relieve authors of the consequences of ill-advised and unremunerative grants. . .” Mills Music, Inc. v. Snyder, 469 U.S. 153, 172-73 (1985). But termination rights do not apply to a grant of rights in a work made for hire. 17 U.S.C. Section 304(c).

The notices sought to terminate Kirby’s assignment of his copyrights in several works, including Amazing Fantasy, The Amazing Spider-Man, The Avengers, The Fantastic Four, The Incredible Hulk, and Journey Into Mystery; comics that introduced many iconic characters that are commonly associated with Marvel Comics today. In response, Marvel filed a suit for declaratory judgment in the Second Circuit, claiming that Kirby’s creations were works made for hire under the Copyright Act of 1909. Hence the current dispute, if Kirby’s created works made for hire, then Kirby’s heirs could not exercise termination rights because Marvel would be the works’ author and own the copyrights.

Because the works were created between 1958 and 1963, the Copyright Act of 1909 dictates who possesses ownership rights in the disputed works. Section 8 of the 1909 Copyright Act provides “the author . . . of any work made the subject of copyright by this Act . . . shall have copyright for such work under the conditions and for the terms specified in this Act[.]” Section 62 of the 1909 Act states: “author shall include an employer in the case of works made for hire.” 17 U.S.C. Section 26 (1976 ed.) (repealed). However, the Act did not further define “employer” or “works made for hire.”

In the 1950-1960s, Congress undertook a comprehensive revision of the Copyright Act and, ultimately, enacted the Copyright Act of 1976. Unlike the 1909 Act, Section 101 of the 1976 Act did define a “work made for hire.” It states that a “work made for hire” is:

(1) a work prepared by an employee within the scope of his or her employment; or

(2) a work specially ordered or commissioned for use as a contribution to a collective work, as part of a motion picture of other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.

17 U.S.C. Section 101. While the 1976 Act did not define “employee” or “scope of employment,” it “clearly delineates between works prepared by an employee and commissioned works.” Community for Creative Non-Violence v. Reid, 490 U.S. 730, 742 (1989).

Because the Kirby’s works were created under the 1909 Copyright Act, the district court applied its “instance and expense” test. Marvel Worldwide, Inc. v. Kirby, 777 F. Supp. 2d 720 (S.D.N.Y. 2011). Under the “instance and expense” test, the court examined whether Marvel induced the creation of the work and the extent of resources Marvel invested in the creation of the work. Id. at 738. The court found that Kirby’s works were created at the “instance and expense” of Marvel, which raised a rebuttable presumption that the works were “made for hire.” Id. at 738-743. However, the court found that Kirby’s heirs did not rebut that presumption and, therefore, the works were “made for hire” and not subject to termination rights. Id.

The decision was affirmed by the Second Circuit Court of Appeals. Marvel Characters, Inc. v. Kirby, 726 F. 3d 119 (2d Cir. 2013). On March 21, 2014, Kirby’s heirs filed a Petition for Writ of Certiorari with the Supreme Court to appeal the Second Circuit’s decision. In their petition, they argue the Second Circuit erred by utilizing its “instance and expense test” to find Kirby’s works were “made for hire” because only works created within a “traditional employment” relationship could be a work-for-hire under the 1909 Copyright Act. (Kirby’s heirs raised additional legal arguments, including, inter alia, the Second Circuit’s decision constitutes a violation of the Takings Clause and due process. However, the case will likely turn on the first issue – whether works made for hire under the 1909 Act can only be made by traditional employees.)

Without revisiting the particulars of the “instance and expense” test, suffice to say, commissioned works created by non-traditional employees are potentially works made for hire under the test. See e.g., The Estate of Burne Hogarth (“Hogarth”), 342 F. 3d 149 (2d Cir. 2003) (affirming the district court’s ruling that “in the Second Circuit an independent contractor is an ‘employee’ and a hiring party is an ‘employer’ for purposes of the [1909 Act] if the work is made at the hiring party’s instance and expense”). Thus, if the test is appropriate, the commissioning party could be an author pursuant to the 1909 Act. Assuming the Second Circuit applied the “instance and expense” test correctly (as it appears to have done), Kirby’s heirs can only prevail if the Supreme Court finds the test should not have been applied to the 1909 Act. But was it wrong? As Marvel argues in its brief in opposition, each circuit has uniformly adopted the “instance and expense” test.

Kirby’s heirs make three notable arguments against the “instance and expense” test: (1) the test violates the Supreme Court’s holding in Community for Creative Non-Violence v. Reid (“CCNV”); (2) Congress intended only works created in the context of traditional employment to be a work-for-hire under the 1909 Copyright Act; and (3) the test’s consideration of post-creation contingencies when determining authorship is impermissible under the 1909 Act.

In CCNV, the Supreme Court was asked to resolve how to determine whether a work is a “work made for hire” as defined in Section 101 of the 1976 Copyright Act. CCNV, 490 U.S. at 732. The dispute was between a sculptor and the commissioning party. Because a sculpture is not a commissionable work-for-hire under the 1976 Act, the case turned on whether the sculptor was an “employee” or an “independent contractor.” Id. at 738. In doing so, the Court considered various tests that circuits had used to determine who was an “employee,” including the Second Circuit’s “control” test (which closely tracks the “instance and expense” test). Id. at 739. The Court rejected the “control” test, reasoning that the test conflicted with the plain language of the 1976 Copyright Act. Id. at 741. According to the Court, the Act clearly delineated between works prepared by an employee and commissioned works, but the overbroad “control” test threatened to ignore that delineation as it could potentially convert a commissioned work into one prepared by an employee. Id.

The Court found “[t]he structure of Section 101 indicate[d] that a work for hire can arise through one of two mutually exclusive means, one for employees and one for independent contractors[.]” CCNV, 490 U.S. at 742-43. And, where Congress did not define certain terms in the statute, it was obligated to read those terms in accordance with their common law definition. Id. at 741. Thus, when defining who is an “employee,” “ordinary canons of statutory interpretation indicate[d] that the classification of a particular hired party should be made with reference to agency law.” CCNV, 490 U.S. at 742-43. Thus, under the 1976 Copyright Act, courts should first resolve whether, under the general common law of agency, the work was prepared by an employee or independent contractor. Id. at 751. In doing so, the courts should consider the skill required, source of instrumentalities, location of the work, duration of the relationship, whether the hiring party had the right to assign additional projects, extent of the hiring parties discretion, method of payment, provision of benefits, and other related factors. Id. at 751-52, citing Restatement Section 220(2). Based on that determination, the courts should then apply the applicable subsection of Section 101. Id. at 751.

Kirby’s heirs argue that “[l]eading commentators read CCNV as overruling the ‘instance and expense’ test under both the 1976 and 1909 Acts,” but the Second Circuit has not reconciled its application of the test with works for hire under the 1909 Act. But does CCNV reject the use of the “instance and expense” test under the 1909 Act?

In recounting the legislative history surrounding the 1976 Act, the Court discussed works made for hire under the 1909 Act. The Court noted:

Because the 1909 Act did not define “employer” or “works made for hire,” the task of shaping these terms fell to the courts. They concluded that the work for hire doctrine codified in Section 62 referred only to works made by employees in the regular course of their employment. As for commissioned works, the courts generally presumed that the commissioned party had impliedly agreed to convey the copyright, along with the work itself, to the hiring party.

CCNV, 490 U.S. at 744.

In CCNV, the commissioning party argued that the 1976 Acts actually adopted the view that “an employment relationship exists sufficient to give the hiring party copyright ownership whenever that party has the right to control or supervise the artist’s work” because Congress did not explicitly reject a line of cases utilizing that test for the 1909 Act. Id. at 748. The Court, however, was not persuaded. It found that “Congress’ silence is just that – silence.” Id. at 749 (quoting Alaska Airlines, Inc. v. Brock, 480 U.S. 678, 686 (1987)). “At that time, [] the courts had applied the work for hire doctrine under the 1909 Act exclusively to traditional employees. Indeed, it was not until after the 1965 compromise was forged and adopted by Congress that a federal court for the first time applied the work for hire doctrine to commissioned works.” Id. But, the Court’s opinion passed no judgment on whether it was appropriate to do so.

The Court’s holding did not address whether the courts’ interpretation of works made for hire under the 1909 Act had only been applied to works prepared by an employee (thus far) or only applied to works prepared by an employee. If the 1909 provision only encompassed the latter, then why did Congress modify the provision to include “employee” and “scope of employment”?

Furthermore, the Court rejected the notion that “employee” in the 1976 Act referred “only to formal, salaried employees.” CCNV, 490 U.S. at 743 (“While there is some support for such a definition in the legislative history . . . the language of Section 101(1) cannot support it.) How could Section 101(1) of the 1976 Act, which explicitly limited works made for hire to an employee preparing works in the scope of their employment, be more restrictive than the 1909 Act, which, facially, had no similar constraints? [Ed. Note: This is essentially the inverse of Bruce Lehman’s argument – “There is no reasonable explanation how “employer” could have a broad scope in the 1909 Act when as CCNV held it has a narrow scope in the 1976 Act bound by the common law of agency and traditional employment.” Brief of Amici Curiae Bruce Lehman at p. 12.]

Kirby’s heirs argue that “[n]othing in the text of the 1909 Act’s ‘work for hire’ provision indicates that Congress used the word ‘employer’ to describe anything less than a conventional employment relationship, or supports its judicial extension to freelancers like Kirby” and “[t]he conventional master-servant relationship clearly distinguishes independent contractors like Kirby.” Petitioner’s Petition for Writ, p. 15. That position appears to be somewhat internally inconsistent – were works for hire under the 1909 Act restricted to traditional employees or could courts utilize the doctrine of master-servant?

Section 2 of the Restatement of Law (Second) of Agency (1958) (which did exist during the time Kirby created his works) defined a master as “a principal who employs an agent to perform service in his affairs and who controls or has the right to control the physical conduct of the other in the performance of the service.” This principle became reflected in the common law through the “control” test, of which the “instance and expense” test appears to be a rough proxy. Easter Seal Soc. For Crippled Children & Adults, Inc. v. Playboy Enterprises, et al., 815 F. 2d 323, 327 (5th Cir. 2004). Although CCNV rejected the “instance and expense” test as conflicting with the structure of the 1976 Act, the factors for determining a servant were endorsed by the Court for determining an “employee.” Would Kirby’s heirs have prevailed under those factors?

While the Second Circuit’s opinion filtered its analysis through the “instance and expense” test, it addressed several of the factors used to analyze whether an individual is an employee or independent contractor. The Second Circuit found:

Although Jack Kirby was a freelancer, his working relationship with Marvel between the years of 1958 and 1963 was close and continuous. . . . Understood as products of this overarching relationship, Kirby’s works during this period were hardly self-directed projects in which he hoped Marvel, as one of several potential publishers, might have an interest; rather, he created the relevant works pursuant to Marvel’s assignment or with Marvel specifically in mind. . . . Marvel also played at least some creative role with respect to the works. Kirby undoubtedly enjoyed more creative discretion than most artists did under the “Marvel Method,” a fact [Stan] Lee readily admits. But the only evidence on the issue indicates that he did not work on “spec” (speculation) – that is, he worked within the scope of Marvel’s assignments and titles. There is no disputing, moreover, that Marvel had the power to reject Kirby’s pages and require him to redo them, or to later them, a power it exercised from time to time. And there is evidence that Kirby collaborated with Lee with respect to many of the works.

Marvel Characters, Inc. v. Kirby, 726 F.3d 119, 141 (2d Cir. 2013). Clearly, the Second Circuit addressed the extent of control and supervision Marvel had over Kirby’s works and the length of time Kirby and Marvel worked together. The court even seems to quietly suggest Stan Lee’s contributions to Kirby’s end product may be more along the lines of a joint author. However, other factors, such as who supplies the tools and method of payment, clearly militate against finding an employee relationship. In short, reexamining the relationship through the principles of agency law does not necessarily clarify the issue. (Ed. Note: Although the Second Circuit’s decision assumes Kirby is an independent contractor, as Kirby’s heirs contest, I am reticent to concede that would be the case after applying the principles of agency law. This has more to do with my professional experience in an industry where we often need to argue that freelancers are employees.)

To me, this case will ultimately come down to Congress’ intent when drafting the 1909 Act. There is evidence that Congress did distinguish works prepared by employees and those created by independent artists when drafting the 1909 Act. The drafters noted that “the right belonging to the artist who is employed for the purpose of making a work of art so many hours a day … should be very different from the right that is held by the independent artist.” See Stenographic Report of the Proceedings of the Librarian’s Conf. on Copyright, 2d Sess. 188 (Nov 1-4, 1905) (statement by Lithographer’s Association).

And the legislative history surrounding the creation of the 1976 Act does appear to reinforce that distinction. During the 1950s, Congress commissioned a study to aide its revision of the 1909 Act, which found that “it may be concluded that section 26 [sic] [of the 1909 Act] refers only to works made by salaried employees in the regular course of their employment.” Petitioner’s Brief, p. 16-17, quoting B. Varmer, Copyright Law Revision Study No. 13, “Words Made for Hire and on Commission, Studies Prepared for the Copyright Office, Reprinted by the Senate Subcommittee on Patents, Trademarks and Copyrights of the Committee of the Judiciary, 86th Cong., 2d Sess. 127, 130 (1960). Varmer’s report led to the question of whether the 1976 Act should alter that presumption and treat commissioned works as works made for hire. Brief of Amici Curae Bruce Lehman at p. 10. That question became a hotly contested topic in bill debates and revisions between the drafters and interested parties.

As the Supreme Court noted:

In 1965, the competing interests reached a historic compromise, which was . . . ultimately enacted in the same form and nearly same terms 11 years later, as Section 101 of the 1976 Act. The compromise retained as subsection (1) the language referring to “a work prepared by an employee within the scope of his employment.” However, in exchange for concessions from publishers on provisions relating to the termination of transfer rights, the authors consented to a second subsection which classified four [later nine] categories of commissioned works as works for hire if the parties expressly so agreed in writing[.]

CCNV, 490 U.S. at 746. That compromise appears to support the notion that the 1909 Act did not include commissioned works as works made for hire.

Again, however, I recognize the legislative history may not be so clear. As the Second Circuit noted in Hogarth:

[T]he renewal term – [wa]s a distinct feature of the 1909 Act, not carried into the 1976 Act for works created on or after January 1, 1978[.] As enacted, the 1909 Act authorized an original term of 28 years and a renewal term of an additional 28 years, if application for the renewal term was made “within one year prior to the expiration of the original term.” An important aspect of the renewal term is that, although it is assignable by the author, the assignment of the “expectancy” in acquiring the renewal term, is voided by the author’s death prior to the date when the renewal term vests[.] In that event, the renewal right belongs to the author’s surviving spouse or children, if living, or, if they are not living, to the author’s executor. However, in the case of a work made for hire, the proprietor of the copyright in the original term, i.e., the employer or its assignee, is entitled to the renewal term.

Hogarth, 342 F. 3d at 157. (Internal citations omitted). According to the legislative history, the inclusion of the termination provision was a quid pro quo,

based on the premise that the reversionary provisions [reversion of renewal rights] of [the 1909 Act] should be eliminated, and that [the 1976 Act] should substitute for them a provision safeguarding authors against unremunerative transfers. A provision of this sort is needed because of the unequal bargaining position of authors, resulting in part from the impossibility of determining a work’s value until it has been exploited.

H.R. Rep. No. 94-1476, at 124 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5740. While not mutually exclusive with the compromise justification, this could possibly cast some doubts as to what was the impetus behind Congress creating termination rights.

Lastly, I do find persuasive the Kirbys’ argument that the Second Circuit’s use of the “instance and expense” test impermissibly permits post-creation contingencies to impact the authorship inquiry. In their petition, they argue:

With a true work for hire, copyright ownership … [is] with the employer automatically upon the employee’s creation of the work, and the employer is the “author” at inception. . . . Accordingly, authorship cannot be based on contingent post-creation events like Marvel’s discretionary payment for that material it wished to publish – authorship is fixed at creation. . . . Marvel’s revisionist “work-for-hire” defense, adopted below, leads to absurd contradictions. It means that Marvel authored those Kirby works it chose after completion to buy, and Kirby authored those works Marvel ultimately rejected. This stands fundamental principles of authorship and “work for hire” on their head.

Petitioner’s Petition for Writ at p. 29. With respect to other provisions, such as the writing requirement for works-for-hire and transfers under the 1976 Copyright Act, circuits have split on whether the writing need be contemporaneous, but all agree the intent needed to have existed at the time of creation/transfer. See e.g., Barefoot Architect, Inc. v. Bunge, 632 F.3d 822, 827 (3rd Cir. 2011); Konigsberg Int’l v. Rice, 16 F. 3d 355 (9th Cir. 1994). Could there have been the intent to create a work for hire at the onset if it turned on whether the piece was ultimately accepted? To me, the only plausible counter-argument is that the potential for non-payment is a factor that should be strongly considered, but not solely dispositive as it would potentially render the Restatement factors void (assuming those factors should even be considered under the 1909 Act).

So how can we best reconcile the statutes, case law, and the facts? I think, as Kirby’s heirs and amici argue, if the 1909 Act is interpreted as conveying an implied assignment to the commissioning party, the legislative history and development of the doctrine would be brought into accord and the current potential for post-creation variation in authorship under the “instance and expense” test would be rendered moot. In fact, it appears that the Second Circuit strongly considered such a shift in Hogarth, supra.

There, the Second Circuit undertook an expansive review of its prior decisions and how the “instance and expanse” test developed to convert works by independent contractors and commissioned parties into works-for-hire under the 1909 Act. The Second Circuit recognized that its prior decisions “may have been intended to reflect a conclusion that the copyright . . . were transferred by the artist to the patron by an implied assignment[.]” Hogarth, 342 F. 3d at 158. In fact, the “use of an implied assignment rationale strongly indicates that the work was not regarded as a work for hire.” Id. at fn. 11.

Additionally, the circuit court recognized that it had repeatedly overstated its holdings in prior decisions while expanding the doctrine and that it may have been swayed by unusual facts. See id. at fn 13 (“This reversal of the usual roles might have influenced the outcome: the Court characterized the commission parties as ‘small merchants’ who ‘were naïve with respect to the complex provisions of the copyright law.’” See also Petitioner’s Petition for Write at pp. 21-22 (“As later acknowledged in Hogarth: ‘[Picture Music] characterized Battleboro as having ‘expressly applied the statutory work for hire doctrine to the case of an independent contractor’ when in fact ‘what Battleboro had done was [to] apply the ‘instance and expense’ test to determine that a party commissioned to create a work should be deemed to have assigned its copyright . . . to the commissioning party.”). Despite those misgivings, the Second Circuit continued to use the “instance and expense” test to conclude works by independent contractors were made for hire. Hogarth, 342 F. 3d at 163.

If the Supreme Court grants cert and finds that only traditional employees could create works-for-hire under the 1909 Copyright Act, the implications would be significant and far-reaching. Under this holding, Kirby’s heirs could license several current Marvel properties, valued in the billions of dollars, to other entities. Even if the Kirbys licensed those properties back to Marvel, its plans to commercialize those properties through films, comics, and elsewhere may be profoundly altered. You would be remiss to think these ramifications would only affect Marvel’s multi-billion dollar properties. Several amici have noted the potentially massive impact this case would also have on the music industry as well.

Honestly, I have no idea if the Court will even hear the case and, if so, how the Court will rule. Given prior opportunities to address the Second Circuit’s commissioned works decisions, the Supreme Court denied those petitions for certiorari. E.g., Estate of Hogarth v. Edgar Rice Burroughs, Inc., 124 S. Ct. 1660 (2004); Picture Music, Inc. v. Bourne, Inc., 409 U.S. 997 (1972). Based upon Justice Ginsburg’s order to Marvel to respond, however, it seems this Court may now be interested in reviewing this matter further.

Personally, I would be interested in hearing the Court’s thoughts on the issue as I find myself a bit conflicted. From a moral standpoint, it seems unfair that Kirby’s heirs cannot commercialize his continuing influence. The termination right seems apt for such a case where the true value of Kirby’s creations was not fully realized until later. On the other hand, I find it ironic that Kirby’s heirs protest the retroactive application of the “instance and expense” test to exercise a right that didn’t exist when the works were created. In any event, it’s something that any True Believer! should pay attention to.

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* Special thanks to Robert T. Law, Esq. (the T stands for “THE”) and Devlin Hartline of Law Theories.