Claire Corlett

Fish Food, Fish Tanks, and More
William Fisher, CopyrightX: Lecture 8.3, Distribution & Performance Rights: Exceptions & Limitations

William Fisher, CopyrightX: Lecture 8.3, Distribution & Performance Rights: Exceptions & Limitations

This is the third and
last segment of a lecture on the rights of distribution,
public performance, and display. In this segment, I’ll
examine statutory exceptions to and limitations upon copyright
owners’ rights of public performance and display. For this purpose, we’ll be returning
once again to the map of copyright law. The first thing to notice
is that the exceptions are embodied in a long, itemized list. The general strategy
underlying this list contrasts very sharply with the strategy
underlying the more famous fair use doctrine, which we’ll be
considering next week. The basic idea underlying
fair use, as you’ll see, is that we use general, open-ended
standards to confer upon courts a great deal of discretion
to decide on an ad hoc basis whether a particular, unauthorized
activity by a defendant should be excused as fair. By contrast, the list of exceptions
to the public performance right are, or at least appear
to be, quite precise. As we’ll see, this approach resembles
more closely the European style of exceptions and limitations than
it does the US fair use approach. So let’s run down the list. One of the more straightforward
exceptions is section 110(1). That provision permits in a classroom
a public performance or display that would otherwise violates
Section 106(4) or 106(5) as long as it’s done live. And as long as the copy of the work
in question was prepared lawfully. This means that when I
present audiovisual works in the course of outlining case studies
in my classroom, I’m on safe ground. So as long as the material I
show was prepared lawfully. A closely related provision is
110(2), also known as the Teach Act, which deals with distance learning. It’s a very good idea to how a
statutory provision that creates a safe harbor for distance learning. Unfortunately, in practice
this particular provision is almost completely ineffective. The first thing you notice about 110(2)
is that it’s extremely complicated, contrasting sharply with
the simplicity of 110(1). The portions that I
have marked with italics impose upon a defendant
who seeks to invoke this provision many quite
detailed obligations. Most importantly, 110(2) is only
applicable to formal instruction of enrolled students. That’s it’s inapplicable to the
copies of these recorded lectures that I make available to the public. It’s also limited to
streaming of materials. If a teacher wishes to
invoke this provision, he cannot make copies of any of those
materials available for downloading, nor can he stream copyrighted materials
in a way that enables students to copy them. Again, this restriction
renders the provision useless for the kind of instruction
I’m trying to do in this course. Next, the provision is
limited to materials that are not designed
for distance education. In other words, the
copyrighted works at issue have to have been designed
for some other purpose and then adapted to distance education. A teacher must accompany those materials
with instructions about copyright law. This may not be a problem
in this course, which happens to be about copyright law. But it’s a burden with
respect to most other courses. Finally, the teacher must adopt
technologies to prevent the recipients from saving the materials to
which they are given access. These restrictions, when
you add them all up, are sufficiently burdensome that very
few distance learning enterprises rely on 110(2). To the extent that its purpose was
to facilitate distance education, it’s widely considered
to have been a failure. Now, it likely occurs to you to
ask how then does Fisher get away with including some copyrighted
materials in his recorded lectures? The answer is that some are licensed. But for the most part, I rely
on the fair use doctrine. Next week, you’ll be in a position to
judge whether my invocation of fair use is persuasive. Section 110(3) is much
simpler than 110(2). It deals with public
performances of religious works in the course of services. It’s not obvious that this
exception advances social welfare. Putting aside the constraints imposed
by the clauses in the US Constitution pertaining to the establishment
and free exercise of religion, and just doing the provisioning from
a policy angle, the result of 110(3) is to make it a lot easier for churches
and other religious establishments to operate. But it also means that the creators
of religious materials, specifically non-dramatic, literary musical works,
don’t get paid as much insofar as often the principal value of their
creations is through performances. Perhaps the premise is
that religious composers are motivated by
non-monetary incentives. And thus we don’t need to compensate
them in order to stimulate their work? Not clear. Section 110(4) is the
so-called nonprofit exception. This one is often neglected. But it’s actually very important. As you can see from the map,
it privileges live performances of a non-dramatic
literary or musical work without any purpose of direct or
indirect commercial advantage. Restaurant waiters,
for example, sometimes sing Happy Birthday to patrons. That’s not copyright
infringement as long as there’s no direct or
indirect commercial advantage. If the restaurant or the waiters
charge the friends of the birthday boy or girl, they would not be
shielded by this provision. But as long as there’s no independent
charge for the performance, they’re probably on safe ground. Some years ago there
was a big controversy that implicated this
particular provision. ASCAP, as you now know, is one of the
organizations in the United States that issues blanket licenses,
blanket performance licenses, to many organizations allowing them
to publicly perform musical works. Foolishly, ASCAP apparently
decided to seek license fees from the Girl Scouts in return for
permitting the Scouts to sing songs around their campfires. This was a public relations
disaster for ASCAP. The Wall Street Journal wrote
a scathing article about it. And in the end, ASCAP backed down
and now grants the Girl Scouts public performance
rights for a nominal fee. How did ASCAP get itself in this
position in the first place? In particular, doesn’t
110(4) permit the Scouts to perform the songs
without getting a license? It’s not entirely clear. But the answer seems to
be the Girl Scout camps that the ASCAP threatened with liability
were charging for access to them. That made 110(4) inapplicable. Now, we get to two related exceptions–
the so-called home-style exception and the FMLA, which is an abbreviation
for Fairness in Music Licensing Act. The home-style exception
embodied in Section 110(5)(B) is, as its informal name suggests, a
privilege for publicly performing copyrighted works using the kind of
apparatus that you would ordinarily find in a home. That’s a little vague. And it’s changing as technology evolves. But the rough idea is that if
the gizmo you used perform a work is the kind of tuner plus
speakers that you would ordinarily have in your living room, then it’s OK. The standard is vague
and not often litigated. But there it is. As I trust you see,
this exception operates to shield some of the
performances we were worried about in the previous
segment of this lecture. Unfortunately, it’s not broad enough
to shield stores and restaurants who want to play music to
entertain their customers, but need to deploy
apparatuses bigger than you would find in an ordinary home. So organizations representing
restaurants and stores sought and obtained 110(5)(B) commonly known
as the Fairness in Music Licensing Act. This one is extremely complex. You can read the
details at your leisure. The operators of bars,
restaurants, and retailers when deciding how big an operation
to set up and how to outfit it, pay lot of attention
to the details here. If they’re able to stay under
these statutory ceilings, they can escape altogether an obligation
to pay copyright owners, particularly ASCAP, any licensing fees. An alarm bell should be going off now. You’ll recall, I hope, that
the Berne Convention requires member countries to grant
certain substantive rights and limits their ability to carve
exceptions out those rights. The TRIPS Agreement, discussed
in lecture number one, incorporates and extends
those requirements and creates a mechanism for
punishing WTO countries that fail to abide by them. May the US without running
afoul of those agreements carve out of the performance
right an exception this broad? The European Union thought no and
brought a dispute resolution proceeding against the US concerning
the FMLA and won. In other words, the US, in this respect,
was deemed to be in violation of TRIPS. So did the US Congress
amended the statute? Surprisingly no. Instead, the US responded by submitting
this dispute to binding arbitration which resulted in a monetary judgment
the result was that the United States has to pay the EU a fee and
continues to do so, over a million a year, to compensate for the injuries
that EU copyright owners incur because of this exemption. The last of the exceptions we’re
going to deal with in this lecture concerns not public performances,
but public displays. This exemption is contained
not in section 110, which is occupied us until this
point, but in section 109. As we can see here, 109(C) provides
notwithstanding the provisions of section 106(5). That’s the public display right. The owner of a particular copy
lawfully made under this title to display that work
publicly is not violated if he shows the two viewers present at
the place where the copy is located. The upshot is that you
can hang a painting on the wall of your living room. And you can host a wedding reception
or a garden tour in your house, enabling lots of strangers
to see the painting without infringing the
painter’s copyright. As you can see, this
is a major exception and helps to relieve the otherwise
quite surprising reach of 106(5). For the past several minutes, we have
been examining types of performances that the law excuses outright. In other words, we’ve been studying
statutory provisions that give people an unqualified privilege to engage
in particular sorts of performances and displays without permission and
without paying the copyright owners anything. We turn finally to a
set of provisions that permit people to engage in
particular sorts of performances without permission, but require them
to pay the copyright owner’s fees that are set in some
way by the government. As you know now, such provisions
are known as compulsory licenses. From the standpoint of
the copyright owners, these provisions are not great because
they deprive the owners of the capacity to control uses of their works and,
typically, though not invariably, force them to accept license fees
that are lower than the copyright owners given their
druthers would demand. But from the standpoint of
the owners, such provisions are much better than the
exceptions we’ve just finished surveying because the
owners are at least paid something. There are five main compulsory
licenses listed on your chart. These provisions give
qualified privileges to public broadcasting
organizations, some types of webcasts engaged in digital audio
transmissions, re-transmissions by cable systems and
satellites, and jukeboxes. The ways in which the
compulsory fees are set are complex and vary considerably
across these provisions. Businesses that depend on these
compulsory licenses for revenue or freedom to operate, of course,
pay a great deal of attention to the details of the regimes. But I will not do so here. Instead, I will concentrate,
during my remaining minutes, on the general, normative question
posed by all such compulsory licenses. What might justify using this technique? The question is difficult and important
because you can readily see reasons why governments should
not use this technique. As I mentioned, it
deprives owners of control. They must acquiesce in uses of
their works that they might hate. You will recall from lecture number
two that scholars like Rob Merges sharply criticize compulsory
licenses on this basis. In addition, the processes by
which most of the compulsory rates are set and collected are
expensive and cumbersome. The advocates of compulsory
licenses bear the burden of establishing that
despite these drawbacks, compulsory licenses make sense. How might they do so? Defenders of compulsory licenses
commonly make four arguments. I’ll describe them, note the principal
rebuttals to these arguments, and let you weigh the competing claims. The first argument is
the compulsory licenses facilitate socially beneficial uses of
copyrighted materials that otherwise would be frustrated by
high transaction costs. It would be prohibitively costly, so the
argument goes, for jukebox operators, say, to negotiate licenses with
the owners of the copyrights in all the songs and sound recordings
they want to perform. The result is that were it
not for compulsory licenses, we would have no jukeboxes. The retort is that transaction costs
are not as high as the story suggests. And information technology
is causing them to decline. So, it is said, compulsory
licenses are outmoded. The second argument is that
inequality in the bargaining power of the copyright
owners, on one hand, and these particular types
of users on the other, would enable the owners
in an uncontrolled market to extract excessive
license fees from the users. Excessive either in the sense of
being exploitative and unfair, or in the sense of being much
higher than is necessary to motivate the owners’ creativity and,
thus, socially wasteful. Skeptics suggest that the beneficiaries
of most of these compulsory licenses are far from being powerless. The third argument is that the ratio
of socially beneficial incentives to corresponding social
losses is higher with respect to compulsory licenses than with
respect to freely-negotiated licenses. We touched on this argument
briefly in lecture number four. Here’s a brief review. Copyright law, seen through
the eyes of an economist, is a device that shields an
innovator from competition in sales of copies of his creation. At least if there are no close
substitutes for his innovation, this shield enables the innovator to
set the price for access to those copies well above the marginal
cost of producing them. The resultant monopoly
profits, represented by the blue zone in this now
familiar simplified graph, provide an incentive for innovators
to produce their creations in the first instance. An unfortunate side
effect of the strategy is that some potential
consumers are priced out of the market for
copies of the creation, giving rise to a welfare loss
represented by the red zone. That’s regrettable. But we accept those
social costs in order to offer creators
sufficiently large carrots to induce them to make
things we need or enjoy. If administered sensibly,
compulsory licenses, it is argued, enable us to improve on the system. Compulsory licenses
force copyright owners to accept fees lower than
they would otherwise demand. That, of course, reduces their profits. But the loss is partially
offset by an increase in output. The result is that the
blue zone in this picture is smaller than the blue
zone in the preceding picture but not by an enormous amount. Conversely, as you can readily see
when the images are juxtaposed, the imposition of a
compulsory license sharply reduces the concomitant
dead-weight loss. The ratio between incentives and losses
associated with uncontrolled licensing markets on the left is lower than the
ratio between incentives and losses associated with controlled
markets on the right. Opponents contend that the
administrative costs associated with the system on the right will
exceed the cost savings it enables. The last of the four
arguments is the simplest. Compulsory licenses are
sometimes necessary, it is said, to enable socially-beneficial
activities to flourish. This is a hard argument to make
with respect cable re-transmissions, but perhaps easier with respect
to public broadcasting systems. The argument can be expressed
in the language of economics. Public broadcasting has
strong positive externalities that the stations are unable to capture. So we need to reduce its
costs if it is to survive. Or the same argument can be
expressed in more moral terms. Public broadcasting helps
educate the citizenry, generating a more informed,
responsible, and tolerant electorate. For that reason, we should and do
place a thumb on its side of the scale. You decide who’s right. Next week, we’ll take up fair use.

1 comment on “William Fisher, CopyrightX: Lecture 8.3, Distribution & Performance Rights: Exceptions & Limitations

  1. Thank you. I really appreciate the fact that each explanation came with a practical example. Due to the lack of distribution when it comes to visual artists works are they stuck depending on galleries. Copyright laws should promote both the creation and dissemination of creative works Golan 132 S. Ct. at 888-89. The bundle of rights are structured for distribution am I missing something? Thanks in advance.

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