Access to Orphan Works, and ACTA provisions on damages

Access to Orphan Works, and ACTA provisions on damages
KEI Policy Brief 2010: 1
20 October 2010

Introduction

Copyright is a term that in the United States describes the laws that regulate the use and distribution of "original works of authorship." The types of activities and expressions protected by copyright have expanded over the years, particularly due to technology, but also due to the lobbying by various interested parties. The current systems of registration of copyrighted works in the United includes the following catagories:

  1. literary works
  2. musical works, including any accompanying words
  3. dramatic works, including any accompanying music
  4. pantomimes and choreographic works
  5. pictorial, graphic, and sculptural works
  6. motion pictures and other audiovisual works
  7. sound recordings
  8. architectural works

The U.S. Copyright office notes that these categories "should be viewed broadly" and that computer programs are typically registered as “literary works,” and maps and architectural plans as “pictorial, graphic, and sculptural works.”

In addition to copyright, there are in many countries "related" or "neighboring" rights, sometimes called "copyright like" rights, that apply to a number of other activities, including in some countries the mere broadcasting of copyrighted works, or in some countries, the storage of non-copyrighted works into databases, as well as in some legal systems, the rights of performers and producers of recorded music.

While laws differ considerably between countries, since the 19th century there has been a sustained effort to promote both the expansion and harmonization of those rights. Today more types of expressions are covered than ever before, for longer periods of time, for more purposes, and with greater sanctions against the infringement of those rights.

While there are many international treaties and trade agreements that influence copyright policy, the most important international copyright norms are the Berne Convention, which was adopted in 1886 and amended several times through 1979, the 1961 Rome Convention, and the WTO TRIPS Agreement, which came into force in 1995. These agreements mandated minimum terms of protection, that are now enforceable by the WTO. In addition, in 1907 the Berne Convention was amended to declare that "the enjoyment and the exercise of these rights shall not be subject to any formality," such as a formal mark like (c), or registration with the state. These treaty and trade agreement obligations, as important as they are, have been in exceeded in many countries, including in the United States, the 27 members of the European Union, and in many of the Parties involved in the ACTA negotiation. For example, the TRIPS requires photographs to be protected for 25 years, while under U.S. law published photographs are protected for life of the author plus 70 years, or 95 years for a work for hire. And while unlike the Berne Convention, the Rome Convention does allow for the use of formalities to limit protection, such requirements are not commonly used in national laws.

The combination of the low standards for copyright protection, the elimination of formalities or requirements for registration, and the very long periods of protection, have contributed to a massive sea of works for which it is impossible to identify and locate the lawful owner of the copyrights. These are called "orphaned works," and include both published out-of-print and unpublished works.

There are no reliable estimates of the number of orphaned works. Certainly there are millions of books no longer in print for which no one can easily locate the owner of the copyrights. There are also countless newspaper and magazine articles, pamphlets, and other protected works, as well as untold numbers of photographs, recordings, films, personal letters, and other items strongly protected by the civil and criminal statutes, but which no one has a clear right to use or exploit commercially.

The rise of the Internet and digital publishing possibilities has created enormous interest in new approaches to liberalizing access to such work.

ACTA as a Barrier to Access to Orphan Works

There are many different approaches under consideration to liberalize access to orphaned works. Some involve the use of compulsory licenses granted by governments, to allow works to be exploited, subject to payment of fees to collection societies or funds for authors. Others involve state mandated extended licensing agreements, with voluntary opt-outs, again involving payment of fees to collection societies. The United States has considered two different approaches. Legislative solutions were proposed in the 109th and 110th Congress in the United States. The U.S. courts are now considering a proposed settlement to a class action lawsuit involving publishers and the Authors Guild over the Google Books service.

The Google Book Search Copyright Class Action Settlement, if approved, is a type of extended licensing agreement, subject to an opt-out, that will require Google to share sales revenue with publishers and authors, for the use of works for which the owner of the copyright cannot be found. As originally proposed, the Google Book settlement was also a monopolistic solution, that effectively created a cartel between certain publishers and organized authors, to collect revenues from out-of-print and un-commercialized works protected by copyright. The mechanism to authorize the Google Book settlement was a class action lawsuit, something that is rarely possible outside of the United States.

The legislative solution considered in the U.S. by the Copyright Office and the 109th and 110th Congress was based upon statutory limits on the liability for infringement of orphaned works. These limitations concerned injunctions, damages, and orders to seize or destroy infringing copies of works --- all key elements of the ACTA agreement.

The damages section of the ACTA includes obligations for hefty liabilities for infringement, which go beyond current national norms. For example, in Article 2.2.1, the ACTA text says:

"In determining the amount of damages for infringement of intellectual property rights, its judicial authorities shall have the authority to consider, inter alia, any legitimate measure of value submitted by the right holder, which may include the lost profits, the value of the infringed good or service, measured by the market price, the suggested retail price.|

The phrase "any legitimate measure of value submitted by the right holder" and the reference to "measured by the market price, the suggested retail price" is clearly designed to ramp up liability for infringement. We have not found a legislative reference to "suggested retail price" in any national statute, and the ""any legitimate measure of value" language runs counter to national statutes that set statutory standards or limits on damages.

In Article 2.2.2, ACTA provides additional obligations:

At least in cases of copyright or related rights infringement and trademark counterfeiting . . . each each Party shall provide that in civil judicial proceedings, its judicial authorities shall have the authority to order the infringer to pay the right holder the profits of the infringer that are attributable to the infringement. . . .

Article 2.2.3 of ACTA is an obligation to provide at least one of the following sanctions for infringement.

At least with respect to works, phonograms, and performances protected by copyrights or related rights, and in cases of trademark counterfeiting, each Party shall also establish or maintain a system that provides for one or more of the following:
(a) pre-established damages, or
(b) presumptions for determining the amount of damages[3] sufficient to compensate the right holder for the harm caused by the infringement, or
(c) at least for copyright, additional damages.

/fn3/ Such measures may include the presumption that the amount of damages is (i) the quantity of the goods infringing the right holder’s intellectual property right in question and actually assigned to third persons, multiplied by the amount of profit per unit of goods which would have been sold by the right holder if there had not been the act of infringement, or (ii) a reasonable royalty or (iii) a lump sum on the basis of elements such as at the least the amount of royalties or fees which would have been due if the infringer had requested authorization to use the intellectual property right in question.

In Article 2.2.5, ACTA provides an obligation to provide that "for at least copyright and related or related rights" and "where appropriate":

"the prevailing party be awarded payment by the losing party of court costs or fees and appropriate attorney's fees or any other expenses as provided for under that Party's domestic law."

Also, in Article 2.3.1, on "other remedies"

"At least with respect to pirated copyright goods and counterfeit trademark goods, each Party shall provide that in civil judicial proceedings, at the right holder’s request, its judicial authorities shall have the authority to order that such goods be destroyed, except in exceptional circumstances, without compensation of any sort."

The cumulative impact of these obligations, taken together, is to reduce national flexibility in determining liability for damages.

The obligations in ACTA are not without some flexibility. In Article 2.2.1 of ACTA, the right owners can present "any" methodologies for damages that are "legitimate," and perhaps one can argue about what is "legitimate," despite the unhelpful specific examples given. And in Article 2.3, the destruction of goods can be ignored "in exceptional circumstances," and perhaps a solution to millions of orphaned copyrighted works (including much more than entire books, but also photographs, recorded sounds, interviews and music, articles, pamphlets, etc) could be described as an "exceptional circumstance."

Even with liberal interpretations of these terms in the ACTA, the obligations are problematic in terms of solutions to liberalize access to orphan works for the simple reason that ACTA is designed to ramp up sanctions for infringement, and most solutions to the orphan works problem require the exact opposite.

To appreciate what is at stake, consider the legislative solution that was proposed in the United States by the U.S. Copyright Office in 2006 (See Appendix below), a version of which passed the U.S. Senate in the 110th Congress, as S.2913, the Shawn Bentley Orphan Works Act of 2008.

S.2913 Shawn Bentley Orphan Works Act of 2008 (Engrossed as Agreed to or Passed by Senate)
`(a) Definitions- In this section, the following definitions shall apply:
`(3) REASONABLE COMPENSATION- The term `reasonable compensation' means, with respect to a claim of infringement, the amount on which a willing buyer and willing seller in the positions of the infringer and the owner of the infringed copyright would have agreed with respect to the infringing use of the work immediately before the infringement began.
`Sec. 514. Limitation on remedies in cases involving orphan works
`(c) Limitations on Remedies- The limitations on remedies in an action for infringement of a copyright to which this section applies are the following:

`(1) MONETARY RELIEF-
`(A) GENERAL RULE- Subject to subparagraph (B), an award for monetary relief (including actual damages, statutory damages, costs, and attorney's fees) may not be made other than an order requiring the infringer to pay reasonable compensation to the owner of the exclusive right under the infringed copyright for the use of the infringed work.
`(B) FURTHER LIMITATIONS- An order requiring the infringer to pay reasonable compensation for the use of the infringed work may not be made under subparagraph (A) if the infringer is a nonprofit educational institution, museum, library, archives, or a public broadcasting entity (as defined in subsection (f) of section 118), or any of such entities' employees acting within the scope of their employment, and the infringer proves by a preponderance of the evidence that--
`(i) the infringement was performed without any purpose of direct or indirect commercial advantage;
`(ii) the infringement was primarily educational, religious, or charitable in nature; and
`(iii) after receiving a notice of claim of infringement, and having an opportunity to conduct an expeditious good faith investigation of the claim, the infringer promptly ceased the infringement.

‘(2) INJUNCTIVE RELIEF-
‘(B) EXCEPTION- In a case in which the infringer has prepared or commenced preparation of a new work of authorship that recasts, transforms, adapts, or integrates the infringed work with a significant amount of original expression, any injunctive relief ordered by the court may not restrain the infringer’s continued preparation or use of that new work, if--
‘(i) the infringer pays reasonable compensation in a reasonably timely manner after the amount of such compensation has been agreed upon with the owner of the infringed copyright or determined by the court; and
‘(ii) the court also requires that the infringer provide attribution, in a manner that is reasonable under the circumstances, to the legal owner of the infringed copyright, if requested by such owner.

The ACTA provisions on damages and other remedies are starkly inconsistent with provisions of S.2913 from the 110th Congress.

  • In S.2913, there are no costs, and attorney's fees for infringement of orphan works. In ACTA:

    Article 2.2.5
    "Each Party shall provide that its judicial authorities, where appropriate, shall have the authority to order, at the conclusion of civil judicial proceedings concerning infringement of at least copyright or related rights, or trademarks, that the prevailing party be awarded payment by the losing party of court costs or fees and appropriate attorney's fees or any other expenses as provided for under that Party's domestic law."

  • In S.2913, there is no possibility of statutory damages for orphan works. In ACTA, statutory damages can only be waived if you provide for either tough "presumptions for determining the amount of damages," or "additional damages."
  • In S.2913, there are no damages possible for certain infringements by nonprofit educational institution, museum, library, archives, or a public broadcasting entities. In ACTA, liability for infringement is mandatory.
  • In S.2913, in cases where damages are available, they are not based upon "actual damages," but rather "reasonable compensation, which is defined as
    "the amount on which a willing buyer and willing seller in the positions of the infringer and the owner of the infringed copyright would have agreed with respect to the infringing use of the work immediately before the infringement began."
  • In ACTA,

    "each Party shall provide that in civil judicial proceedings, its judicial authorities shall have the authority to order the infringer to pay the right holder the profits of the infringer that are attributable to the infringement."

  • In S.2913, there are certain limits on injunctive relief, or orders to destroy a "new work of authorship that recasts, transforms, adapts, or integrates the infringed work with a significant amount of original expression." In ACTA,

    Article 2.3.1. At least with respect to pirated copyright goods and counterfeit trademark goods, each Party shall provide that in civil judicial proceedings, at the right holder’s request, its judicial authorities shall have the authority to order that such goods be destroyed, except in exceptional circumstances, without compensation of any sort.

If a country signs ACTA and the agreement is interpreted to shut off the policy option of limiting the remedies for infringing orphan works, the only legislative options left to deal with the orphan works program will be those involving compulsory licensing of works, which are then subject to the 3-step tests in Part II of the TRIPS, and the limitations on the uses of compulsory licenses found in the Berne Convention. Such solutions will be, among other things, more expensive for users of such works, if the compulsory licenses require remuneration, even when the right owners cannot be located. Thus, the ACTA will effectively take off the table legislative solutions that would provide free access to millions of orphaned works, for which the authors have no real interest in or practical means to charging for access.

Appendix: Selections from the US Copyright Office's 2006 Report on Orphan Works.

Report on Orphan Works
A Report of the Register of Copyrights · January 2006
Marybeth Peters, Register of Copyrights

Available at: http://www.copyright.gov/orphan/orphan-report-full.pdf

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2. Specific Provisions

The proposed amendment follows the core concept that many commenters favored as a solution to the orphan works problem: if the user has performed a reasonably diligent search for the copyright owner but is unable to locate that owner, then that user should enjoy a benefit of limitations on the remedies that a copyright owner could obtain against him if the owner showed up at a later date and sued for infringement. The limitations on remedies should give the user more certainty that his efforts to make the work available to the public will not result in significant monetary damage or an injunction that would disrupt the efforts the user has made in reliance on the orphan

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works designation. At the same time, the owner should in most cases be able to recover compensation for the use of his work, prevent new uses of the work by the user, and, where possible, receive attribution for his work.

By amending the remedies provision of the Copyright Act, the recommendation makes clear that it is not an exemption or limitation of general applicability, but a limitation on the remedies that might be imposed in particular circumstances with respect to a particular user. Additionally, this approach preserves the applicability of all exemptions and limitations to copyright, in that it only applies after a finding of infringement has been made – if the use of an orphan work qualifies for an exemption like fair use under section 107 or a library exemption under section 108, then there is no infringement liability and thus remedies are no longer relevant.

The recommendation has two main components: (1) the two threshold requirements of a reasonably diligent search for the copyright owner and attribution to the author and copyright owner, if possible and appropriate under the circumstances; and (2) the closed list of remedies that would be available if the user proves that he conducted a reasonably diligent search. The details of the recommendation are set out in the next sections, followed by a discussion of some other proposals that we considered carefully, but ultimately decided not to recommend

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d. The Limitation on Remedies

If a user meets his burden of demonstrating that he performed a reasonably diligent search and provided reasonable attribution to the author and copyright owner, then the recommended amendment would limit the remedies available in that infringement action in two primary ways: first, it would limit monetary relief to only reasonable compensation for the use, with an elimination of any monetary relief where the use was noncommercial and the user ceases the infringement expeditiously upon notice. Second, the proposal would limit the ability of the copyright owner to obtain full injunctive relief in cases where the user has transformed the orphan work into a derivative work like a motion picture or book, preserving the user’s ability to continue to exploit that derivative work. In all other cases, the court would be instructed to minimize the harm to the user that an injunction might impose, to protect the user’s interests in relying on the orphan works provision in making use of the work. These recommendations are discussed in detail in this section.

i. Limitations on Monetary Relief

A vast majority of the commenters in this proceeding agreed that the prospect of a large monetary award from an infringement claim, such as an award of statutory damages and attorneys’ fees, was a substantial deterrent to users who wanted to make use of an orphan work, even where the likelihood of a claim being brought was extremely low.378 Most of the proposals for addressing the orphan works problem called for clear limitations on the statutory damages and attorneys’ fees remedies in cases involving orphan works. Our recommendation follows this suggestion by limiting the possible monetary relief in these cases to only “reasonable compensation.”379

378 See supra note 323.

The likelihood of statutory damages or attorneys’ fees being awarded in an orphan works case is probably low, given that for those remedies to be available, the work must have been registered prior to infringement, see 17 U.S.C. § 412, and if a work is registered it is unlikely that the copyright owner is unlocatable through a diligent search. Nevertheless, there is the possibility that an old registration might exist and is not found on reasonable search (e.g. for a photograph whose title in the registration is not descriptive of the work) or contains outdated information, and thus the prospect of statutory damages might be more likely in some circumstances.

379 The Copyright Act elsewhere provides a limitation on remedies to reasonable compensation in circumstances somewhat analogous to the orphan works situation. Section 104A(d)(3) addresses the situation where someone has created a derivative work based on a foreign work that was in the public domain but has been restored in 1996. It protects the interests of the “reliance party” who created the derivative work creator by allowing the party “to continue to exploit that derivative work for the duration of the restored copyright if the reliance party pays to the owner of the restored copyright reasonable

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The term “reasonable compensation” is intended to represent the amount the user would have paid to the owner had they engaged in negotiations before the infringing use commenced. In most cases it would equal the reasonable license fee as that concept is discussed in Judge Leval’s opinion in Davis v. The Gap, Inc., 380 which explains why a reasonable license fee is appropriate in circumstances very similar to the orphan works situation where the user has sought to find the owner through diligent search:

The Gap was not seeking, like [other] defendant[s], to surreptitiously steal material owned by a competitor . … [T]he Gap and Davis could have happily discussed the payment of a fee, and … Davis’s consent, if sought, could have been had for very little money, since significant advantages might flow to him from having his [work] displayed in the Gap’s ad. Alternatively, if Davis’s demands had been excessive, the Gap would in all likelihood have simply eliminated Davis’s [work] from the photograph. Where [a prior court case was] motivated by its perception of the unrealistic nature of a suggestion that the infringer might have bargained with the owner, …, such a scenario was in no way unlikely in the present case.381

As that decision makes clear, reasonable compensation would equal what a reasonable willing buyer and reasonable willing seller in the positions of the owner and user would have agreed to at the time the use commenced, based predominantly by reference to evidence of comparable marketplace transactions. As the Davis case suggests, the burden is on the copyright owner to demonstrate that his work had fair market value, and such assertion cannot be based on “undue speculation.”382 It is not enough for the copyright owner to simply assert the amount for which he would have licensed the work ex post; he must have evidence that he or similarly situated copyright owners have actually licensed similar uses for such amount.383

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While many commenters supported a general remedy like “reasonable compensation,” some expressed concern about the impact that any monetary remedy at all might have on their ability to go forward and use orphan works. For example, museum representatives explained that they would like to use hundreds or even thousands of orphan works in their collections, so even a minimal monetary award might be prohibitive. Libraries and archives made similar observations, given their desire to make large collections of orphan works accessible. To address these concerns, the museums have proposed that in the orphan works situation the user receive a time-limited exemption, one that last only 5 years from the reasonable search, with no monetary payment required. Others have proposed a low cap on monetary damages, such as $100 or $500 per work. They believe this would give them more certainty about their potential exposure and thus more confidence using the orphan work.

On the other side of this issue were individual copyright owners. While corporate copyright owners were generally in favor of a reasonable compensation approach, individual authors like photographers, illustrators and graphic artists noted that under current conditions, obtaining a lawyer to even file an infringement case is prohibitively expensive, so much so that only where statutory damages are available is it possible to file a case. If compensation were limited to only a reasonable royalty, they fear that it will likewise be practically impossible even to recover that compensation given the cost of litigation.

In our view, a general standard of reasonable compensation is the right solution to this problem, for several reasons. First, with respect to the concern about a chilling effect of any monetary remedy, it must be noted that in nearly all cases where a diligent search has been performed, the likelihood of a copyright owner resurfacing should be very low, so that no claim for compensation is ever made. Second, it should be clear that “reasonable compensation” may, in appropriate circumstances, be found to be zero, or a royalty-free license, if the comparable transactions in the marketplace support such a finding. Indeed, given that the burden is on the copyright owner to produce evidence of

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market value for the work, it is unlikely that for orphan works, where by definition the owner was not locatable by reasonable search, the plaintiff could produce such evidence.

Our discussions with museums, universities and libraries indicated that in many orphan works situation a low or zero royalty is likely to be the reasonable compensation. For example, a common situation is the following: A university would like to republish an article from an encyclopedia, and it has received permission (royalty-free) from the publisher, but the photographs contained in the article are owned separately by individual photographers. Nineteen of the twenty photographs have identifiable owners, all of whom grant a royalty-free license when contacted by the university. The twentieth photograph is similar to the other nineteen in type, quality and subject matter, but is an orphan work, and the university relies on the proposed legislation in deciding to publish it. If the owner surfaces after publication, it is our view that the university has a good case that “reasonable compensation” in that situation is zero, given the other royalty-free licenses involved in publication of similar works in a similar context. Furthermore, to the extent some of the other photographs were licensed for payment, the university has some certainty about the range of license fees it might have to pay for use of the orphan work. In addition, the nature of the user will come into play in such a determination – just as a museum might stress in negotiations with a copyright owner its non-profit status and its public service mission as justification for a low or no royalty payment, those factors could be considered by the court in assessing reasonable compensation.

In addition, to make absolutely sure that the concerns of nonprofit institutions like libraries, museums and universities about monetary relief are assuaged, we recommend an additional limitation on monetary relief where the user is making a non-commercial use of the work and expeditiously ceases the infringement after receiving notice of the infringement claim. In that case, there should be no monetary relief at all. Libraries, archives and museums indicated that posting material on the Internet was a primary use they would like to make of orphan works, and that they would take down any material if a copyright owner resurfaced. This additional provision provides certainty about their exposure in that circumstance. If the organization wishes to continue making use of the work, it would have to pay reasonable compensation for its past use, and, as described below, for future use of the work.

The language used to define commercial use (“direct or indirect commercial advantage”) is used throughout the Copyright Act,384 and we have added one example of a commercial use (“sale of copies or phonorecords of the work”) to make clear where reasonable compensation would be required, even from a nonprofit organization.385 The museum example is instructive. Most of the activities of a not-for-profit museum related to orphan works, such as posting the work on a website that is not supported by advertising or that generates other revenue, would be “without purpose of direct or indirect commercial advantage.” However, where the museum essentially acts as a publisher and the infringement consists of selling books, DVDs or other materials in its gift shop, that conduct would not fall within the exception in the recommendation, and such activity would require the museum to pay reasonable compensation to the owner if he surfaces. The amount of that compensation might still be zero or very low, based on the evidence the owner must produce about the market value of the work and the evidence of license fees paid (or not paid) by the museum for similar uses of similar works.

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C. Recommended Statutory Language

SECTION 514: LIMITATIONS ON REMEDIES: ORPHAN WORKS
(a) Notwithstanding sections 502 through 505, where the infringer:
(1) prior to the commencement of the infringement, performed a good faith, reasonably diligent search to locate the owner of the infringed copyright and the infringer did not locate that owner, and
(2) throughout the course of the infringement, provided attribution to the author and copyright owner of the work, if possible and as appropriate under the circumstances, the remedies for the infringement shall be limited as set forth in subsection (b).
(b) LIMITATIONS ON REMEDIES
(1) MONETARY RELIEF
(A) no award for monetary damages (including actual damages, statutory damages, costs or attorney’s fees) shall be made other than an order requiring the infringer to pay reasonable compensation for the use of the infringed work; provided, however, that where the infringement is performed without any purpose of direct or indirect commercial advantage, such as through the sale of copies or phonorecords of the infringed work, and the infringer ceases the infringement expeditiously after receiving notice of the claim for infringement, no award of monetary relief shall be made.

(2) INJUNCTIVE RELIEF
(A) in the case where the infringer has prepared or commenced preparation of a derivative work that recasts, transforms or adapts the infringed work with a significant amount of the infringer’s expression, any injunctive or equitable relief granted by the court shall not restrain the infringer’s continued preparation and use of the derivative work, provided that the infringer makes payment of reasonable compensation to the copyright owner for such preparation and ongoing use and provides attribution to the
author and copyright owner in a manner determined by the court as reasonable under the circumstances; and
(B) in all other cases, the court may impose injunctive relief to prevent or restrain the infringement in its entirety, but the relief shall to the extent practicable account for any harm that the relief would cause the infringer due to the infringer’s reliance on this section in making the infringing use.
(c) Nothing in this section shall affect rights, limitations or defenses to copyright infringement, including fair use, under this title.
(d) This section shall not apply to any infringement occurring after the date that is ten years from date of enactment of this Act.