Copyright Blog Update: Court of Appeals Rejects “Transformative Use” Test & Malibu Media Marches Along

Stephen Carlisle September 17, 2014

This blog has been running for three months now, and I want to thank everyone for their kind comments, and those who paid me the ultimate compliment by linking to my blog posts. Now it’s time to take a look back at two topics which continue to generate debate.

“Transformative Use” Theory Rejected

Back on August 6, 2014, I devoted my blog post to the absolute mess that the “transformative use” test has made of fair use. ¹ In particular, I argued that the finding of transformative use was largely pushing the right of the author to control derivative works right out of the copyright statute. While I would be immensely flattered if my blog post influenced the decision yesterday by the Seventh Circuit Court of Appeals, ² I must confess that eventuality is extremely unlikely. Nevertheless, the unanimous opinion of the Seventh Circuit took exactly the same position I took in criticizing the Second Circuit’s reasoning in Cariou v. Prince. ³ The Seventh Circuit stated “[w]e’re skeptical of Cariou’s approach, because asking exclusively whether something is “transformative” not only replaces the list in § 107 but also could override 17 U.S.C. § 106(2), which protects derivative works. To say that a new use transforms the work is precisely to say that it is derivative and thus, one might suppose, protected under § 106(2). Cariou and its predecessors in the Second Circuit do no tex-plain [sic] how every “transformative use” can be “fair use” without extinguishing the author’s rights under § 106(2). We think it best to stick with the statutory list.” The Court later commented “The fair-use privilege under § 107 is not designed to protect lazy appropriators. Its goal instead is to facilitate a class of uses that would not be possible if users always had to negotiate with copyright proprietors. (Many copyright owners would block all parodies, for example, and the administrative costs of finding and obtaining consent from copyright holders would frustrate many academic uses.)” ⁴

The Court nevertheless goes on to find fair use, in a case of where a copyrighted photograph of the Mayor of Madison, Wisconsin was reproduced on a T-shirt with a political comment directed at the Mayor, largely finding no harm to the market for the copyrighted work: “[A]s we have mentioned… [the photographer] does not argue that defendants’ acts have reduced the value of this photograph, which he licensed to… [the Mayor] at no royalty and which is posted on a public website for viewing and downloading without cost.” ⁵

Alas, over in the District Court for the Southern District of New York, controlled by Second Circuit precedent, the transformative use test still holds sway. In the closely watched case of Fox News Network v. TVeyes, Inc., ⁶ the Judge was so enamored of the “transformative use” of TVeyes’ copying and indexing service, that he held that the transformative use completely overruled the importance of factor two (nature of the work used) and factor three (the amount and substantiality of the taking). ⁷ This flies in the face of the Supreme Court ruling in Campbell v. Acuff-Rose Music, that one factor cannot act as a trump to the remaining three factors. ⁸ Indeed, as Terry Hart, over at the Copyhype website, notes, the Judge even waxed poetic over the “public benefit” to a service that is not available to the general public. ⁹ Nevertheless, I do agree with the overall outcome, as I do not see that TVeyes’ indexing service is a realistic replacement for the market for Fox News’ services.

At least now, with a split between two Courts of Appeals, perhaps the Supreme Court will now take up the “transformative use” test, and give us some clear cut guidance on exactly what they meant when they first mentioned transformative use in Campbell.

Malibu Media Marches On

My July 2, 2014 blog post examined the facts underlying BitTorrent file sharing cases, with a particular focus on the tactics employed by so-called “copyright trolls.” ¹⁰ In order to be a true copyright troll, the troll must make no effort to actually litigate the case. A copyright troll is only interested in using the subpoena power of the Court to extort settlements. This was the tactic employed by the Prenda Law firm, which since my blog post has suffered numerous Court setbacks and seems to be collapsing under the weight of Court imposed monetary sanctions. ¹¹ However, Malibu Media marches on, and has collected at least two more judgments outside of the one won in the Eastern District of Pennsylvania in 2013. ¹² The first was a default judgment obtained in the Northern District of Indiana, where it was awarded $36,000.00 for the infringement of 24 copyrighted videos, at a rate of $1,500.00 per work infringed. ¹³ Also awarded was $1,607.00 in attorneys fees and costs.

They also received summary judgment in a contested hearing in the Western District of Michigan. ¹⁴ This case was notable because the defendant claimed he had no idea how BitTorrent worked, and therefore had no idea that what he was doing was infringing. He managed to say this with a straight face even though he wound up with 57 of the Plaintiff’s copyrighted videos on his computer. While the Judge dismissed his intention as irrelevant to the question of liability, there is a bit of method to this madness. The Copyright Act’s section regarding statutory damages provides that “[i]n a case where the infringer sustains the burden of proving, and the court finds, that such infringer was not aware and had no reason to believe that his or her acts constituted an infringement of copyright, the court in its discretion may reduce the award of statutory damages to a sum of not less than $200.” ¹⁵ Remember though, that this award is per work infringed and that $200 multiplied by 57 works is still $11,400.00, plus attorneys fees and costs. Yet if the benchmark award in the same Circuit is $1,500.00 per work infringed, that would mean the statutory damages would be $85,500.00, plus attorneys fees and costs, a savings of nearly $75,000 to his client if he can pull off this rather cheeky defense.

Another strange defense that has cropped up in the Malibu Media cases is that some Defendants are claiming that the actors in Malibu Media’s videos are underage and thus the videos constitute illegal child pornography. Why anybody would claim this is puzzling, because if the allegation is true, this would mean that the defendants knowingly downloaded and retained child pornography, making them as criminally liable as Malibu Media.

As of this blog post, Malibu Media files more copyright infringement suits than anyone else. ¹⁶ As quoted by the New Yorker magazine, Ben Depoorter, a professor at the University of California, Hastings College of Law, noted “If you’re filing three lawsuits per day, that very much looks like an abusive model. Some judges may say this looks like a business model. On the other hand, infringement is infringement.” ¹⁷