Re: Coursepacks-outsourcing online distribution

On 04/22/99, Robert Cumbow <rcumbow[_at_]grahamdunn.com> wrote:
>
> The Sixth Circuit also (if I recall correctly) relied on the
> assumption that MDS's coursepacks harmed PUP by depriving them
> of a license fee ... an analysis that the dissent rightly pointed
> out amounts to a circular argument, since if the copying was fair
> use to begin with, there would have been no entitlement to a
> license fee.

It IS a circular argument; but as both the Sixth Circuit (in PUP v. MDS) and the Second Circuit (in AGU v. Texaco) point out, the argument proves too much. The harm to the market factor always requires one to assume that some kind of market exists. How to draw the line between derivative works that the author is entitled to license, and those that it is not?

In Campbell, the Supreme Court attempted to address this problem in stating that "The market for potential derivative uses includes only those that creators of original works would in general develop or license others to develop." The Second Circuit interpreted this to mean that "courts have recognized limits on the concept of 'potential licensing revenues' by considering only traditional, reasonable, or likely to be developed markets when examining and assessing a secondary use's 'effect on the potential market for or value of the copyrighted work.'"

This approach allowed the publishers in both the MDS and Texaco cases to successfully argue that the existence of the CCC made resort to fair use unnecessary, since there is now a market in photocopy licenses that did not previously exist. The problem with this reasoning, of course, is that it allows copyright bullies to write the rules. If they are successful in persuading (or coercing) some people to pay license fees, they can claim that a market now exists. That is the natural result of focusing on "likely to be developed" markets as well as traditional and reasonable ones. But the opposite decision would freeze the scope of fair use along traditional lines, which seems contrary to Congress' intent to allow fair use to continue to evolve.

The problem is impossible to resolve without resort to external norms and values, such as the First Amendment. But the Harper & Row decision has led many courts to ignore the First Amendment interest altogether in copyright fair use cases.

For a more thorough analysis of the problem, see Lydia Pallas Loren, Redefining the Market Failure Approach to Fair Use in an Era of Copyright Permission Systems, 5 J. Intell. Prop. L. 1 (1997). She argues that courts should expressly consider diffuse social benefits from the use that are not internalized in a market-based transaction (i.e., positive externalities).

Tyler T. Ochoa
Associate Professor
Whittier Law School
<tochoa[_at_]law.whittier.edu> Received on Fri Apr 23 1999 - 18:32:28 GMT