It is hardly news that bad arguments can lead to bad law. A recent example is the Sixth Circuit's opinion Tuesday in Zomba Enterprises, Inc. v. Panorama Records, Inc., 2007 WL 1814319 (6th Cir. June 26, 2007). There have been a few other cases involving the unlicensed use of music in karaoke CDs, see e.g. ABKCO Records, Inc. v. Stellar Records, Inc., 96 F.3d 60 (2d Cir. 1996)(Section 115 compulsory license not available), but in Zomba, defendant had the chutzpah to argue that its unlicensed creation and marketing of CD+Gs (CD plus graphics) constituted fair use. Not surprisingly the claim was rejected and a judgment of $806,000 for willful statutory damages awarded, along with $76,456 in attorney's fees.
What is regrettable is loose language in the court's proper rejection of the fair use argument, particularly in its discussion of the first factor, reproduced here almost in its entirety:
As an initial matter, Panorama's use of the compositions is only minimally, if at all, transformative. Although Panorama created its own recordings of these songs, Santos admitted that the hired musicians did not “change the words or music.” Unlike a parody, see Campbell, 510 U.S. at 579-80, a facsimile recording of a copyrighted composition adds nothing new to the original and accordingly has virtually no transformative value. Cf. Princeton Univ. Press, 99 F.3d at 1389 (“If you make verbatim copies of 95 pages of a 316-page book, you have not transformed the 95 pages very much.... This kind of mechanical ‘transformation’ bears little resemblance to the creative metamorphosis accomplished by the parodists in the Campbell case .”).
The crux of Panorama's fair-use argument is its assertion that its use was transformative because its karaoke packages are used for “teaching.” Notably, this focus is newly found. In the district court, Panorama's primary argument was that their karaoke packages “encourage creativity, and often commentary” among their end-users, and accordingly qualify as “transformative works.” Although Panorama offered a passing reference to karaoke's value as “an interactive and educational experience,” it never argued that the primary purpose of karaoke is “teaching,” and for good reason, as this argument is wholly meritless. Panorama's own description of karaoke further undermines its assertion regarding “teaching”: “Karaoke is primarily thought of as a form of entertainment that allows anyone to grab a microphone, hop on stage, and live out their [sic] fantasies of performing as famous music stars.” Moreover, the record is bereft of evidence indicating that Panorama's products are used for teaching at all (e.g., invoices showing sales to schools, advertisements aimed at educators, affidavits from teachers, etc.).
More importantly though, the end-user's utilization of the product is largely irrelevant; instead, the focus is on whether alleged infringer's use is transformative and/or commercial. In Princeton University Press, we considered a copyright suit against a college-town copy shop that copied portions of books and then sold these copies to students in “coursepacks.” 99 F.3d at 1383. We rejected the copy shop's fair-use defense, concluding that the defendant's copying was a commercial use, even though the students ultimately used the copies for educational purposes. Id. at 1389. To reach this conclusion, we emphasized that “the use of the materials by the students is not the use that the publishers are challenging.” Id. at 1386. Instead, the publishers were challenging “the duplication of copyrighted materials for sale by a for-profit corporation that has decided to maximize its profits ... by declining to pay the royalties requested by the holders of the copyrights.” Id.
Quite similarly, Zomba does not challenge karaoke crooners' renditions (atrocious or otherwise) of the relevant compositions, but rather Panorama's decision to copy these songs onto CD+Gs and then distribute them without paying royalties. Like the copying at issue in Princeton University Press, Panorama's manufacturing and selling the karaoke packages at issue “was performed on a profit-making basis by a commercial enterprise.” Id. at 1389. Accordingly, Panorama's use is commercial in nature, a fact militating against its fair-use defense.
Its the bolded sentence that bothers me: "More importantly though, the end-user's utilization of the product is largely irrelevant; instead, the focus is on whether alleged infringer's use is transformative and/or commercial." The sentence bothers me because Zomba did not make the end-user's conduct an issue so the court didn't need to reach it. Princeton University Press and other decisions, like Kinko's in the SDNY, paint with too broad a brush. It is reasonable that each defendant has to prove its own entitlement to fair use, but to argue that that entitlement has to be made in a vacuum is absurd: it divorces the purpose of the use from the first factor's "nature and purpose of the use." Fpr example, in the Cablevision RS-DVR case (478 F. Supp.2d 607 (S.D.N.Y 2007), currently on appeal), had Cablevision made a fair use argument for itself, would it have been "largely irrelevant" that Cablevision's letting consumers store time-shifted programming on Cablevision's servers rather than on a set-top box?
The signal failure of fair use decision making is the irresistible tendency of courts to announce and apply hard and fast rules to what is always an ad hoc determination, in the process destroying the very nature and purpose of the doctrine.