Re: Distinguishing Mirage (Was: T-shirt resale)

On 02/19/99, Ari Kahan <akahan[_at_]netcom.com> wrote:
>
> I think it's not very hard to come up with an example of how the
> copyright holder could regard himself as being materially "injured" when
> a purchaser alters the purchaser's personal copy of a copyrighted work,
> but does not copy or redistribute the altered copy. (This may sound a
> bit familiar, and perhaps I'm obsessed with this issue). As follows:
>
> There's a new service "SimplyPostage", which you can read about at
> http://www.simplypostage.com/ : Using this service, you can print your
> own postage from your PC to avoid standing in line at the post office.
> First, you buy some software from SimplyPostage that runs on the PC.
> Then, you use that software to connect to SimplyPostage's site over the
> internet, and download virtual postage from the site, for which you pay
> SimplyPostage the actual price of the postage, plus a premium for the
> convenience of buying postage over the net; you can then print up as
> much postage as you've purchased, and affix it to your outgoing letters
> and packages, and the postage you've printed will be honored by the
> postal service. (Presumably, SimplyPostage has made arrangements with
> the postal service so that the postal service gets paid.)
>
> The software itself is a loss-leader; SimplyPostage appears to make its
> money by charging not for the software, but through the convenience
> charges paid by customers in connection with ordering postage using the
> software.
>
> Suppose I'd like to offer postage over the net, too; but I don't want
> to go to the expense of writing software for my customers to use. (In
> fact, that's how I'll be able to undercut SimplyPostage's price.) So, I
> tell my customers how to ALTER the SimplyPostage software so that it'll
> connect to my site instead of to SimplyPostage's site. (Maybe I even
> offer my customers a free patch that will modify the software for them.)
> Now, SimplyPostage isn't getting revenues from people who've altered
> their software to work with my service: they could claim to have been
> damaged. But all the customers have done is alter, ever so slightly,
> their own copy of the software (as people do routinely, by altering
> configuration files to achieve desired results, for example.)
>
> SimplyPostage argues: under a plain reading of the statute, the customer
> has infringed by preparing a derivative work, and Ari has contributorily
> infringed by telling the customer to do it, and we've been damaged
> because we're no longer getting revenues through our service. And, our
> license agreement prohibits the customer from changing the software, so
> they're in violation of the license agreement, and Ari's liable for
> inducing breach of contract.
>
> Ari and the customer argue: The changes were de minimis, and they
> were made to achieve compatibility, and besides, we never copied or
> distributed the changed software, and our counsel, Dr. Ochoa, told us
> that was okay. And, to the extent your license agreement purports to
> prohibit making changes that would be permitted by the Copyright Act,
> and in particular section 117(1), it's void (unless we're in a ProCD
> jurisdiction, perhaps), as well as constituting an attempt to illegally
> tie the purchase of the software to the use of your service in violation
> of the antitrust laws. So there.
>
> Where does Mirage leave us here?

It's an interesting hypo, and I think you've stated the competing arguments clearly enough. As a matter of public record, however, I must protest your characterization of my advice (recognizing that it was meant as a jest). I would never counsel a client that "it was okay" to do this. As an academic, I am advocating that it SHOULD be okay to do this, and that the Copyright Act SHOULD be interpreted in such a way as to permit you to do this. If I were counseling a client, I would be extremely cautious. This kind of activity is likely to get you sued; and unless you WANT to be a test case, steer clear of it.

With that caveat, I am comfortable with the result reached by the second argument you outline above. This isn't (or shouldn't be) a copyright problem. SP has already been paid for its software. The harm to SP arises not because consumers have modified SP's software, but because those same consumers have chosen a different vendor for the underlying service. If SP wants to recover its development costs on the software, the answer is simple: stop pricing it as a loss leader. Then they can price their postage service at just above its marginal cost, and you won't be able to undercut them.

Economically, this is no different from you purchasing multiple copies of SP's software, modifying each one of them, and then reselling them to your customers. Under Mirage, it is clear that this type of modification would be considered infringing.

Mirage and Lee could be distinguished on the ground that the defendants in those cases didn't really change the art; they only mounted it. Here, the software is being modified, not merely framed or mounted for display. Or one could draw a commercial non-commercial distinction using fair use. But I prefer a solution that focuses on the policy that private uses of a copyrighted work that don't involve reproduction ought to be non-infringing.

Tyler T. Ochoa
Associate Professor
Whittier Law School
<tochoa[_at_]law.whittier.edu> Received on Tue Feb 23 1999 - 02:38:27 GMT