Copyright Reform for the Digital Age: Is Fair Use Too Unpredictable?

Matthew Sag

Associate Professor, Loyola University of Chicago Visiting Scholar, Melbourne University Law School

A presentation for the 2013 Australian Digital Alliance Copyright Forum – Embracing the Digital Economy: creative copyright for a creative nation. Friday 1 March 2013

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Copyright and New Technology

(L) Jean Le Tavernier, Portrait of Jean Miélot, 15th C. (R) Jost Amman, 1568

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Limitations and exceptions to copyright

Content? Structure? Who decides and when?• Should we rely on a standard-based limitations and

exceptions (L&E) such as the U.S. “fair use” doctrine? • Or, should we trust the legislative process to

articulate a more tailored and constrained rule-based set of L&E?

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The Fair Use Advantage

Fair use allows law to adapt to new challenges as they arise.

The fair use standard ensures that decisions are made with reference to the ultimate goals of copyright law.

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The Contrast

Fair use allows technologists to back their own judgment that a use is fair, not risk free but ...

In a Rule-based system, only those with existing lobbying power can hope to introduce new exceptions.

In a fair use system, the legitimacy of new uses is determined when challenged, based on specific facts, not general assertions.

In an exclusively rule-based, every new use is forbidden by default until the legislature gets around to saying otherwise…

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This can take a long time

Technology Commercialized in the U.S.

Use Illegal in Australia Until

Video Cassette Recorder

1970’s 2006

Portable Digital Music Player

Late 1990’s 2006

Internet Search Engines

Late 1990’s 2014???

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“Most responses to the Review from established UK businesses were

implacably hostile to adoption of a US Fair Use defence in the UK on the

grounds that it would bring: massive legal uncertainty because of its roots in American case law; an American style proliferation of high cost litigation; and a further round of confusion for suppliers and purchasers of copyright

goods.”

Hargreaves Report 2011, 44

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?

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Prior Literature

Claims that fair use is uncertain are too numerous to list• Anecdotes, noteworthy cases where district court was

overturned, reinstated. • Intrinsic belief that standards must be more uncertain than

rules

But, looking at all the cases• Barton Beebe (2008) identifies many consistent patterns in

fair use decisions Relies on judges’ retrospective evaluation of the 4 fair use

factors• Pamela Samuelson (2009) comprehensive doctrinal survey

identifying “policy-clusters”

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The Aim of My 2012 Study

Test explicit and implicit claims about fair use • based on real world facts available to litigants,• without relying on the retrospective classifications of

opinion writers.

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Data

280+ U.S. District Court Cases, 1978 – May 2011 Written opinions, some final, many motions for

summary judgment. Average fair use win rate at the district court level =

39.92%

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Hypotheses derived from various sources

The text of the Copyright Act Court cases Academic commentary Legal folk wisdom

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Brief overview of the U.S. fair use provision – Copyright Act of 1976, Section 107

Notwithstanding the provisions of sections 106 and 106A,

the fair use of a copyrighted work,

including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research,

is not an infringement of copyright. In determining whether the use made of a work in any particular case

is a fair use the factors to be considered shall include–

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;(2) the nature of the copyrighted work;(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and(4) the effect of the use upon the potential market for or value of the copyrighted work.The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.

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Hypotheses derived from § 107 and case law

Fair use is more likely if defendant’s use• Is “transformative”• Is not commercial• Is only a partial copy• Does not effect the market value of

plaintiff’s work

Fair use is less likely if the plaintiff’s work is • Unpublished• Creative

{107(1), Campbell} {107(1), Sony}

{107(3)}{107(4)}

{107(2)}{107(2)}

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Transformative Use

§107(1) “the purpose and character of the use” Campbell v. Acuff-Rose (U.S. Supreme Court 1994)

the creation of transformative works, lies “at the heart of the fair use doctrine”

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What is transformative use?

Transformative• “a further purpose or different character, altering the

first with new expression, meaning, or message.”• Creativity Shift (0,1) Plaintiff’s work is creative,

defendant’s is informational, or vise-versa.

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What is Commercial Use?

Direct “commercial” Use• D used P’s work as part of a commercial product

or service Indirect Commercial Use

• D used P’s work as an intermediate step to creating a commercial product or service.

Non-commercial Use • Personal uses, Educational uses, Research uses

(not part of a specific product development process), No direct or indirect commercial benefit (e.g. file sharing)

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How can we measure Market Effect?

Problems Prone to circular reasoning

If fair use then no effect on copyright owner’s market: If not fair use, permission required, market for permission

Extent of competitive injury (past & future lost sales), always disputed

Partial Solution Industry Separation using NAICS codes as a proxy for

market effect

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Additional hypothesis: Fair Use Favors the Underdog

fair use is “a form of subsidy” at the expense of authors that permits limited use of a work “for the public good.”

– Justice Blackmun in Sony Corp. v. Universal City Studios, U.S. Supreme Court (1984)

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Measures of Underdog Status

Measures• Natural person v. Corporation

(court records, corporate databases, PACER)

• Experience Rating of Attorney & Law Firm (Martindale Hubble Directory)

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Results

Original Photo by Dolor Ipsum / Frank Carey CC License

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Results | Regression TableDoctrine Variable Regression Model – Finding of Fair Use

Transformative use Creative Shift .995** 1.350** .872* .880* 1.313**

Commercial use Commercial UseDirect Commercial Use

-.328-.629*

-.484-.771*

-.304-.495

-.355-.548#

-.407-.703*

Nature of the Work Creative WorkUnpublished Work

.012

.269-.458.093

-.048.073

-.208-.002

-.472-.005

Amount Copied Partial Copy .312 .781* .308 .426 .754*

Market Effect Industry Separation .448 -.116 .207 .144 -.199

Time Post 1994 .013* .097 .090 .042 .203

Underdog Pf natural personDf natural personDf attorney underdogDf law firm underdog

1.568** .283-.967#

.270

.968**

.1491.299**.271-.871#

.296

Industry Plaintiff IndustryDefendant Industry

.031**

.005 .013.004

.017

.008

ConstantPseudo R2

-.585.073

-.551.166

-2.538.089

-1.655.111

-1.969.173

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Results | Graphical Form (Ordinary Least Squares, Full Specification)

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What makes a finding a fair use more/less likely?

Direct Commercial Use

Weak Defendant(defendant attorney underdog)

Weak Plaintiff(plaintiff natural person)

Partial Copy

Transformative Use(Creative Shift)

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Debunking Myths of Fair Use

Myth 1 Fair use is only available to non-commercial

actors. Not statistically significant

Myth 2Creative & Unpublished Works are less

susceptible to fair use. Not statistically significant

Myth 3Fair use favors the ‘underdog’. Evidence suggests fair use favors the ‘overdog’

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Are fair use cases unpredictable?

Lessig: “merely the right to hire a lawyer” Madison: “a lottery argument”

Are fair use cases unpredictable?Cumulative Predicted Probability of A Fair Use Win

39%

62%68%

87%

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Concluding Thoughts

No copyright expert agrees with every court decision, but fair use is not a lottery.

U.S. lawyers routinely advise clients on how close they are to the line between infringement and non-infringement. • Often the advice is hedged, but so is most legal

advice. • Often the advice is proactive – “your case would be

stronger if …”

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Not all certainty is desirable

Copyright without fair use offers us the ‘certainty’ that • new uses will only be approved once they are

already mainstream; • copyright owners will continue to try to regulate

down-stream uses of content regardless of the fairness of those uses;

• test-cases on new technology will focus on technological happenstance and questions of taxonomy, not on issues of fundamental principle;

• the U.S. will continue to be a better place to start a web2.0 business than Australia

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Some Realism About Rules

We need to compare fair use in the real world to rule-making in the real world.

In the real world, the certainty of rule-based E&L is limited by: • Inability to foresee new technological developments.

In Australia we can’t even predict the past, let alone the future

• Tendency toward highly regulatory, cumbersome and unintuitive rules Hard to use, lock in status quo, allow incumbents to

game the system against new entrants, collecting societies used to disguise price-fixing ...

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Thank You!

This presentation is based on

Matthew Sag, Predicting Fair Use, Ohio State Law Journal, Vol. 73:1 47-91 (2012)

You can download this paper for free at http://ssrn.com/abstract=1769130

These slides will be available at www.matthewsag.com/publications-2/presentations