USPTO White Paper on Remixes, First Sale, and Statutory Damages

*Guest post by Jonathan Band, policybandwidth*

Today the Department of Commerce Internet Policy Task Force today released its White Paper on Remixes, First Sale, and Statutory Damages. (This follows on from the Green Paper issued in 2013.) The Task Force has proposed several significant changes to statutory damages. It recommends that the statutory damages provision be amended: 1) to incorporate a list of factors for courts and juries to consider when determining the amount of a statutory damages award; 2) to expand the eligibility for lower innocent infringement awards when the copyright owner uses a copyright notice; and 3) to give courts discretion to assess statutory damages other than on a strict per-work basis in cases involving non-willful secondary infringement for online services offering a large number of works. These changes, if adopted, would make the statutory damages framework much less burdensome. The Task Force does not recommend any statutory changes relating to remixes or digital first sale, but it proposes multi-stakeholder negotiations related to these issues. The White Paper contains numerous references to comments submitted by the Library Copyright Alliance (which consists of ARL, ALA, and ACRL) and individual libraries.

The message at the beginning of the White Paper from Commerce Secretary Penny Pritzker states that “a healthy copyright system strikes important balances between rights and exceptions–delineating what is protectable and what is not, determining which types of uses require permission or payment, and establishing appropriate frameworks to effectively protect rights and foster creativity and innovation. These balances must be reviewed regularly to ensure they continue to function well as a foundation for America’s culture and economy.”

Digital First Sale. The Task Force does not recommend statutory amendment to facilitate digital first sale. It says that it was hard to measure the extent of consumer loss resulting from the absence of a digital first sale provision. Further, it feels that the market has responded with business models such as providing access to large quantities of digital works, e.g., Netflix. At the same time, digital first sale could cause harm to the primary market. Accordingly, the Task Force sees no need to amend the Act at this time.

However, the Task Force notes the problems libraries had experienced with the lending of e-books. The Task Force observes that the situation appears to be improving, and that government intervention could interfere with the development of innovative solutions. However, “if over time it becomes apparent that libraries have been unable to appropriately serve their patrons due to overly restrictive terms imposed by publishers, further action may be advisable (such as convening library and publisher stakeholders to develop best practices, or amending the Copyright Act).” Similarly, the Task Force recognizes that publishers might interfere with library preservation. This could be addressed, if necessary, in the context of updating section 108.

Remixes. The White Paper does not recommend any statutory changes to facilitate the creation of remixes. The Task Force recognizes that fair use is the central mechanism for permitting remixes, and believes that fair use performs this job well. It rejects compulsory licensing schemes as unnecessary. At the same time, the Task Force has suggestions for making it easier for remixers to understand what uses are fair and to obtain a license when they wish to do so. While recognizing the role of single sector best practices (e.g., the best practices organized by AU), it expresses a preference for negotiated guidelines for remixing. Although acknowledging the challenge of different stakeholders reaching an agreement on guidelines, it believes they are achievable if the scope of any guideline is narrow enough.

The Task Force also encourages the development of voluntary licensing systems. It acknowledges the concern the Library Copyright Alliance raised that licensing systems might undermine fair use, but disagrees with that assessment in a helpful way. In essence, it argues that the fourth fair use factor receives less weight in cases of transformative uses. Thus, the existence of a licensing system should not weaken a remixer’s fair use argument.

The Task Force recognizes that users would benefit from clarification of the terms of EULAs, and recommends a multi-stakeholder process for better communicating terms to the public (e.g., developing standardized notices or alternatives to a “buy” button).

Statutory Damages. As noted above, the White Paper’s most important contribution is in the area of statutory damages. The Task Force recognizes that the existing framework can be applied inconsistently because courts and juries have insufficient guidance. Moreover, the potential of draconian damages deters development of innovative technologies. At the same time, the Task Force does not seem convinced that there was a copyright troll problem.

The Task Force’s first proposal is to codify model jury instructions concerning statutory damages adopted by several circuits. The instructions include a list of factors to consider when determining the amount of a statutory damages award. These factors would help insure that the damages award is related to the actual harm and that the defendant’s state of mind and financial condition are given appropriate weight. These factors would improve consistency and transparency in the application of statutory damages.

The second proposal is to expand the eligibility for lower innocent infringement awards ($200 as opposed to $750). Currently, under sections 401(d) and 402(d), the innocent infringer defense is not available when the copyright owner places a copyright notice on the work. The Task Force proposes eliminating the preclusive effect of notice on the innocent infringement defense. At the same time, the Task Force rejects the Library Copyright Alliance proposal to expand the remission of damages when a library or archives has a good faith belief that its copying was a fair use. Currently, this provision applies only to the reproduction right, not the other exclusive rights. The Task Force believes that the libraries had not demonstrated need for this amendment. If the problem becomes more evident, the Task Force suggests addressing it in the context of section 108 reform.

The third proposal is to give courts discretion to assess statutory damages other than on a strict per-work basis in cases involving non-willful secondary infringement for online services offering a large number of works. This would reduce the threat statutory damages pose to innovative Internet companies.

Finally, the Task Force expresses support for the establishment of a small claims court for copyright infringement. The Task Force evidently believes that such a court could benefit defendants by diverting smaller cases away from a venue where significant statutory damages can be assessed.

Edited: January 28, 5:00pm

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