Monday, April 5, 2010

Copyright – Part I: Out-of-print and out-of-touch

Congress has a duty to "promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." (1) Of these rights, the most contested and contentious area is undoubtedly the copyright. This article looks at a significant copyright issue in the print media and in the entertainment industry and how consumers drive infringement.

Print Media

In 2004, Google drew both praise and criticism by scanning and posting on Google a copy of almost every book and magazine from select libraries.

On the praise side, researchers and the public were finally able to access out-of-print books and periodicals, which are notoriously time consuming and expensive to find. Where but Google Books, for example, could a modern day person find the 1904 series "The Works of Daniel Defoe" by Daniel Defoe and Howard Maynadier (2) or read the June 15, 1953 edition of Life magazine about the coronation of Queen Elizabeth? (3)

The criticism came from The Authors Guild, the Association of American University Presses, the Association of American Publishers and other publishers. The posting rankled some people so much that The Authors Guild sued on behalf of three of its author members stating, "[i]t's not up to Google or anyone other than the authors, the rightful owners of these copyrights, to decide whether and how their works will be copied." (4)

Google's defense was to assert fair use (discussed later), and a concept called "sampling," i.e., "[a]t most we show only a brief snippet of text where their search term appears." (5) The Electronic Frontier Foundation, which "battles for digital freedom" also weighed in, asserting that fair use favored Google. (6) Neither defense was really successful, however, because fair use has statutorily defined applications, which did not apply, and sampling really means a small part, and half or more is clearly not a sample.

Fortunately, The Authors Guild and Google settled. (7) The authors and publishers are to receive $60 per copy, for at least $45 million, with $34.5 million to set up a Book Rights Registry, i.e. an ASCAP equivalent entity for writers, and of course, a chunk for the lawyers. (Note: The settlement consolidates multiple lawsuits, which will likely be appealed separately on different points of law.)


The other high visibility aspect of copyright is in the field of music and video entertainment. Until 1984, there weren't many problems with copyright infringement of either. Disc records (33, 45, etc.) has so many flaws that the public could not make a good copy, and copied magnetic tape (cassette or 8-track) suffered from distortion and degradation.

Meanwhile, Sony released the Betamax video cassette for the time-shifted viewing of television, and even the Supreme Court accepted that "time-shifting may enlarge the total viewing audience and that many producers are willing to allow private time-shifting to continue." (8) The central issue feared by the entertainment studios was the home or commercial storage of copied content that would result in a "great deal of harm" because "the copyright owner has lost control over his program." (9) By a 5-4 margin, the studios lost because they failed to show this was true.

Since then, the studios and industry groups have been careful to monitor and adopt technology only when it could either control the technology, persuade Congress to legislate penalties for unauthorized copying, or both. For example, in the 1990's, as Congress was harmonizing U.S. copyright law with international treaty, the studios enlisted the help of Rep. Sonny Bono to revise copyright law to forbid the time-honored concept of reverse engineering if the product was subject to copyright protection. (10)

The studios then used technology called "Content Scramble System" (CSS) and coded DVDs so people could not copy a DVD or watch imported DVDs. Of course, the new law is only a U.S. law, so a teenager in Norway reverse engineered a DVD player and created a program he called De-CSS so he watch a DVD he had bought but couldn't watch on his DVD player. He gave the program to a friend, and in short time, millions of people became criminals. The studios, not surprisingly, starting suing U.S. users of the De-CSS program and similar encoding-cracking programs. (11) In 2004, the studios also adopted the now familiar hard-line warning seen before every movie.

The unauthorized reproduction or distribution of this copyrighted work is illegal. Criminal copyright infringement, including infringement without monetary gain, is investigated by the FBI and is punishable by up to five years in federal prison and a fine of $250,000.

While encryption, law and threats have had some curtailing affect to copyright infringement, the real disincentive occurs when the economics of rental and purchase prices achieve what many people have long said was the best option - the studios need to lower the acquisition price of purchases. There are two examples of this affect.

Driving Infringement

Currently, there are 50 million DVD sales monthly for about $18 each. (12) This sounds great for the studios until you factor in that DVD sales fell almost 14% to $5.4 billion in the first half of 2009. (13) While the move to downloaded content for the Apple iPod and similar portable players accounts for part of the decrease, the 8% rise in DVD rentals to 175 million DVD rentals each month at an average price of $3.50 says that the DVD is still a strong force in American video entertainment.

In addition, there are companies still trying to legally break CSS encryption. To legally sell a CD or DVD player, a device maker must have a CSS license. Kaleidescape bought such a license and sells an $8000 system for copying a DVD, and then playing the digital content without the DVD. Sued by the licensor for breach of contract, Kaleidescape lost an appeal on the scope of the contract, and is likely to lose on remand.

Here's the interesting part: The complaint did not allege copyright infringement, probably because the Kaleidescape system cannot replicate or distribute the copied DVD or CD. The real issue, however, is that the Kaleidescape system cannot distinguish between the user's purchased movies and those the user may have borrowed or rented. (14) Kaleidescape attempted to divert its liability by including a license agreement that mandates that a user will "never to load or permit someone else to load a commercial DVD or CD onto your Kaleidescape System ... that you do not rightfully own and possess." (15) Even so, a user can copy a DVD and create a library for unauthorized time-shifting, just as Sony feared.

Real Networks developed DVD copying software in 2008 and a $30 DVD copying system in early 2009. For its efforts, Real Networks received preliminary injunctions on both. The studios' attorney, Bart Williams, analogized DVD copying as using renting a car, buying a theatre ticket, or having a locker room press pass, and then keeping the car, filming the movie in the theatre, or stealing from the players. (16)

At one point, Kaleidescape tried a defense that people are not going to spend $8000 just to copy a bunch of $3.50 rentals. They know better. Apple's iTunes store (17) and the Napster file-sharing case (18) show that people want and will get inexpensive information and entertainment legally, illegally or in combination.

Overall, the intellectual property system works as envisioned more than 200 years ago. The public receives the promoted Progress of Science and useful Arts, and the Authors get compensated. The studios and industry groups need to pay attention. The more they continue to squeeze for high profit margins, the more out-of-touch they become with their market and technology.

(1) U.S. Constitution. Article I, Section 8.
(2) Volume 9 is available at:
(3) Available at:
(4) Elinor Mills, CNET News, "Authors Guild sues Google over library project", September 20, 2005, available at:
(5) Available at:
(6) Fred von Lohmann, Electronic Frontier Foundation, "Authors Guild Sues Google", September 20th, 2005, available at:
(7) Roy Blount Jr., The Authors Guild, "$125 Million Settlement in Authors Guild v. Google", October 28, 2008, available at:
(8) Sony Corp. V. Universal City Studios, Inc., 464 U.S. 417, 443 (US 1984).
(9) Sony, 464 U.S. at 451, citing 480 F. Supp. at 467.
(10) Digital Millennium Copyright Act, 17 U.S.C. §1201 (2009).
(11) See e.g., Universal City Studios, Inc. v. Reimerdes, 111 F. Supp. 2d 294 (S.D.N.Y. 2000); and United States v. Elcom, Ltd., 203 F. Supp. 2d 1111 (ND Cal. 2002).
(12) Bart Williams Munger, Tolles & Olson, State Bar of California Telephone Seminar, "Winning Strategies for Securing a TRO and/or Preliminary Injunction in IP Cases," October 27, 2009.
(13) Douglas A. McIntyre, "DVD Sales Crushed By Rentals, As Apple (AAPL) And Amazon (AMZN) Rise", September 22, 2009, available at
(14) DVD Copy Control Association, Inc., v. Kaleidescape, Inc., H031631 at 4, Santa Clara County Super. Ct. No. CV031829, Filed 8/12/09.
(15) Kaleidescape Service and License Agreement, provision 7, available at
(16) Bart Williams, State Bar of California, supra.
(17) Dawn C. Chmielewski, L.A. Times, "Hottest tracks to cost $1.29 at ITunes starting April 7", March 26, 2009, available at:
(18) David Kravets, Wired, "Napster Trial Ends Seven Years Later, Defining Online Sharing Along the Way" August 31, 2007, available at:

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