The Demise Of Copyright Toleration

In the Supreme Court oral argument (p. 12) of MGM Studios, Inc. v. Grokster, Ltd, Don Verrilli, attorney for the Recording Industry Association and other content owners, raised eyebrows:

“The record companies, my clients, have said, for some time now … that it's perfectly lawful to take a CD that you've purchased, upload it onto your computer, put it onto your iPod.”

Counsel for these content owners seemed to be acknowledging, before our highest court, that if you copy a prerecorded song into a more convenient format strictly for your own use it is a fair use under Section 107 of the Copyright Act. But less than a year later they explained away the statement that the Court transcript had “attributed” to their attorney. In a filing with the Copyright Office in the 2006 round of use exemptions under the Digital Millennium Copyright Act, counsel for a group of content owners, including the RIAA, said (n.46, emphasis added):

“Nor does the fact that permission to make a copy in particular circumstances is often or even routinely granted, necessarily establish that the copying is a fair use when the copyright owner withholds that authorization. In this regard, the statement attributed to counsel for copyright owners in the MGM v. Grokster case is simply a statement about authorization, not about fair use.”

Although denying fair use, these content owners were acknowledging a larger truth about copyright, the Internet, and even the law in general: It works largely due to toleration. Not every case is clear; not every outcome can be enforced; and not every potential legal outcome can be endured. Instead, “grey area” conduct must be impliedly licensed, or at least tolerated.

Counsel then or now could not have cited a single court holding on whether the private, noncommercial recording of a song is a lawful fair use. Long before the Supreme Court in Sony Corp. of America v. Universal City Studios, Inc. said that video home recording from broadcasts as a fair use, the music industry could have pursued consumers for home audio recording from vinyl records. But the risk of losing and establishing a bad precedent was too great.

Toleration endured because fair use, and the practicalities of enforcement, had to be endured by content owners. They recognized that their own creative members also relied on fair use in adapting and building on the works of contemporaries as well as earlier generations. They also realized that offending consumers by suing them might not be a good idea – a reason (in addition to the possibility of losing) why the Sony plaintiffs dropped the individual consumer defendants they had originally named.

But one of the virtues of fair use is that it often points to directions that authorized users had failed to notice. And once “the street” has shown the way, the content owners cite the new genre as a form of “derivative work” – and seek to monetize it. The Supreme Court, in the course of protecting a parody of Pretty Woman in Campbell v. Acuff-Rose Music, Inc., left the door to this grey area wide open:

“The market for potential derivative uses includes only those that creators of original works would in general develop or license others to develop.”

Those with a stake in precedents still approach this door with caution. But the emergence of Internet search and tagging, social media, and troll lawyers has meant that the climate of toleration may be ending, as the door to grey areas is being forced closed.

• First came the patent trolls – plaintiffs who essentially buy the right to sue, with little to lose from any adverse precedent. They find, sue, and harass entrepreneurs, retailers and consumers, as leverage for settlements.

• Then came the copyright trolls – rights aggregators and their lawyers who find web and social media postings and links that were posted under assumptions of fair use, rights holder marketing encouragement, or toleration. Consumer defendants are accustomed to seeing such posts by rights holders themselves; they assume that any complaint about their own use must be spam.

• Classic copyright “troll” clients have been pornographers. But rights aggregators and their attorneys have now branched out to, and beyond, making deals with individual photographers and cartoonists who seek to further monetize their work. At least one has signed up major music publishers as clients and moved from harassing school and college marching bands and choirs to threatening symphony orchestras. They threaten to sue over commissioned or in-house arrangements as derivative works, in need of an additional license beyond blanket performance rights – a grey area long respected and tolerated by the music industry. (A strict interpretation of such a “right” would mean the end of academic and group member jazz arranging of copyrighted works.)

Now to apply the coup de grace to implied license and toleration comes the CASE Act – “Copyright Alternative in Small-Claims Enforcement Act of 2017 – H.R. 3945, before the House Judiciary Committee. It disregards grey areas and would destroy the toleration that has made copyright viable in the face of swiftly changing times and technologies. It would set up “commissioners” within the Copyright Office to rule on “small claims” cases without precedent or appeal on the merits to any court. Yet “statutory damages,” pursued at the discretion of the plaintiff, could still reach $30,000.

Techdirt recently reviewed here what a bad idea this bill is. It is also probably unconstitutional. But a larger issue is what such a law would say about copyright, and about grey areas and tolerance. It denies the existence and necessity of each. This may be the biggest reason why this bill should never become law.

Guest contributor Robert S. Schwartz practices law at Constantine Cannon LLP. The views expressed are his own.

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