Monday, May 08, 2006

Clarity About the Fourth Fair Use Factor

The Sunday New York Times Business Section ran a story by Randall Stross entitled "Someone Has to Pay for TV. But Who? And How?, accompanied by a large glossy (posed) photograph of a well-dressed young man handcuffed from behind and holding a TV remote control. The story begins with the author's reading of a patent application filed by Royal Philips Electronics, described as "threaten[ing] the inalienable right to channel-surf during commercials or fast-forward through ads in programs you've taped," or, alternatively, as "uphold[ing] the right to avoid commercials, but only for those who would pay a fee." The author calls this a "pay to surf" technology, where viewers are disabled from skipping commercials unless they pay to skip them.

Mr. Stross then goes on more generally to discuss the effect of Digital Video Recorders on advertising revenues, and how things will have to change: someone will have to pay for the privilege of having advertising-supported free television, something of a paradox it would seem, but it is clear that Philips has the public in mind in fingering who should pay for "free" TV. The Supreme Court's Sony decision is mentioned, and two law professors are quoted about how a Sony decision might be affected by the future existence of the pay-to-surf technology. Apparently, at least one of the professors believes that the existence of a revenue-generating source from consumers who do not want to watch commercials would be a "compelling fact that would have made a difference" in the Sony case. An inflammatory remark four years ago by Jamie Kellner, then head of Turner Broadcasting System, in an interview in CableWorld magazine that viewers who use their DVRs to fast forward past comemrcials were committing "theft," and "stealing the programming" was also noted.

Mr. Kellner's and the law professor's comments serve to put important issues in play, though, such as how copyright, and fair use in particular, are being warped to deal with noncopyright issues. The Sony case was not "about" copying at all, and certainly not about copying of free over-the-air broadcasting for which there was no secondary market in the late 1970s when the suit was brought. Instead, Sony arose out of Hollywood's fears that fast-forwarding through commercials would decrease the amount paid by advertisers, a fear that it retains 30 years later. In the later 1970s, the Nielsen company was figuring out how to factor VCR viewing into its ratings, and the handwriting was on the wall for future contracts between the content owners and the networks as well as between the networks and their advertisers. (One can read about this in James Lardner's classic 1987 Fast Forward: Hollywood, the Japanese, and the Onslaught of the VCR.

To be clear, then about Sony: the fourth factor analysis of harm to the market for the copyrighted work was a bunch of hoo-ha in that case. The fourth factor concerns ways in which copying of the work itself damages similar or otherwise relevant markets for the particular type of copying done by defendant. The fourth factor most certainly does not concern harm to advertisers, nor does it reach reduced advertising revenues because viewers are not copying or not viewing a third party's works, i.e., the advertisements. Sony, properly understood, did not deal with copying of the works in question at all. Whatever else one thinks about how to deal with the issue of advertising, we should not distort basic principles of fair use, when the real issues lie outside of copyright altogether.

13 comments:

Fred von Lohmann said...

I entirely agree - the fourth factor should consider what impact the copying of the work has on the market for the original, rather than what you do with the copy (such as skipping distinct works contained alongside the original, i.e., the ads).

But the hard fourth factor issue arises not out of ad-skipping, but rather out of the willingness of copyright owners to offer very inexpensive download alternatives. Does the availability of a 99 cent version of Lost, made available within 24 hours of the broadcast, change the fourth factor analysis?

I think we're missing something in our fourth factor analysis these days. It can't be the case that the existence of a licensing market for substantially similar uses automatically tips the fourth factor.

Edward Lee said...

Thanks for this blog post, it's an enjoyable read.

Right now, I'm not as sure as you are that the "advertising" issue can be so neatly cabined. Wouldn't the copyright holders of the TV content argue that they have a market for licensing their shows with commercials? And following up on Fred's point, they have a much bigger secondary market for replays of their shows today, in some cases with commercials that cannot be skipped.

Not that I favor any change to Sony, but isn't this still within Factor 4, regardless of how the factor shakes out?

William Patry said...

Here is a link to an article by Randy Picker on point, "The Digital Video Rcorder: Unbundling Advertising and Content" http://papers.ssrn.com/sol3/papers.cfm?abstract_id=450180

William Patry said...

To answer Fred's 99 cent question, yes, I think that is a very relevant fair use consideration, and thus I think that Steve Jobs has helped the music industry in many ways. But no one factor is decisive, yet one of many areas where I disagree with the Nimmer treastise which said with no support that the fourth factor was "undoubtedly the single most important factor." One of the great accomplishments of Justice Souter's 2 Live Crew opinion was to take a "wholistic" look at fair use.

On Professor Lee's point, I agree that the motion picture industry has a real secondary market for their works today, although perhaps more on cable than over-the-air programming. I, for example, pay an extra $5 a month for HBO on demand, although I dearly wish they would ut out another season of Extras. But I don't think that for fair use purposes the copyright owner of Extras can consider harm to lost revenues for not copying or even more remotely not viewing someone else's work. Call me dense, but
I think that the harm spoken of is harm to your work not the way your work is hawked on someone else's network. I am not downplaying that there may be a drop-off in ad revenues, only that the drop-off is not a copyright issue.

Aaron Silverstein said...

The Lardner book is also available in a paperback reprint from Pierce Law.

William Patry said...

Speaking of the Franklin Pierce Law School, their website has invaluable postings of decisions of the Copyright Office Appeals board: http://www.ipmall.info/hosted_resources/copyrightappeals.asp

John Noble said...

Bill observes that the "Sony case was not 'about' copying at all." Mr. Lee notes that the copyright owners "have a market for licensing their shows with commercials."

Doesn't it follow that the real party in interest in Sony was not represented by the respondents (Universal Studios and Walt Disney Productions), but by the incumbent broadcasters, which could at least claim a direct harm in reduced advertising revenues. CBS was on-hand as amici.

When CBS foundered in the wake of the decision, it wasn't because the copyright in original works had lost value. Capital investment shifted from broadcast to content and alternative distribution technologies. Sony acquired Columbia Records and Columbia Pictures in 1988 and 1989. The rest of CBS survives as the red-headed step-child of content conglomerate Viacom.

The harm alleged by the copyright owners proved an illusion because it was indirect. Copyright owners found more profitable channels of distribution, including cable and videotape. Universal Studios survives as the production affiliate of NBC Universal (it's the brand not the broadcast facilities that got NBC first billing); and Disney owns ABC.

The real party in interest had a different copyright claim based on the unauthorized reproduction of the commercial-laden telecast "derivative" -- but it was a nightmare. Each telecast is modified by the addition of different commercials by the programmer to create a different "derivative," and the damages arose because the alleged infringer avoids infringement of the derivative copyright holders display rights.

Cory Hojka said...

I feel that the argument that ad-skipping doesn't infringe on a copyrighted work may be too clever for it's own good.

The average television show for a half-hour broadcast segment is 22 minutes in length, which means that there is 8 minutes of advertising. Obviously, broadcasters don’t show the whole show at once, but rearrange it to be 30 minutes long with intervals of dead air in between actual content. While that broadcaster could choose to show nothing in that interval of dead air, they prefer instead to provide us with advertising to fill in the gaps.

Now, when the consumer downloads the television show and skips over commercials, she isn’t just ignoring the ads. Such a device would be an ad-blocker, not an ad-skipper. Instead, the ad-skipper is really a time-skipper that rearranges the 30 minute copyrighted work into a 22 minute version. Interestingly, it just so happens that usually there is a market for such 22 minute arrangements of the copyrighted work on DVD or through the Internet. Thanks to “ad-skipping,” however, the consumer no longer likely needs to buy them. Thus, I’m not convinced that ad-skipping, as opposed to ad-blocking, evades the reach of the fourth factor in fair use analysis.

In footnote 36 of Sony, there is some discussion of this issue, but it was rejected by an argument based on the technology of the times. In the view of the district court, and cited approvingly by the Supreme Court, "[i]t must be remembered, however, that to omit commercials, Betamax owners must view the program, including the commercials, while recording. To avoid commercials during playback, the viewer must fast-forward and, for the most part, guess as to when the commercial has passed. For most recordings, either practice may be too tedious."

Given how much the "tedium" of skipping over advertising has changed since 1984, it would seem strange to me to argue that footnote 36 should remain a valid argument for fair use analysis in this regard.

William Patry said...

I agree with John Noble that the parties who have been injured from VCRs are the broadcasters. We all know how the video market turned out to be a boon to the studios and we all know Jack Valenti's Boston strangler comment. Broadcasters however had no such boost.

A friend mentioned to me today the theory that broadcasters might have a compilation interest that is violated by copying and then skipping ads. In the 1980s, before the Copyright Royalty Tribunal and then the DC Court of Appeals, the National Association of Broadcasters succssfully argued that they had a compilation copyright in their broadcast day, the way they put it all together; but it did them no good since it was found to have no value for royalty purposes.

Then CBS hit upon the idea of retransmisson consent which CBS thought would get them big bucks from cable; over the IP subcommittees objections CBS got retransmission consent but no pot of gold developed.

My basic probelm with fast forwarding is that it is not an exclusive right given to anyone, not even the advertiser.

Anonymous said...

Fred should take comfort in the fact that to have an adverse impact on the copyright owner's efforts to generate revenue from a work, the putative fair use from otherwise infringing conduct must in fact impact a real market for the goods. Experimental downloads of single shows by a network or studio with low prices or imbeded advertising or adjacent advertising are all unproven models that cost more as experiments than any revenue they currently generate.

107 does speak in terms of a "potential market" for the copyrighted work. But that can't be read mean "any possible market in which any even token price is paid" or the fourth factor becomes surplusage.

Justin Levine said...

This issue sheds light on one of the many aspects of copyright law that are fundamentally dishonest.

Let's say that you tape an hour-long television show that contains 24 thrity second commercials.

Haven't you really then copied 25 separate creative works? (Yes - you would think applying copyright laws to commercials would be problematic since their entire purpose is simply to reach as many people as possible in order to sell products. But we know that courts would rule differently on this issue and decalre that commercials have copyright protection just like any other work.)

But now let's suppose that both the television show and each of the commercials contain 4 separate creative works "embedded" within them (a poster, song, picture, etc. Each of which was licensed by the author of the television show or commercial.). Isn't the person who videotapes a single hour-long show then actually copying no less than 100 creative works without permission from the original authors?

So which is it? Is the taping of an hour's worth of television the copying of just one work? Or 100?

Copyright law allows you to keep splitting hairs like this all the time - and then allows you to magnify those hairs into a net.

We need a radical overhaul of copyright laws even more than the tax code. One that allows for a clear and consistent application of the rules - along with robust fair use protections.

Doug Lichtman said...

Bill -

I am a few days late to the party, but I think your original post is off the mark. The fourth factor clearly does come into the VCR commercial-skipping cases.

How?

1. People are copying, without permission, a copyrighted television show like ER. That sets up a prima facie infringement case.

2. Those folks, and the people who help them copy, try to invoke "fair use" as a defense to *that* copying. Not the copying of the commercial; the copying of the copyrighted program.

3. In the analysis of that copying, the courts ask whether copying in this manner alters the economic returns from *that* work -- again, ER, not the commercial. But gosh, the answer is "YES": copying via the VCR does impact the financial viability of ER, because VCR copying messes with commercial revenue.

Thus, the law gets it right. Clearly on policy grounds we should think about the financial impact of commercial-skipping when we think about the VCR.

William Patry said...

I hesitate to disagree with my cherished friend Doug Lichtman, except perhaps when it comes to fair use and ER: no one should watch that show, better Scrubs, or better yet HBO.

My disagreement is not about whether a prima facie of infringement is made out by off-air-taping: the way the Copyright Act is structured, if you breathe in the vicinity of a copyrighted work, you've met that burden.

My disagreement is over what was the motivating factor behind Sony: it couldn't have been copying the programs themselves: they were free, over-the-air broadcast programs broadcast in the 1970s. Even now one can only buy a handful of such programs on DVD or videocassette, and it is big news when a broadcaster puts out a few streams on the Internet.

No, Sony wasn't about copying at all, it was about not viewing, and not viewing material (advertisements) owned by third parties. I don't disagree with Doug that not viewing third parties' works could ultimately have an impact on the prices that copyright owners can charge networks because of the diminished revenues that advertisers might pay networks.

But I do disagree that such potential harm is the sort that the fourth fair use factor is directed toward: it is a misuse of copyright to solve another problem. The idea that not viewing a third party's work should be considered in a fair use analysis of reproducing a different work seems very strange to me.