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Copyright Law for Business People: A Handy Guide

Business Strategies
November 2003

Hornick, John F.

Article

Authored by John F. Hornick

I. Becoming Copyright Conscious

Copyrights are a valuable, though often underutilized, tool for protecting business assets. Practically everyone knows that copyrights protect books, films, and music. But many business people may not know that copyrights also protect computer programs, databases, web sites, proposals, newsletters, training films, manuals, technical publications, directories, architectural works and architectural and technical drawings, and promotional and advertising materials, both at home and abroad. Even fewer know that copyright protection is absolutely free; that it arises automatically when a work is created, and that the timely registration of copyright claims, for a nominal fee, can make copyright infringement suits economically feasible. Fewer still realize that copyrights (and also trademarks and patents) may be used as collateral for secured loans.

Since the enactment of the U.S. Copyright Act of 1976 and U.S. adherence to the Berne Convention (an international treaty for the protection of copyrights), copyright protection has become a more powerful business tool. As the scope and power of the copyright laws have increased, so too has the ability of copyright owners to exploit their copyrighted works in new media. With this increased protection for copyright owners, however, has come the greater likelihood that certain business uses of materials may be viewed as copyright infringement. Moreover, changes in the law have resulted in different sets of copyright rules, the applicability of which depends upon the dates of creation and publication of the copyrighted work. For instance, copyright notice requirements differ for works published before January 1, 1978; on or between January 1, 1978 and February 28, 1989; and on or after March 1, 1989. In addition, new rules pertaining to digital works and Internet Service Providers require special treatment of copyrighted works.

Unfortunately, because the business community is generally unfamiliar with the copyright laws, many arrangements are entered into, without the advice of counsel, that do not take full advantage of the provisions of the Copyright Act, and sometimes are even inconsistent with copyright law. Often the deficiencies of such arrangements must be corrected by rehabilitative action by copyright attorneys, at substantial costs to the client.

For the same reasons that the copyright law can be a powerful business weapon, it can also be a trap for the unwary. Thus, it is important now, more than ever, to become copyright conscious. In today's highly competitive world market, it is not enough for business people merely to be aware of their copyrighted assets, but they must also be cognizant of how best to exploit these valuable assets to their fullest and how to minimize the risk of running afoul of the copyrights of others.

II. What Law Applies?

The past 100 years have seen several systems of copyright protection for U.S. authors. The U.S. Copyright Act of 1909 and various state and common laws provided a dual system of protection from 1909 through the end of 1977. The Copyright Act of 1976, which became effective on January 1, 1978, virtually eliminated state and common law protection, and established a single system of federal protection, which is still in effect today. The 1976 Act then underwent some important amendments that became effective on March 1, 1989, when the U.S. acceded to the Berne Convention, thereby beginning the third copyright era of the last century. The Act underwent another revision (effective January 1, 1996) when the United States joined the World Trade Organization (WTO) and acceded to the Agreement on Trade-Related Aspects of Intellectual Property (commonly referred to as the TRIPs Agreement). The Digital Millennium Copyright Act ("DMCA")(partially effective October 28, 1998) and the Sonny Bono Copyright Term Extension Act (effective October 27, 1998) were enacted in 1998 to bring the U.S. into compliance with international treaties and update U.S. copyright law to deal with digital technology. Most provisions of the DMCA became effective October 28, 1998 (see section XVI for a further discussion of the Digital Millennium Copyright Act and other issues involving digital technology).

As a general rule, the copyright law in effect at the time that a particular act or transaction takes place governs that act or transaction. This may sound like a simple concept, but it's not. For instance, a copyrighted book written in 1975, published in 1980, and copied by an infringer in 1990 is governed by the common law for purposes of determining ownership at the time of creation, by the 1976 Act for purposes of determining copyright notice requirements, and by the Berne Convention Implementation Act of 1988 ("Berne Act") (effective March 1, 1989) for purposes of determining certain damages issues related to the unauthorized copying.

Owners of pre-1978 copyrights should be mindful that the 1909 Act contains many pitfalls that were substantially eliminated under the 1976 Act (and the Berne Act), and that the two acts differ substantially. However, copyright law under the 1909 Act will continue to be relevant to copyright owners and attorneys for many years. Accordingly, maintenance of pre-1978 copyrights and actions affecting the ownership or validity of such copyrights should be undertaken only in conjunction with the advice of copyright counsel.

III. What Is Copyrightable?

A. Copyrightable Subject Matter
Just about anything that can be fixed in a tangible form and constitutes the author's or creator's personal and nontrivial expression is automatically protected under the Copyright Act of 1976. This automatic protection begins the moment the copyrighted work is first fixed. According to § 102(a) of the 1976 Act, "[c]opyright protection subsists . . . in original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device." Works of authorship that fall within the scope of protection of the 1976 Act include:

(1) literary works, including computer programs in source code or object code, databases, operating systems programs embedded in ROMS, PROMS, etc., and microcode;

(2) musical works and any accompanying words;

(3) dramatic works and any accompanying music;

(4) pantomimes and choreographic works;

(5) pictorial, graphic, and sculptural works;

(6) motion pictures and other audiovisual works;

(7) sound recordings; and

(8) architectural works.

17 U.S.C. § 102(a).

The list of copyrightable works in § 102(a) is not exhaustive. The types of works of authorship qualifying for copyright protection under § 102(a) was intentionally left open-ended by Congress so that new forms of expression not specifically identified in § 102(a) may receive protection under the 1976 Act to the same extent as those works listed in § 102(a). According to the legislative history accompanying § 102:

Authors are continually finding new ways of expressing themselves, but it is impossible to foresee the forms that these new expressive methods will take. The bill does not intend either to freeze the scope of copyrightable subject matter at the present stage of communications technology or to allow unlimited expansion into areas completely outside the present congressional intent. Section 102 implies neither that subject matter is unlimited nor that new forms of expression within that general area of subject matter would necessarily be unprotected.

H.R. Rep. No. 94-1476, 94th Cong., 2d Sess. 51 (Sept. 3, 1976).

In addition to the list of copyrightable works under § 102 of the 1976 Act, § 103 of the 1976 Act provides that compilations and derivative works that constitute original works of authorship are also copyrightable subject matter. A compilation "is a work formed by the collection and assembling of preexisting materials or of data that are selected, coordinated, or arranged in such a way that the resulting work as a whole constitutes an original work of authorship." 17 U.S.C. § 101. A derivative work is "a work based upon one or more preexisting works" that has been transformed or recast in some way, such as into a different medium or language, or into an abridgement or revised edition. Id. A work "consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship, is a 'derivative work."' Id. A derivative work eligible for copyright protection may consist of anything ranging from a full revision of the original work to a subsequent edition containing relatively minor changes, assuming that such changes meet the requirement of minimal requisite originality, discussed in the next section.

Copyright protection in a compilation or derivative work extends only to the new material contributed by the author of the work. Copyright protection for a compilation or derivative work does not extend to preexisting material included in the compilation or derivative work and does not imply any exclusive right in the preexisting material or affect in any way the preexisting copyright. 17 U.S.C. § 103(b). In addition, the scope of copyright protection in a compilation or derivative work under § 103(a) does not extend to any portion of a work that includes copyrighted preexisting material used unlawfully. The term "unlawful" denotes any use that is either not authorized by the copyright owner or not permitted by the copyright law (such as the § 107 fair use exception (discussed in section V(A))). These principles may seem innocuous, but they can have important implications for copyright infringement, which are discussed in section XI.

Certain works and subject matter are expressly excluded from copyright protection under the 1976 Act. Generally, copyright protection is not available for slogans, short phrases, titles, lists of ingredients, standard forms, etc., because they lack a requisite amount of "objective originality." This is discussed in more detail in section III(B). It is worth noting, however, that slogans, short phrases, titles, and logos may be eligible for trademark or service mark protection if they indicate a source of origin of goods or services.

Copyright protection also does not extend to any "idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied" in a work. 17 U.S.C. § 102(b). Rather, copyright protection is limited to an author's particular expression of ideas, concepts, procedures, etc. Furthermore, where an idea and the expression of that idea merge, or where there is a limited number of ways to express a particular idea, the expression will be granted little or no protection by the courts. For example, a jewelry pin in the form of a bee was held not to copyrightable because the features of a bee were capable of limited expression and therefore were not protectable under the copyright law's merger doctrine. Herbert Rosenthal Jewelry Corp. v. Kalpakian, 44 F.2d 738 (9th Cir. 1971).

B. Statutory Requirements for Copyright Protection
A work must meet two basic requirements to be protected as a copyrighted work—originality and fixation. The originality requirement is comprised of two sub-requirements. Specifically, to be original a work must be independently created and be sufficiently creative to warrant copyright protection. Each of these requirements is described in more detail below.

1. Originality
The originality requirement is derived from the statutory requirement that copyright protection extends only to "original works of authorship." 17 U.S.C. § 102(a). To be original, the work of authorship must originate from the author, in the sense that it must have actually been independently created by the author and not copied from other works. Atari Games Corp. v.  Oman, 888 F.2d 878, 882 (D.C. Cir. 1989); Alfred Bell & Co. v. Catalda Fine Arts, Inc., 191 F.2d 99, 102 (2d Cir. 1951). In addition to being independently created, the work must contain a sufficient amount of creativity so as to be more than a trivial variation over preexisting works. The necessary level of creativity has been described as "very slight," "minimal," "modest." Atari, 888 F.2d at 883; Alfred Bell, 191 F.2d at 102-03. (Although the Alfred Bell case was decided under the Copyright Act of 1909, it is one of the leading cases on this issue. In addition, many principles of copyright law are identical under both the 1909 and 1976 Acts, such as the standard of originality.)

The first of the two elements of the originality requirement, referred to herein as the "subjective originality" element, is easy to understand. If the author created the work through his independent effort and did not copy it from some other source, then it is subjectively original to the author. Proof that the alleged author actually created the work may be accomplished through good record keeping or saving early drafts, or even by having the author mail himself a copy of the final draft of the work and keeping the sealed, postmarked envelope. However, the issue of whether the alleged author is the person who actually fixed the work in a tangible form is rarely litigated.

The second element of the originality requirement, "objective originality," is much more difficult to describe and quantify. Another way to look at this is that "subjective" originality constitutes the "original" portion of "original works of authorship" that are protected by the 1976 Act, and "objective" originality constitutes the "works of authorship" portion of "original works of authorship." See Atari, 888 F.2d at 882. Objective originality is not the same as "novelty" or "nonobviousness" in the patentability sense. Rather, to satisfy the objective originality element, a work need not be strikingly unique or novel. The work need only be more than a trivial variation from some preexisting work.  Originality of even the slightest degree, even if it amounts to no more than a rearrangement of age-old ideas, is sufficient objective originality to merit protection. Carolina Enters. v. Coleco Indus., 211 U.S.P.Q. 479, 488 (D.N.J. 1981). With respect to the copyrightability of computer programs, however, some courts seem to apply a somewhat higher standard.  See, e.g., Whelan Assocs. v. Jaslow Dental Lab., Inc., 797 F.2d 1222 (3d Cir. 1986), cert. denied, 479 U.S. 1031 (1987), and Computer Assocs. v. Altai, Inc., 982F.2d 693 (2d Cir. 1992) (discussed in detail below).

Although copyrights arise automatically at the time of creation in a fixed form (fixation is discussed in the next section), and although registration is unnecessary to obtain protection, the Copyright Office may determine what it believes is copyrightable when copyright claims are registered. Despite the requirement of minimal objective originality, it is difficult to predict the amount of objective originality that will satisfy the Copyright Office when it is asked to register a claim.  Although the Copyright Office conducts no type of "prior art" search when examining copyright registration applications, examiners may reject applications for lack of sufficient originality. However, in letters rejecting copyright registration applications, examiners are hard-pressed to quantify the amount of originality that is lacking. Instead, conclusory statements such as "this work does not contain the requisite amount of original authorship" are common. It is important to remember, however, that a work may be copyrightable and may be covered by a valid copyright even if the Copyright Office says that it is not, or if it refuses to register a claim for the work.

Over the years, the Copyright Office has issued regulations precluding copyright protection for and registration of some types of works that have been determined by the Copyright Office or by the courts not to contain a sufficient amount of objectively original authorship. Title 37 of the Code of Federal Regulations (which contains the Copyright Office regulations) states in § 202.1 as follows:

The following are examples of works not subject to copyright and applications for registration of such works cannot be entertained:

a) Words and short phrases such as names, titles, and slogans; familiar symbols or designs; mere variations of typographic ornamentation, lettering or coloring; mere listing of ingredients or contents;

b) Ideas, plans, methods, systems, or devices, as distinguished from the particular manner in which they are expressed or described in a writing; 

c) Blank forms, such as time cards, graph paper, account books, diaries, bank checks, scorecards, address books, report forms, order forms and the like, which are designed for recording information and do not themselves convey information;

d) Works consisting entirely of information that is common property containing no original authorship, such as, for example: Standard calendars, height and weight charts, tape measures and rulers, schedules of sporting events, and lists or tables taken from public documents or other common sources.

e) Typeface as typeface.

37 C.F.R. § 202.1 (2003).

Finally, it should be noted that copyright protection does not preclude independent creation of a work similar or identical to the copyrighted work. Even if two authors each create identical works—for example, two identical sculptures—each sculpture will be subject to copyright protection under the 1976 Act as long as (1) each sculpture is subjectively original to the author (i.e., neither work was copied from the other or from another source), and (2) each sculpture contains a    sufficient amount of objective originality (i.e., each must be a "work of authorship"). Moreover, neither work will infringe the other author's copyright.

2. Fixation

The § 102(a) requirement of fixation in a tangible medium of expression is defined by § 101 of the 1976 Act as follows:

A work is "fixed" in a tangible medium of expression when its embodiment in a copy or phonorecord, by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration. A work consisting of sounds, images, or both, that are being transmitted, is "fixed" for purposes of this title if a fixation of the work is being made simultaneously with its transmission.

According to the legislative history accompanying this definition, [I]t makes no difference what the form, manner, or medium of fixation may be—whether it is in words, numbers, notes, sounds, pictures, or any other graphic or symbolic indicia, whether embodied in a physical object in written, printed, photographic, sculptural, punched, magnetic, or any other stable form, and whether it is capable of perception directly or by means of any machine or device "now known or later developed."

H.R. Rep. No. 94-1476 at 52.

The concept of fixation is important under the 1976 Act because it not only determines whether the provisions of the 1976 Act apply to a particular work, but it also represents the dividing line between common law and federal statutory copyright protection. An unfixed work of authorship, such as an improvisation or an unrecorded choreographic work, performance, or broadcast, would be subject to copyright protection, if at all, under state statute or common law, but would not be subject to protection under federal copyright law. Id. Generally, once an original work of authorship within the scope of § 102 or § 103 is fixed, however, it is protected exclusively by the 1976 Act (as amended) and state statutory and common law copyright protection equivalent to copyright rights granted to the author under the 1976 Act are preempted. 17 U.S.C. § 301.

C. Current Copyrightability Issues
As stated previously, works of authorship are copyrighted when they are fixed in a tangible form. Two types of works, however, require special attention. They are computer software and databases.

1. Computer Software
Controversy over the availability of copyright protection for all forms of computer programs was laid to rest by enactment of the Computer Software Act of 1980, which expressly provided for the protection of computer programs in the 1976 Act, and the subsequently decided case of Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d 1240 (3d Cir. 1983), cert. dismissed, 464 U.S. 1033 (1984), which was the culmination of a line of decisions by various courts that extended copyright protection to an ever-increasing range of computer programs.

The Computer Software Act of 1980 amended § 101 of the 1976 Act by adding a definition of computer programs to the section. Specifically, § 101 of the 1976 Act defines computer programs as follows:

A "computer program" is a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result.

Before discussing the issues related to the copyrightability of computer programs, it might be helpful to review the different aspects of computer programs that bear upon copyrightability. An operating system program is a computer program that manages the internal functions of a computer and facilitates the use of application programs. An application program usually performs a function for the computer user, e.g., word processing. Programs may be written in high-level languages resembling English, known as source code, or lower-level languages consisting of alphanumeric labels or abbreviations. Low-level language versions of a given program are commonly known as object code. Object code consists of combinations of ones and zeros and is readable only by the computer or by programmers with considerable expertise and experience.

Since Apple v. Franklin, it is generally agreed that all forms of computer programs, whether in the form of object code or source code, whether application programs or operating system programs, and whether stored on disks or tapes or embedded in memory devices, are automatically subject to copyright protection when the programs are fixed in a tangible form.  Microcode (instructions that control microprocessors) is also subject to copyright protection. NEC Corp. v. Intel Corp., 645 F. Supp. 590 (N.D. Cal. 1986).

Although the issue of whether copyright protection extends to computer programs has been put to rest, the issue of how far that protection extends remains an important issue. In 1986, the U.S. Court of Appeals for the Third Circuit stirred the controversy when it held that the structure, sequence, and organization—or, in more colloquial terms, the "look and feel"—of a computer program are copyrightable separately from the computer program code. Whelan Assocs. v. Jaslow Dental Lab.,  Inc., 797 F.2d 1222 (3d Cir. 1986), cert. denied, 479 U.S. 1031 (1987). According to the Whelan court, the structure, sequence, and organization of computer programs may be copyrightable if these elements are not functionally dictated by the requirements of the computer or computer programming, or by the requirements of what the program is intended to accomplish. See Data East USA, Inc. v. Epyx, Inc., 862 F.2d 204 (9th Cir. 1988). In other words, as long as the structure, sequence, and organization of a program may be accomplished in more than one way, such elements of the program may be copyrightable.

Subsequently, other courts have limited, superseded, or rejected the Whelan holding. In 1992, the Second Circuit Court of Appeals adopted a three-part test for copyrightability and infringement of computer programs. Computer Assoc. v. Altai, Inc., 982 F.2d 693 (2d Cir. 1992). The Second Circuit's three-part test first analyzes the program in increasing levels of abstraction from the most concrete level of expression (the code itself) to the most general idea of the program. The court then filters out all uncopyrightable elements of the program from each level of abstraction. Finally, the court compares the allegedly infringing program to the remaining copyrightable elements of the plaintiff's program. Here the court applies the substantial similarity standard of comparison (see section XI), unless the computer program is composed primarily of material licensed from third parties or publicly available. If the computer program is composed primarily of material licensed from third parties or publicly available, the copyright owner, in order to prevail, must show virtual identicality, rather than merely substantial similarity, between those aspects of its work that are protectable and those aspects of a defendant's work alleged to be infringing. Apple Computer, Inc. v. Microsoft Corp., 35 F.3d 1435, 1441 43 (9th Cir. 1994), cert. denied, 513 U.S. 1184 (1995) (stating that "when the range of protectable and unauthorized expression is narrow, the appropriate standard for illicit copying is virtual identity."). If substantial similarity or virtual identicality is found, the court then may find infringement unless the copied elements are found to be insignificant to the plaintiff's program. This three-part test has been adopted, with variations, by several other U.S. Courts of Appeals.

Although computer programs are copyrightable subject matter, certain aspects of a computer program may nonetheless not be protected by copyright.  For example, in Lotus Dev. Corp. v. Borland Int'l Inc., 49 F.3d 807 (1st Cir. 1995), aff'd mem. by an equally divided court, 116 S. Ct. 804 (1996), a computer software user interface (i.e., menu command structure) was held not to be copyrightable subject matter under section 102(b) of the Copyright Act. (Section 102(b) is discussed in section III (A).)

Lotus claimed that Borland's Quattro Pro spreadsheet program infringed the copyright in its 1-2-3 spreadsheet program by copying Lotus's command words and structure. The First Circuit held that Lotus's user interface was a "method of operation," and therefore not copyrightable subject matter under section 102(b) of the Copyright Act.

The Supreme Court split a four-to-four vote that left the First Circuit decision intact. The Supreme Court's deadlock in conjunction with the Court's lack of a written decision in the case, however, provides little guidance for future cases involving user interfaces.

In the years since the Lotus v. Borland decision, courts have found that the user interface is a functional aspect of the program, and thus not copyrightable subject matter. In Mitel v. Iqtel, 124 F.3d 1366 (10th Cir. 1997), the court found that technical interface specifications are not protectable. The court excluded from protection those elements of the work that necessarily result from external factors inherent in the subject matter of the work. These factors include: hardware standards and mechanical specifications, software standards and compatibility requirements, computer manufacturer design standards, industry programming practices, and the practices and demands of the industry being serviced.

2. Databases
Compilations, including compilations of data known as "databases," have been protected by copyright since the very first copyright act. Although they were protected, courts used two very different rationales to afford such protection. Some courts protected compilations based on whether the compiler arranged and selected the compilation in a creative manner. Other courts protected databases based on whether the compiler invested time, effort, and resources in the process of creating the database. This latter rationale was known as the "sweat of the brow" doctrine.

The reason for the division between the courts may have been that it was not until the 1976 Act that a definition of compilations was included in the Copyright Act.  The 1976 Act, § 101, defines a "compilation" as any:

work formed by the collection and assembling of preexisting materials or of data that are selected, coordinated, or arranged in such a way that the resulting work as a whole constitutes an original work of authorship.

Although § 101 of the 1976 Act defined the basis for extending copyright to compilations, some courts continued to apply the "sweat of the brow" rationale to compilations (and primarily to databases, such as telephone directories) long after the 1976 was enacted. This changed in 1991 when the Supreme Court decided the case of Feist Publications v. Rural TeI. Serv. Co., 499 U.S. 340 (1991).

In Feist, the Court expressly rejected the "sweat of the brow" doctrine, holding that a modicum of creativity in the compilation's selection, coordination, or arrangement is required for a compilation to qualify as an "original work of authorship."  Using this reasoning, the Court held that the work at issue, a white pages telephone directory, was not copyrightable because it lacked such creativity. The Court further noted that the scope of protection afforded to compilations by copyright is "thin" because copyright protection extends only to the original elements of a compilation's selection, coordination, or arrangement.

Courts in the post-Feist era have generally found compilations to be creative enough to warrant copyright protection, provided that the arrangement and selection of the compilations were not typical or obvious. The following factors are relevant when determining whether a database has sufficient creativity in its selection and arrangement to warrant copyright protection:

(i) the total number of options available, (ii) external factors that limit the viability of certain options and render others non-creative, and (iii) prior uses that render certain selections "garden variety."

Matthew Bender & Co., Inc. v. West Publishing Co., 158 F.3d 674, 682 683 (2d Cir. 1998), cert. denied, 526 U.S. 1154 (1999).

Although courts generally extend protection to databases, the scope of protection has been relatively narrow. The usual standard for determining whether a copyrighted work is infringed is whether there is "substantial similarity" between the allegedly infringing work and the copyrighted work (see section XI). Where databases are involved, however, the standard is often heightened to a "virtually identical" standard. For instance, many courts have held that a copyrighted database was not infringed because the differences between the databases were trivial, or because any elements of selection, coordination, or arrangement that were copied did not constitute creative authorship. Accordingly, the more creativity that is used to generate a database, the more likely the database will be protectable under the copyright law, and the greater protection that will be afforded to such a database.

IV. Exclusive Rights

Section 106 of the 1976 Act grants to the copyright owner the exclusive rights: to reproduce the copyrighted work in copies or phonorecords; to prepare derivative works based upon the copyrighted work; and to perform or display the copyrighted work publicly. Section 106 also grants copyright owners the exclusive right to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending. This right includes the right to prevent the unauthorized importation of copies or phonorecords of a work into the United States. 17 U.S.C. § 602. The scope of the importation right was limited by the Supreme Court case of Quality King v. L'anza, 523 U.S. 135 (1998). In Quality King, the Court held that the importation right in section 602 does not allow a copyright owner to prevent U.S.-manufactured gray market goods exported abroad from being imported back into the United States without the copyright owner's authority. The Court found that once a copyright owner sells a copyrighted work that has been manufactured in the United States, the first sale exception prevents a copyright owner from controlling further distribution of that work—including distribution by importation (see first sale discussion in section V(B)).

With the Court's decision in Quality King, the ability of copyright owners to use the copyright law to prevent importation of gray market goods has been limited, but not extinguished. Quality King notwithstanding, if the gray market goods are manufactured abroad and imported into the United States, the copyright law may still be used by businesses to prevent such unauthorized importation.

Section 106 also grants copyright owners the exclusive right to perform the copyrighted work publicly, unless the work is a sound recording. If the work is a sound recording, the copyright owner of the sound recording has the exclusive right to perform the sound recording publicly only when the performance occurs by means of a digital audio transmission.

The exclusive rights constitute the copyright owner's so-called "bundle of rights." The copyright owner may keep the bundle of rights exclusively to himself, or each of the five rights may be licensed to different licensees on an exclusive or nonexclusive basis, each right may be subdivided, and each subdivision of an exclusive right may be owned and enforced separately. H.R. Rep. No. 94-1476 at 61. Copyright licenses and transfers are further discussed in section IX.

V. Limitations On The Exclusive Rights

The exclusive rights are not without limitations. Exceptions and limitations to these rights are found in sections 107 through 122 of the 1976 Act.

A. The Fair Use Exception

1. In General
The most notable of these exceptions is the so-called fair use exception, found in § 107, which embodies the doctrine of fair use as developed by case law under the Copyright Act of 1909. The fair use exception constitutes both a before-the-fact limitation on the copyright owner's bundle of exclusive rights and an after-the-fact defense to a charge of infringement of such rights. Section 107 reads as follows:

Notwithstanding the provisions of section 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include—

1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

2) the nature of the copyrighted work;

3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

4) the effect of the use upon the potential market for or value of the copyrighted work.

The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors. 17 U.S.C. § 107.

Two specific types of fair use are worth mentioning. The first is truthful comparative advertising embodying the copyrighted work of another, which was held to be a type of fair use in Triangle Publications, Inc. v. Knight-Ridder Newspapers, Inc., 626 F.2d 1171 (5th Cir. 1980). This type of fair use probably can be categorized as a form of criticism or comment. The second is videotape "time-shifting" (whereby television programs are videotaped at one time for viewing at another) for noncommercial home use. Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417 (1984) (the well-known "Betamax" case).

The U.S. Supreme Court has spoken on the doctrine of fair use. The first decision was the Betamax case, in which the Court linked the first and fourth fair use factors and seemed to create an economic effects test for fair use.  In so doing, the Court seemed to establish a presumption of unfair use when the accused use is commercial in nature. The Court also seemed to establish a presumption that noncommercial uses are fair by de-emphasizing the second and third factors.

One year after the Betamax decision, the Supreme Court accepted another opportunity to interpret the fair use defense, and to develop the law relating to the second and third factors. In Harper & Row Publishers v. The Nation Enters., 471 U.S. 539 (1985), the Court held that The Nation magazine infringed Harper & Row's copyright in the unpublished memoirs of former President Gerald Ford when it published excerpts totaling three hundred words from the unpublished manuscript relating to the pardon of former President Nixon. With respect to the second factor, the nature of the copyrighted work, the Court stated that "the unpublished nature of a work is '[a] key, though not necessarily determinative, factor' tending to negate a defense of fair use." Id. at 554 (quoting S. Rep. No. 94-473 at 64). The Court further said that "[u]nder ordinary circumstances, the author's right to control the first public appearance of his undisseminated expression will outweigh a claim of fair use." Id. at 555. The right of first publication, the Court said, "encompasses not only the choice whether to publish at all, but also the choices when, where, and in what form first to publish a work." Id. at 564. The last sentence of § 107, which relates to the effect of publication on the fair use analysis, was added to § 107 after the Harper & Row decision. 

With respect to the third factor, the amount and substantiality of the use in relation to the copyrighted work as a whole, the Supreme Court held that although The Nation copied only a small portion of the copyrighted work (300 words relating to the Nixon pardon), the portion copied was qualitatively substantial because it was essentially the heart of the work:

The Nation article is structured around the quoted excerpts which serve as its dramatic focal points. . . .  In view of the expressive value of the excerpts and their key role in the infringing work, we cannot agree with the Second Circuit that the 'magazine took a meager, indeed an infinitesimal amount of Ford's original language.'

Id. at 566 (quoting Harper & Row Publishers v. The Nation Enters., 723 F.2d 195, 209 (2d Cir. 1983) (omitting citation to Appendix).

The Supreme Court's next interpretation of fair use was in Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569 (1994), in which the Court considered whether a parody of the famous song "Pretty Woman" was fair use. In a complex opinion that interweaves all of the fair use factors, the Court stated that the commercial nature of the allegedly infringing use did not render the use presumptively unfair under either the first or fourth fair use factors. The Court also seemed to roll the requirements of the preamble of § 107 (i.e., that the fair use be for a se such as criticism, comment, research, news reporting, classroom teaching, or scholarship) into the first factor (i.e., the purpose and character of the use). The basic teaching of the Acuff-Rose case is that all four of the factors must be seriously considered and balanced against one another.

Because the scope of the fair use exception is broad, it is difficult to predict whether it will be applied consistently in similar factual situations. The reasoning in Acuff-Rose was subsequently applied by the Second Circuit Court of Appeals in American Geophysical Union v. Texaco, Inc., 37 F.3d 881 (2d Cir. 1994), which involved Texaco's photocopying of articles from scientific journals. The Court of Appeals affirmed the trial court's holding that the photocopying of eight such articles by one of Texaco's researchers for his future retrieval and reference was not fair use. The court emphasized, however, that all fair use analyses are fact-specific, and that its ruling does not necessarily eliminate fair use photocopying for research. In fact, the court stated specifically that the issue before it was copying of the eight articles for archival purposes, and not the broad issues of (1) whether photocopying of scientific articles is fair use, or (2) whether photocopying of such articles is fair use when undertaken by a research scientist employed by a for-profit corporation.

Another example of the unpredictability of the fair use analysis relates to reverse engineering of computer programs.  Because software products are published in the form of object code that is only readable by machine, it is necessary to "reverse engineer" the software in order for a human to read the code. Reverse engineering is the most effective way to discover the workings of a computer program, including the ideas contained therein that are in the public domain and not subject to copyright protection. However, reverse engineering a program necessarily involves reproduction and adaptation of the underlying computer program, thereby meeting the prima facie requirements for copyright infringement. Applying the four factors, it does not appear that reverse engineering is a fair use. Reverse engineering is undertaken for a commercial purpose. The entire work is reproduced and adapted. The effect on the market for the product is potentially quite large.

Yet, both the Federal and Ninth Circuits have held that reverse engineering is a fair use. See Atari Games v. Nintendo of America, Inc., 975 F.2d 832 (Fed. Cir. 1992); Sega Enterprises Ltd. v. Accolade, Inc., 977 F.2d 1510 (9th Cir. 1992); DSC Communications v. Pulse Communications, 170 F.3d 1354 (Fed. Cir. 1999); Sony Computer Entertainment, Inc. v. Connectix, Inc., 203 F.3d 596 (9th Cir. 2000). 

The Acuff-Rose case may lead to complex analyses of the four fair use factors. Generally, however, a fairly safe rule of thumb is that the use of a qualitatively and quantitatively small portion of a published copyrighted work for a noncompetitive purpose that unquestionably falls into one of the approved fair use categories is likely to be a fair use if the use is not economically harmful to the copyright owner. However, before making any unlicensed use of a copyrighted work, the user should obtain the advice of counsel. This is particularly important where the intended use could draw the attention of the copyright owner.

2. Fair Use on the Internet
Also worth mentioning is how these fair use factors are applied to the Internet. A few general principles can be discerned. First, posting verbatim copies of copyrighted works or portions thereof, either by "cutting and pasting" or by making the works available for downloading, is usually not a fair use, regardless of the purpose of the posting. Religious Technology Center v. Netcom On-Line Communication Services, Inc., 923 F.Supp. 1231, 1243 (N.D. Cal. 1995). On the other end of the spectrum, a simple "link" to another web site that contains copyrighted material is not likely to be an infringement. Bernstein v. JC Penney, Inc., 50 U.S.P.Q.2d 1063 (C.D. Cal. 1998) (dismissing a Complaint for failure to state a claim upon which relief can be granted where Complaint alleged copyright infringement based on a simple link).

In the middle ground between these two poles, it is unclear what uses are considered "fair uses." The reproduction of "thumbnail" images of copyrighted works by a search engine as part of its searching feature was found to be fair use in Kelly v. Arriba Soft Corp., 77 F. Supp.2d 1116 (C.D. Cal. 1999). On the other hand, where the defendants placed a notice on their web site that an infringing copy of a copyrighted work was available at several other web sites and listed the corresponding web addresses, one court determined this was likely to be contributory infringement. Intellectual Reserve, Inc. v. Utah Lighthouse Ministry, Inc., 75 F. Supp. 2d 1290 (D. Utah 1999). Similarly, where a website operator used video excerpts to develop its own movie trailers for exhibition to its customers online, the District Court of New Jersey found the action was not defensible under the fair use doctrine. Video Pipeline, Inc. v. Buena Vista Home Entm't, Inc., 192 F. Supp. 2d 321 (D.N.J. 2002).

In the well-publicized case A&M Records v. Napster, Inc., 2001 U.S. App. LEXIS 5446 (9th Cir. 2001), amended by 239 F.3d 1004, aff'd, 284 F.3d 1091 (9th Cir. 2001), the Ninth Circuit found the defendant's peer-to-peer file sharing process, which facilitated the transmission and storage of audio recordings on the Internet, did not involve fair use of the recordings. Plaintiffs, who were corporations engaged in the commercial recording, distribution, and sale of copyrighted music and sound recordings, filed a copyright infringement action alleging that defendant was a contributory and vicarious copyright infringer. Defendant's appeal did not contest the district court's finding that defendant's users were engaged in wholesale reproduction and distribution of copyrighted works, but raised the issue of fair use. The appellate court found no error in the district court's conclusions that plaintiffs would likely succeed in establishing that defendant's users did not have a fair use defense; defendant's liability as a contributory infringer; and defendant's liability for vicarious copyright infringement.

B. The First Sale Limitation
According to § 109(a) of the 1976 Act, notwithstanding the copyright owner's exclusive public distribution right under § 106(3), the owner of a particular copy or phonorecord lawfully made under the 1976 Act, or any person authorized by such owner, is entitled to sell or otherwise dispose of possession of the copy or phonorecord without the copyright owner's permission.

Applications of the § 109(a) first sale doctrine often arise in the context of copyright licensing, where a copyright licensor may wish to limit or control a licensee's use and disposal of copies or phonorecords owned by the licensee. The legislative history accompanying § 109 states in relevant part as follows:

Section 109(a) restates and confirms the principle that, where the copyright owner has transferred ownership of a particular copy or phonorecord of a work, the person to whom the copy or phonorecord is transferred is entitled to dispose of it by sale, rental, or any other means. Under this principle, which has been established by the court decisions and section 27 of the present law [i.e., the now-repealed 1909 Act], the copyright owner's exclusive right of public distribution would have no effect upon anyone who owns "a particular copy or phonorecord lawfully made under this title" and who wishes to transfer it to someone else or to destroy it.

Thus, for example, the outright sale of an authorized copy of a book frees it from any copyright control over its resale price or other conditions of its future disposition.

H.R. Rep. No. 94-1476 at 79.

Thus, for example, if a copyright owner wishes to authorize a licensee to use copyrighted computer software only for the licensee's internal use, but then sells copies of the software to the licensee, the copyright owner cannot then prevent the purchaser/licensee from reselling the purchased copies of the software to anyone it chooses. The copyright owner probably also cannot subject the purchaser/licensee to any collateral restrictions relating to the purchased copies, such as obligations to maintain the program in confidence. Note, however, that the § 109(a) first sale exception relates only to distribution and would not permit the purchaser/licensee to make additional copies of the software.

A licensor who wishes to subject licensees to collateral restrictions or to restrict licensees' use or disposal of the licensed work generally must retain ownership of the physical copies of the work. The licensee, on the other hand, might wish to obtain ownership of the copies, not only so that it can take advantage of the first sale doctrine, but also, where the work is a computer program, to enjoy the benefits of § 117 of the 1976 Act, which permits the lawful owner of copies to make adaptations of the program for certain purposes. (See section V(C).) In other instances, such as where the licensee is authorized to make multiple copies or derivative works, it may be acceptable to the licensor and desirable to the licensee to have ownership of the physical copies pass to the licensee.

It is important to note that the § 109(a) first sale limitation on the § 106(3) exclusive right of public distribution is itself subject to an exception. Specifically, § 109(b)(1)(A) extends to the copyright owners of computer programs and sound recordings the exclusive distribution rights to rent, lease, and lend copies even after a "first sale" has occurred. That section provides as follows:

(b)(1)(A) Notwithstanding the provisions of subsection (a), unless authorized by the owners of copyright in the sound recording or the owner of copyright in a computer program (including any tape, disk, or other medium embodying such program), and in the case of a sound recording in the musical works embodied therein, neither the owner of a particular phonorecord nor any person in possession of a particular copy of a computer program (including any tape, disk, or other medium embodying such program), may, for the purposes of direct or indirect commercial advantage, dispose of, or authorize the disposal of, the possession of that phonorecord or computer program (including any tape, disk, or other medium embodying such program) by rental, lease, or lending, or by any other act or practice in the nature of rental, lease, or lending. Nothing in the preceding sentences shall apply to the rental, lease, or lending of a phonorecord for nonprofit purposes by a nonprofit library or nonprofit educational institution. The transfer of possession of a lawfully made copy of a computer program by a nonprofit educational institution or to faculty, staff, and students does not constitute rental, lease, or lending for direct or indirect commercial purposes under this subsection.

This exception to the first sale rule is itself limited by §§ 109(b)(1)(B) and (b)(2)(A):

(B) This subsection does not apply to—(i) a computer program which is embodied in a machine or product and which cannot be copied during the ordinary operation or use of the machine or product; or (ii) a computer program embodied or used in conjunction with a limited purpose computer that is designed for playing video games and may be designed for other purposes.

(2)(A) Nothing in this subsection shall apply to the lending of a computer program for nonprofit purposes by a nonprofit library, if each copy of a computer program which is lent by such library has affixed to the packaging containing the program a warning of copyright in accordance with requirements that the Register of Copyrights shall prescribe by regulation.

In addition to the limitations on the distribution right, § 109 also limits the scope of a copyright owner's display rights. Specifically, § 109(c) permits the owner of a particular copy of a type of work covered by § 106(5) to display such copy publicly—without the copyright owner's permission—either directly or by the projection of no more than one image at a time to viewers present at the place where the copies are located.

Finally, with regard to the first sale exception, it is important to note the close relationship between sections 109 and 202 of the 1976 Act. Section 202 of the 1976 Act makes clear that the transfer of ownership of physical copies of a copyrighted work does not in itself also transfer ownership of any of the copyrights in the work. Conversely, transfer of ownership of a copyright or any exclusive right under a copyright does not in itself also transfer property rights in any physical copies of the copyrighted work.

C. The Computer Program Copying Limitation
Under § 117 of the Act, as amended, it is not copyright infringement for the owner of a copy of a computer program to make or authorize the making of another copy or adaptation of that computer program provided:

1) that such a new copy or adaptation is created as an essential step in the utilization of the computer program in conjunction with a machine and that it is used in no other manner, or

2) that such new copy or adaptation is for archival purposes only and that all archival copies are destroyed in the event that continued possession of the computer program should cease to be rightful.

17 U.S.C. § 117(a).

Any exact copies prepared in accordance with the provisions of § 117 may be leased, sold, or otherwise transferred, along with the copy from which such copies were prepared, only as part of the lease, sale, or other transfer of all rights in the program. Also, if adaptations are prepared in accordance with § 117, they may be transferred only with the authorization of the copyright owner.

At least one court has read §117 broadly, permitting the owner of a lawfully owned copy of a computer program to authorize a third party to modify the program where the enhanced program was used only in-house by the owner of the copy. Foresight Resources Corp. v. Pfortmiller, 719 F. Supp. 1006 (D. Kan. 1989) (the court's statements in this regard were made in the context of denying the plaintiff's motion for preliminary injunction, and therefore are not part of a final judgment on the merits of the case). Another court has held that the creation and distribution of a program that permitted the copying of copy-protected programs by the owners of the copies of such programs was not a contributory infringement because it facilitated an essential step in the utilization of the copyrighted program and permitted the owner to make archival copies. Vault Corp. v. Quaid Software Ltd., 847 F.2d 255 (5th Cir. 1988). However, the Federal Circuit limited the scope of § 117 in DSC Communications v. Pulse Communications, 170 F.3d 1354 (Fed. Cir. 1999). The court, applying Ninth Circuit law, found that the terms of the license determine whether or not the licensee is considered an "owner" of the software. It found that the licensee in question was not an owner because its use exceeded the scope of its license, which included language that limited use of the software to use "in the equipment for which it was intended." The use in question was not "in the equipment for which it was intended," the court found. Therefore, the licensee was not considered an owner for purposes of § 117.

With the Digital Millenium Copyright Act of 1998, Pub. L. 105-304, 112 Stat. 2860, Congress amended § 117 by adding additional protection against infringement based on machine maintenance or repair. See 17 U.S.C. § 117(c) & (d). See also MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511 (9th Cir. 1993) (where the court held that third-party maintenance which required copying code was infringement under copyright statute, helping to spur the need for the amendment).

D. Online Service Provider Liability
The Online Copyright Infringement Liability Limitation Act incorporated as Title II of the Digital Millennium Copyright Act immunizes Online Service Providers from third party liability for damages, costs, or attorney's fees under the Copyright Act, but only if the service providers comply with a series of technical requirements. A Service Provider that satisfies three threshold prerequisites set forth in 17 U.S.C. § 512(i) may be entitled to immunity from copyright infringement liability for (1) transmitting, routing, and providing connections to infringing material (or what the statute refers to as "transitory digital network communications"); (2) system caching; (3) information stored by a user (the "user storage" limitation); (4) linking or referring users to infringing material (the "information location tools" limitation); or (5) disabling access to or removing in good faith allegedly infringing material; but only if additional specific conditions applicable to each of the five new liability limitations also are met. Service Providers that qualify for any of the first four limitations also may be immune from injunctive relief, except in limited circumstances.

Courts have provided varying interpretations of the scope of these requirements. One court, for instance, found that 17 U.S.C. § 512(i) does not require Internet service providers to take affirmative steps to investigate potential infringement and set up notification procedures to identify responsible individuals. Ellison v. Robertson, 189 F. Supp. 2d 1051 (C.D. Cal. 2002). The court in Perfect 10, Inc. v. Cybernet Venture, Inc., however, "part[ed] ways" with this interpretation, holding that 17 U.S.C. § 512(i) "creates room for enforcement policies less stringent or formal than notice and take-down provisions of 17 USCS § 512(c), but still subject to  . . .[a] . . . 'reasonably implemented' requirement." 213 F. Supp. 2d 1146 (C.D. 2002). The court explained that there was a need to maintain "strong incentives" for providers to prevent their services from becoming "safe havens" for repeat copyright infringers.

To meet the three threshold requirements under the Act, the Service Provider must adopt and implement a policy of terminating the accounts or subscriptions of repeat infringers; inform subscribers and account holders of this policy; and accommodate and not interfere with "standard technical measures" to protect the integrity of data (such as anti-copying technologies). 

To benefit from liability limitations pertaining to information residing on the Service Provider's network or system at the direction of other users, the Service Provider also will need to designate an agent to receive notification of alleged acts of infringement and comply with specific rules governing notification, counter notification, and procedures for removing or blocking access to (or replacing or restoring access to) content alleged to be infringing. 17 U.S.C. § 512(c)(2).

VI. Duration of Copyright

Copyright protection automatically subsists in all works of authorship from the moment of fixation. Congress extended the duration of copyright with the Sonny Bono Copyright Term Extension Act of 1998, Pub L. 105-298, 112 Stat. 2827. See Eldred v. Reno, 239 F.3d 372 (D.C. Cir. 2001) (upholding the constitutionality of the act), aff'd, Eldred v. Ashcroft, 537 U.S. 186 (2003).

Works created on or after January 1, 1978 by individual authors are protected by copyright for the life of the author plus seventy years. 17 U.S.C. § 302(a). The period of copyright protection for works created by joint authors is seventy years from the date that the last joint author dies. 17 U.S.C. § 302(b).

The period of copyright protection for works made for hire (see section VII(A)), anonymous works, or pseudonymous works, is ninety-five years from the year of first publication, or one hundred and twenty years from the year of creation, whichever expires first. In the case of an anonymous or pseudonymous work where the true identity of the author later becomes known, however, the term of protection will revert to the life plus seventy years period. 17 U.S.C. § 302(c).

Works unpublished and unregistered as of January 1, 1978 automatically became subject to federal copyright protection on that date. 17 U.S.C. § 303. Such works became subject to the copyright duration provisions applicable to works published on or after January 1, 1978 (17 U.S.C. § 302), with some variations designed to cover special circumstances.

The term of protection for works created before January 1, 1978 differs from the terms stated above. Works published before January 1, 1978 (with a proper copyright notice) enjoy an initial term of twenty-eight years of protection beginning on the date of first publication or on the date of copyright registration for some kinds of unpublished works, whichever occurs earlier. Assuming that the copyrighted work is registered during its first twenty-eight year term, after renewal (which is now automatic), the copyright will endure for an additional period of sixty-seven years following the initial twenty-eight year term. 17 U.S.C. § 304(a).

VII. Copyright Ownership

A. Work Made For Hire
In most situations, copyright ownership initially resides in the actual preparer or creator of the work. However, where a work is created by an employee within the scope of employment, the employer is considered the author and copyright ownership resides in the employer. 17 U.S.C. § 201 (b). Such works are called "works made for hire." Section 101 of the 1976 Act defines works made for hire as follows:

1) a work prepared by an employee within the scope of his or her employment; or

2) a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a sound recording, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire. For the purpose of the foregoing sentence, a "supplementary work" is a work prepared for publication as a secondary adjunct to a work by another author for the purpose of introducing, concluding, illustrating, explaining, revising, commenting upon, or assisting in the use of the other work, such as forewords, afterwords, pictorial illustrations, maps, charts, tables, editorial notes, musical arrangements, answer material for tests, bibliographies, appendixes, and indexes, and an "instructional text" is a literary, pictorial, or graphic work prepared for publication and with the purpose of use in systematic instructional activities.

The U.S. Supreme Court interpreted the § 101 work for hire definitions and clarified the law in Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989). To determine which section of the definition applies, the Court held, a determination must be made as to whether the work was prepared by an employee or an independent contractor. The term "employee" must be interpreted under the general common law of agency. Among the factors relevant to this determination are the following:

1) the skill required to create the work;

2) the source of the necessary instrumentalities and tools;

3) the location of the work;

4) the duration of the relationship between the parties;

5) whether the hiring party has the right to assign additional projects to the hired party;

6) the extent of the hired party's discretion over when and how long to work;

7) the method of payment;

8) the hired party's role in hiring and paying assistants;

9) whether the work is part of the regular business of the hiring party;

10) whether the hiring party is in business;

11) the providing of employee benefits;

12) the tax treatment of the hired party.

Id. at 751-52, citing Restatement (Second) of Agency § 220(2). No single factor is determinative, and the list is not intended to be exhaustive.

If, after applying the preceding factors, a conclusion is reached that the hired party is an employee, then the first part of the work for hire definition is applied and the work is considered a work for hire owned by the employer as long as it was created within the scope of the employee's employment. If the work was created by an employee but outside of the scope of employment, then it is not a work for hire and the employee owns the copyright.

If the analysis leads to the conclusion that the hired party is an independent contractor, then the second part of the work for hire definition is applied and the creator of the work retains ownership of the copyright in the work unless there is a written agreement, signed by the parties, expressly stating that the work shall be considered a work made for hire. Note, however, that even if such a written agreement is signed, a work may be a work made for hire under special order or commission only if it falls within the categories of works enumerated in the § 101(2) definition of works made for hire. 490 U.S. at 748. It is unlikely that computer programs fit into any of these categories, unless the program could be viewed as a contribution to a larger "collective work" or as a compilation of instructions. A "collective work" is defined by § 101 of the 1976 Act as:

a work, such as a periodical issue, anthology, or encyclopedia, in which a number of contributions, constituting separate and independent works in themselves, are assembled into a collective whole.

If the work in question is an entire computer program created for the company by an independent contractor, it probably cannot be considered a contribution to a collective work.

The Copyright Act defines a compilation as:

A work formed by the collection and assembling of preexisting materials or of data that are selected, coordinated, or arranged in such a way that the resulting work as a whole constitutes an original work of authorship. The term "compilation" includes collective works.

17 U.S.C. § 101. A computer program may fall under this definition.

Notwithstanding the fact that a work was created by an employee within the scope of employment, the employer and employee may agree in writing that the employee will retain copyright ownership of the work. However, a work that was not created within the scope of an author's employment cannot be made into a work made for hire by way of agreement.

Unfortunately, compliance with the work made for hire provisions often is not considered from a business planning standpoint until too late. Such oversights can result in copyright ownership residing in the creator, even if the creator and the ostensible employer in a special order or commission situation (or even situations where works are created by actual employees for the employer, but outside the scope of employment) actually intended that the ostensible employer would own the copyright.

The principle to remember is that just because a company paid for the creation of a work does not mean that it owns the copyright in that work. For the employer to own the copyright, it must meet the work for hire requirements or obtain an assignment of copyright rights.

An illustrative example from recent case law is Tasini v. New York Times Co., Inc., 192 F.3d 356, amended by, 206 F.3d 161, (2d Cir. 1999), affirmed, 121 S. Ct. 2381 (2001). Freelance writers who contributed copyrighted articles to newspaper publishers filed suit against publishers who licensed articles to online news databases without compensating the writers. Because the authors were "freelance" writers, they were not employed by a particular publisher, nor was any article written pursuant to a work-for-hire contract. The writers alleged that licensing the articles for republication in various electronic databases infringed the author's copyright. The publishers responded that they owned the copyright in the "collective work" in which the articles were originally published (the newspaper itself, in this case) and were therefore entitled to repackage those works in the electronic databases pursuant to their right under 201(c) to "reproduce" and "distribute" the individual works in a "revision" of the collective work. The Court of Appeals determined that the privilege afforded authors of collective works under 201(c) does not permit publishers to license individually copyrighted works for inclusion in electronic databases. Therefore, the right to publish an article by a freelance author in a newspaper does not include the right to compile that article into an on-line database, unless that right was also obtained from the author. The Supreme Court specifically held that the electronic editions of the works were not "revisions" of the individual issues of the published works, and therefore the individual authors had to consent to the republication or transfer their rights in the works.

However, there are certain benefits for a business to have a copyrighted work classified as a work made for hire, as opposed to merely obtaining the copyrights in the work via an assignment. Assigning the copyright in the work to the ostensible employer will not put the employer in the same ownership position for the life of the copyright as would compliance with the work made for hire provisions. A company that owns rights in a copyrighted work by assignment may run into trouble down the road because, regardless of the wording of the assignment, the 1976 Act provides that all assignments may be terminated by the creator thirty-five to forty years after execution of the assignment (17 U.S.C. § 203). If the party owns the copyrighted work as a work made for hire, however, the rights are owned for the full term of protection and cannot be terminated. (see section IX.)

Accordingly, agreements with independent contractors should be structured as work for hire agreements, especially if the work falls within an appropriate category identified in the second part of the definition of "works made for hire," and should include a backup assignment in case a court should find that the work or the agreement does not meet the requirements of a work made for hire. This is discussed in greater detail in section IX, which covers copyright transfers.

Copyrights also may be created jointly. Section 101 of the 1976 Act defines a "joint work" as:

a work prepared by two or more authors with the intention that their contributions be merged into inseparable or interdependent parts of a unitary whole.

The contributions of each ostensible joint author must be independently copyrightable to qualify the contributor as a joint author. Ashton-Tate Corp. v. Ross, 728 F. Supp. 597 (N.D. Cal. 1989), aff'd, 916 F.2d 516 (9th Cir. 1990).

Section 201 (a) of the 1976 Act provides that "[t]he authors of a joint work are co-owners of copyright in the work." The legislative history continues:

[A] work is "joint" if the authors collaborated with each other, or if each of the authors prepared his or her contribution with the knowledge and intention that it would be merged with the contributions of other authors as "inseparable or interdependent parts of a unitary whole." The touchstone here is the intention, at the time the writing is done, that the parts be absorbed or combined into an integrated unit, although the parts themselves may be either "inseparable" (as [in] the case of a novel or painting) or "interdependent" (as in the case of a motion picture, opera, or the words and music of a song).

H.R. Rep. No. 94-1476 at 120. However, authors of books, plays, and music would not be considered co-authors of motion pictures based on or incorporating their works. Id. Co-owners of joint works are considered tenants in common, and each co-owner has an independent right to use or license the use of the joint work, subject to a duty to account to the other co-owners for any profits derived from exploiting the work. Id. at 121.

VIII. Copyright Notice

Prior to March 1, 1989, the copyright law required copyright notice, in a particular form, to be affixed to published copies of copyrighted works. Prior to January 1, 1978, the publication of a work without proper copyright notice injected the work into the public domain, with very limited exceptions. Between January 1, 1978 and March 1, 1989, the publication of a work without notice did not immediately inject the work into the public domain. During that time, if the copyright in the work was registered within five years after the date of first publication of the work and reasonable steps were taken to add notice to copies of the work distributed in the United States after the omission was discovered, copyright protection was maintained.

On March 1, 1989, when the United States acceded to the Berne Convention, the Berne Convention Implementation Act amended the 1976 Act by eliminating all mandatory notice requirements for works published on or after that date. (Prior notice requirements still apply to works published prior to March 1, 1989.)

Although copyright notice no longer is required to be affixed to works first published in the United States on or after March 1, 1989, the use of such notice virtually eliminates a defense of innocent infringement. For this reason, copyright owners would be wise to continue to use a copyright notice on works publicly distributed in the United States as if the law was not changed. It is also advisable to affix a modified form of the notice to copies of unpublished works, as a precaution, to put potential copiers on notice that copyright is claimed in the work.

The notice for published works, regardless of when they were published, consists of the following three elements.

1) (a) For visually perceptible copies of a work, the symbol © (the letter "C" in a circle) or the word "Copyright", or the abbreviation "Copr." (The symbol © is preferable, especially for obtaining international copyright protection under another treaty, the Universal Copyright Convention.); or

(b) For sound recordings, the symbol è (the letter "P" in a circle); and

2) The year of publication, if the work has been published. Precautionary notice affixed to unpublished works should contain no date, but the date of publication should be added when the work is published. For works consisting of a pictorial, graphic, or sculptural work, with accompanying text, if any, reproduced in or on any useful article, such as greeting cards, stationery, or jewelry, no date need be included no matter when the work was published. 17 U.S.C. § 401 (b (2). In the case of compilations or derivative works incorporating previously published material, the year of publication of the compilation or derivative work is sufficient; and

3) The name of the owner of the copyright in the work, or an abbreviation by which the name can be recognized, or a generally known alternative designation of the owner.

Example

For visually perceptible works:

© 2003 Finnegan Henderson

For sound recordings:

è  2001 Finnegan Henderson

In addition, if copyright notice is affixed to unpublished works as a precaution, it is advisable to state in the notice that the work is unpublished.

Example

© Finnegan Henderson (Unpublished Work)

The notice should be affixed to copies in such a manner and location as to give reasonable notice of the claim of copyright.  Ideally, the copyright notice should be affixed in accordance with the guidelines of the U.S. Copyright Office that relate specifically to the type of work to which the notice is being affixed. These guidelines are set forth in 37 C.F.R. § 201.20.

Subject to the preceding exceptions, where copies or phonorecords were publicly distributed by authority of the copyright owner on or after January 1, 1978 and before March 1, 1989 without a year of publication or name of the copyright owner that could reasonably be considered a part of the notice, the work was considered to have been published without any copyright notice and is governed by § 405 of the Act (as amended), which is the rehabilitative provision relating to omission of notice. 17 U.S.C. § 406(c). Under § 405, the omission of copyright notice from copies or phonorecords publicly distributed on or after January 1, 1978 and prior to March 1, 1989 by authority of the copyright owner did not invalidate the copyright in the work if (1) the notice was omitted from no more than a relatively small number of copies or phonorecords distributed to the public (17 U.S.C. § 405(a)(1)); or (2) a copyright claim for the work was registered within five years after the publication without notice, and a reasonable effort was made to add notice to all copies or phonorecords distributed to the public in the United States after the omission was discovered (17 U.S.C. § 405(a)(2)); or (3) the notice was omitted in violation of an expressed requirement in writing that, as a condition of the copyright owner's authorization of the public distribution of copies or phonorecords, they bear the prescribed notice (17 U.S.C. § 405(a)(3)).

The curative provisions of § 405 generally have been interpreted liberally by the courts.  Nevertheless, what constitutes a "relatively small number" under § 405(a)(1) and what constitutes "a reasonable effort .  .  .  to add notice" under § 405(a)(2) will vary from case to case, and not necessarily consistently. See, e.g., M. Kramer Mfg. Co. v. Andrews, 783 F.2d 421 (4th Cir. 1986) (reasonable efforts do not require the addition of notice to stored copies); Disenos Artisticos E Industriales, S.A. v. Work, 676 F. Supp. 1254 (E.D.N.Y. 1987) (reasonable efforts require notice to be added to all copies in inventory or in the possession of distributors). At least one court has held that reasonable efforts require the expenditure of time and money above and beyond the ordinary course of business. Rachel v. Banana Republic, Inc., 228 U.S.P.Q. 416 (N.D. Cal. 1985). Furthermore, the § 405 provisions apply to copies of works first distributed prior to March 1, 1989 if the copies continue to be distributed without notice after that date. However, the curative provision of § 405(a)(2) effectively expired on February 28, 1994 because notice was no longer required after March 1, 1989. Thus, five years after the last date when notice was required (February 28, 1989) was February 28, 1994.

IX. Copyright Transfers

Copyrights or exclusive copyright rights may be transferred by assignment, mortgage, exclusive license, any other type of conveyance, or operation of law. Copyrights also may be bequeathed by will in whole or in part and may pass as personal property by applicable laws of intestate succession. 17 U.S.C. § 201 (d)(1). Nonexclusive licenses, which do not amount to transfers of ownership, also may be granted.

Section 204(a) of the 1976 Act requires transfers of copyright ownership to be in writing and signed by the owner of the rights conveyed. "Transfers" include exclusive licenses because such licenses constitute restrictions on copyright owners' interests in their copyrights. 17 U.S.C. § 101; Library Publications, Inc. v. Medical Economics Co., 548 F. Supp. 1231 (E.D. Pa. 1982), aff'd without op., 714 F.2d 123 (3d Cir. 1983). According to the court, verbal nonexclusive copyright licenses are valid under the 1976 Act, 548 F. Supp. at 1233, but exclusive copyright licenses must be in writing to be valid.  Id. at 1234.  At least one court has held that § 1-206 of the Uniform Commercial Code (relating to the statute of frauds for some personal property) also is applicable to the sale of copyrights. Mellencamp v. Riva Music Ltd., 698 F. Supp. 1154 (S.D.N.Y. 1988).

As discussed in section VIII, obtaining ownership of copyright by way of assignment does not put the assignee in the same position as if he owned the work as a work made for hire. The reason for this is that all licenses or transfers (e.g., assignments) of copyrights executed by the author on or after January 1, 1978 are terminable by the author or his heirs at a certain point in the life of the copyright (i.e., between thirty-five and forty years after the date of the transfer). 17 U.S.C. § 203(a)(3). Similarly, all licenses or transfers executed by authors or certain of the author's heirs prior to January 1, 1978 covering copyrights secured before that date also are terminable at the end of the fifty-sixth year or seventy-five years after the copyright was secured, depending upon certain factors set forth in the Act. 17 U.S.C. § 304(c) and (d).

An obvious question arises: How can this be? How is it possible that an absolute assignment to the company of the author's copyright is terminable? The answer, though it may be a tough pill for the company to swallow, is that Congress specifically intended this result to protect authors against "unremunerative transfers." H.R. Rep. 94-1476 at 124. Knowing that authors often are forced to sell works for a pittance before the actual worth of the works is established, Congress intended to give authors and their heirs "a second bite of the apple." The only consolation to the company is that many copyrighted works of value to the business world do not hold their value past the twenty-eight year original copyright term for pre-1978 copyrights, or for more than thirty-five to forty years for post-1977 transfers.

The solution to these problems, though easy to state, may be very difficult to implement. It is to assure that, whenever possible, all works created for the company are works made for hire, that is, works made by actual employees within the scope of their employment. If the creators are independent contractors, there must be a written agreement stating that the work is a work made for hire and the work must fit into one of the following categories set forth in the statutory definition of works made for hire. The work must be:

1) a contribution to a collective work, as defined by the 1976 Act;

2) a part of a motion picture or other audiovisual work, as defined;

3) a translation;

4) a supplementary work, as defined;

5) a compilation, as defined;

6) an instructional text, as defined;

7) a test or answer material for a test; or

8) an atlas.

The other solutions to these problems are too complex to discuss here. Suffice it to say, however, that they have significant drawbacks that are not present in the work for hire solution.

Under 17 U.S.C. § 205(a), any transfer of copyright ownership or other document pertaining to a copyright, including licenses under the copyright, may be recorded in the Copyright Office. Upon receipt of a document as provided by § 205(a) and the appropriate fee, the Register of Copyrights will record the document and return it with a Certificate of Recordation.  17 U.S.C. § 205(b).

There are important reasons to record copyright transfers in the Copyright Office. Under § 205(c), recordation in the Copyright Office of documents pertaining to copyright gives all persons constructive notice of the facts stated in the recorded document, assuming that the requirements of § 205(c) have been met. Section 205(d) provides for determining priority among conflicting transfers. Section 205(e) provides that a nonexclusive license prevails over a conflicting transfer of copyright ownership if the license is in writing and the license was granted before the transfer or was taken in good faith before recordation of the transfer and without notice of it. If these requirements are not met, recorded transfers can prevail over nonexclusive licenses.

X. Copyright Registration

As stated previously, copyright protection automatically subsists in original works of authorship from the moment of their fixation in a tangible medium of expression. Thus, copyright registration is not necessary to obtain copyright protection.  17 U.S.C. §§ 302, 408. Although copyright registration is not a prerequisite for protection, there are several important procedural advantages and benefits to registering copyrights. Registration is a necessary prerequisite for U.S. authors to file suit for copyright infringement (under the Berne Convention Implementation Act, foreign authors of Berne Convention countries need not register their U.S. copyrights before filing suit). 17 U.S.C. § 411. If registration is made within five years after first publication of the work, or before publication, the certificate of registration also constitutes prima facie evidence of the validity of the copyright and of the facts stated in the registration certificate. 17 U.S.C. § 410(c). This is an important procedural right in copyright infringement litigation.

Perhaps most importantly, eligibility for statutory damages and attorneys' fees is contingent upon registration before infringement commences, with limited exceptions. 17 U.S.C. § 412 (see section XII). Actual damages in an infringement suit are sometimes either nominal or difficult to prove. This is usually true when the injury to the copyright owner is more intangible than monetary. Thus, eligibility for statutory damages and attorneys' fees often makes the difference between permitting ongoing infringement (because a lawsuit would not be cost effective) and being able to stop it.

If the copyright notice affixed to a work published on or after January 1, 1978 and before March 1, 1989 contains the name of a person or entity other than the copyright owner, registration in the name of the true copyright owner eliminates a possible innocent infringer defense for infringements commencing after the registration date. 17 U.S.C. § 406(a). Furthermore, documents recorded in the records of the U.S. Copyright Office, such as assignments, licenses, and mortgages, constitute constructive notice to the world and, if other requirements are met, take priority over conflicting transfers if the copyrights identified in such documents are registered. 17 U.S.C. § 205(c) and (d).

In view of these benefits of copyright registration, companies would be wise to register their copyrights either before publication of their works or soon thereafter.

XI. Copyright Infringement

To establish a claim of copyright infringement, the copyright owner must prove ownership of a valid copyright and copying of the copyrighted work. Sid & Marty Krofft Television Prods., Inc. v. McDonald's Corp., 562 F.2d 1157, 1162 (9th Cir. 1977). Direct evidence of copying is rarely available, so circumstantial evidence of access to the copyrighted work and substantial similarity between the copyrighted work and the allegedly infringing work may be demonstrated to prove copying. Id. at 1162.

With regard to proving access, access is established by showing that the defendant had a reasonable opportunity to view or copy the copyrighted work. Miller Brewing Co. v. Carling O'Keefe Breweries, Ltd., 452 F. Supp. 429, 438 (W.D.N.Y.  1978). A greater showing of access can justify a lower standard of proof to show substantial similarity. Sid & Marty Krofft, 562 F.2d at 1172. Conversely, where the accused work is strikingly similar to the copyrighted work, access may be presumed. Association of Medical Colleges v. Mikaelian, 571 F. Supp. 144, 150-51 (E.D. Pa.  1983), aff'd, 743 F.2d 3 (3d Cir. 1984); Gaste v. Kaiserman, 863 F.2d 1061 (2d Cir. 1988).

The test for substantial similarity is usually stated as follows: Would an ordinary observer recognize the allegedly infringing work as an appropriation of the copyrighted work? United Artists Corp. v. Ford Motor Co., 483 F. Supp. 89, 96 (S.D.N.Y. 1980).

Derivative works also can present special problems in a copyright infringement context. Computer programs, for instance, typically are revised on a regular basis. Even if the copyright owner may consider the most recent version of the program to be the most valuable, worthy of the most protection, it is the first published version from which the copyrights in later versions are derived. That is, copyright first arises in the original version and such copyright covers all protectable aspects of that version. Copyrighters in later versions cover only the differences in those versions.

If the original version is a work for hire published in, say, 2000, the program enjoys copyright protection for 95 years from 2000. The copyrights in subsequent versions, which would be considered derivative works (assuming that they are only revisions and not complete rewrites), cover only the material that is new to each version, and the remainder of the copyrighted material in each version is covered by the copyrights in the earlier version in which such material first appeared. Thus, a revised version published in 2005 enjoys copyright protection for the revisions and additions for 95 years from 2005 and the remainder of the program is protected by the 2000 copyright.

To understand the importance of this concept to the subject of copyright infringement, consider a valuable computer program that is published without the copyright notice required prior to March 1, 1989 (discussed in section VIII).  Assuming that no steps were taken to affix proper notice, assuming that a copyright claim for the program was never registered with the Copyright Office, and assuming that there are no other applicable exceptions, such a work would be injected into the public domain, thereby becoming unprotectable. If revised (derivative) versions of the program were later published, and subject to valid copyrights, such copyrights would cover only the new material in the revised versions. If an infringer then copied the first published version, which is in the public domain, but not any of the material from the revised versions, the copyright owner would have no copyright claim because the first published version is in the public domain. Similarly, if the infringer copied only a very small portion of the new matter, or if it copied all of the new matter but the new matter itself comprised only a small portion of the program as a whole, then the infringer might argue that the copying was de minimis or that the copyright owner suffered little or no injury. Thus, it is important to assure that the proper steps have been taken to preserve the copyrights in all versions of copyrightable works.

Copyright infringers may assert various defenses, such as copyright invalidity, non-infringement, license, and fair use. One of the least developed, but potentially important, defenses is copyright misuse. Copyright misuse fulfills the same function in copyright law as patent misuse does in patent law: to provide an affirmative defense in copyright infringement actions that the copyright holder unlawfully attempted to use his copyright in a manner outside its permissible statutory scope.

Copyright misuse was first recognized in 1990 by the fourth circuit in Lasercomb America, Inc. v. Reynolds, 911 F.2d 970 (4th Cir. 1990). By defining copyright misuse as a matter of public policy and without reference to specific statutes, the Fourth Circuit held copyright misuse to be a defense in equity. In deciding whether any antitrust violation must be proven to uphold the defense, the court cited Morton Salt (see Morton Salt Co. v. G. S. Suppiger Co., 314 U.S. 448 (1992)) or a 60-year history of development for the proposition that a violation of the antitrust law need not be shown for a valid patent misuse defense. By analogy, the court reasoned, "the question is not whether the copyright is being used in a manner violative of antitrust law (such as whether the licensing agreement is 'reasonable'), but whether the copyright is being used in a manner violative of the public policy embodied in the copyright." In upholding copyright misuse as a defense against Lasercomb, the court found persuasive the broad language of the agreement, which not only prevented a licensee from creating software like Interact, but also prevented any such efforts from reaching the public. The length of the agreement, 99 years, was also troublesome to the court since it could extend beyond the life of the Interact copyright itself. Ultimately, the court viewed Lasercomb's license as an impermissible attempt to use the copyright in Interact to control competition in all software like it, amounting to a misuse of the Interact copyright. Interestingly, the court upheld the misuse even though the defendant had not signed Lasercomb's standard, blanket license agreement in which the misuse was found.

Other circuits have followed suit in upholding copyright misuse based on equitable principles. See Practice Management Information Corp. v. American Medical Assoc., 121 F.3d 516, 520 (9th Cir. 1997) (where the court allowed copyright misuse to be pleaded as a cause of action in a suit for declaratory judgment); see also Alcatel USA, Inc. v. DGI Technologies, Inc., 166 F.3d 772 (5th Cir. 1999) (where the court allowed the misuse defense even where the defendant knowingly and willfully copied the plaintiff's operating system).

XII. Remedies for Copyright Infringement

If a work is found to be infringing, the copyright owner is entitled to various remedies under Chapter 5 of the 1976 Act.  Specifically, the copyright owner may recover actual damages and the infringer's profits attributable to the infringement that are not taken into account in computing the actual damages (17 U.S.C. § 504(b)). The concept of infringing profits can reach beyond sales of the infringing work per se. For example, courts have awarded defendant's profits on the sale of homes constructed from infringing architectural drawings. Robert R. Jones Assocs. v. Nino Homes, 858 F.2d 274 (6th Cir. 1988); Intown Enters. Inc. v. Barnes, 721 F. Supp. 1263, 66-67 (N.D.  Ga. 1989).

The copyright owner also may obtain temporary and/or permanent injunctions (17 U.S.C. § 502(a)). When a preliminary injunction is sought in a copyright infringement action, irreparable harm to the copyright owner generally is presumed where the owner demonstrates a likelihood of succeeding on its prima facie case of infringement. West Publ'g Co. v. Mead Data Cent., Inc., 799 F.2d 1219, 1229 (8th Cir. 1986), cert. denied, 479 U.S. 1070 (1987). Infringing works also may be impounded and/or destroyed (17 U.S.C. § 503; see also United States Supreme Court Copyright Practice Rules).

A prevailing copyright owner who has met certain registration requirements may elect at any time before final judgment to recover statutory damages as an alternative to proving actual damages and lost profits, and also is eligible to obtain attorneys fees and costs. As noted in section X, to be eligible for statutory damages, costs, and attorneys fees, the copyright in the work must be registered before the infringement commenced. In the case of infringement of published works commenced before registration but within three months after the date of first publication of the work, the copyright owner is still eligible to obtain an award of statutory damages, costs, and attorneys' fees if the copyright is registered within such three-month period. 17 U.S.C. § 412. In other words, the copyright owner has a grace period to register and maintain the eligibility to obtain statutory damages, costs, and attorneys fees if infringement commences within three months after first publication and registration is made within such period.

Statutory damages may be awarded in a sum of not less than $750.00 or more than $30,000.00, as the court considers just. 17 U.S.C. § 504(c)(1). When the copyright owner proves that the infringement was committed willfully, the court in its discretion may increase the award of statutory damages to a sum of not more than $150,000. 17 U.S.C. § 504(c)(2). The court also may allow the recovery of full costs by or against any party other than the United States or its officers, and may award a reasonable attorneys' fee to the prevailing party as part of the costs. 17 U.S.C. § 505. In suits in which the plaintiff wins on some of its claims but not on others, both parties have been held to be the prevailing party. Video Views, Inc. v. Studio 21, Ltd., 12 U.S.P.Q.2d 1558 (N.D. Ill. 1989), aff'd, 925 F.2d 1010 (7th Cir.), cert. denied, 502 U.S. 861 (1991). In Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994), the U.S. Supreme Court held that prevailing plaintiffs and prevailing defendants are to be treated equally on the issue of the award of attorneys' fees, and that the award of fees is in the courts' discretion.

Section 506 of the 1976 Act also provides for criminal penalties for copyright infringement, for affixation of fraudulent copyright notice, for fraudulent removal of copyright notice, and for false representations made in copyright registration applications and related written statements.

XIII. Protection Without Litigation

The copyright owner may take various steps to protect its copyrights that do not involve litigation.

A. Notice, Registration, and Cease and Desist Letters
The most obvious steps are to affix copyright notice to all copies of the work, published or unpublished (see section VIII), and to register the copyrights in the U.S.  Copyright Office (see section X). Copyright notice announces to the world that an author is claiming copyright in the work, and may deter some infringers, especially if they are sophisticated enough to know that the use of notice substantially eliminates an innocent infringer defense.

Registration also may deter infringers who search the records of the Copyright Office and find that the copyright owner is serious enough about copyrights to register them. Potential infringers also may be deterred from arguing that a work is not copyrightable if it has been registered by the Copyright Office, which typically is accorded great deference by the courts. If the copyright in a work is registered within five years after the date of first publication, a sophisticated potential infringer also may be deterred by the presumption of validity of the copyright carried by the registration. Searching the Copyright Office registration records also may be the only way that a third party can determine if copyright is claimed in a particular work, especially with respect to unpublished works (which have never been required to bear copyright notice) and all works published on or after March 1, 1989 (which no longer must bear such notice).

In cases where the copyright owner discovers an infringing work in the marketplace, a strongly worded cease and desist letter is sometimes sufficient to convince the infringer to stop infringing. The likelihood of obtaining such a result, however, depends not only on the strength of the copyright owner's assertions and the degree of similarity between the works, but also on the relative clout of the copyright owner and the infringer, the ability of the infringer to separate good business judgment from misguided principles, and the aggressiveness and copyright sophistication of the parties' counsel.

B. Use of the Customs Service to Prevent Unlawful Importation
Another extremely valuable means of protecting copyrights from foreign infringers, or from U.S. infringers that import infringing goods, is to allow the U.S. Customs Service to do it for you. Sections 602 and 603 of the 1976 Act prohibit the importation of goods that infringe U.S. copyrights, and authorize the U.S. Customs Service to promulgate regulations to accomplish this goal. Title 19 of the Code of Federal Regulations (the Customs regulations), provide a procedure for recording registered copyrights with Customs. When recording copyright registrations with Customs, the copyright owner should provide information regarding both licensed importers (so their shipments are not detained) and known and suspected infringers. Suspected ports of entry also should be specified if known. 19 C.F.R. § 133.31 et seq. (2003).

The U.S. Customs Service's sophisticated computer system enables it to watch suspected infringing importers and to target goods for inspection that are suspected of infringing U.S. copyrights. If Customs locates a shipment that meets the infringement profile provided by the copyright owner, the goods are detained and compared by Customs laboratories to the copy of the copyrighted work that was submitted with the application to record the copyright registration. If Customs concludes, based on its own investigation, that the goods are infringing, the goods can be seized and forfeited to government custody, and the copyright owner may never even know that it happened (only the importer need be notified). Goods that have been seized and forfeited are destroyed.

If Customs has any reason to believe that any imported goods may be infringing copies, it may also ask the importer if the goods are infringing. If the importer admits or fails to deny infringement, then the goods are seized and forfeited. If the importer denies infringement, then the copyright owner is provided with a sample of the alleged infringing goods so that it may perform its own comparison. The copyright owner then has the right to demand that the goods be excluded from the United States, at which time the copyright owner must post a bond in an amount set by Customs. 19 C.F.R. § 133.43(b). Customs will then invite the copyright owner and the importer to submit briefs and other evidence supporting their claims. Based on the briefs and other evidence submitted by the parties, Customs decides whether to seize and forfeit the goods, allow them to be imported (because Customs determines that they are not infringing), or allow them to be reexported (where the importer convinces Customs that it had no reasonable grounds to believe that the goods violated the law). 19 C.F.R. §§ 133.44-.47; 17 U.S.C. § 603(c) (2000).

As an alternative to this procedure, the copyright owner may seek a court order enjoining importation of the infringing goods. This alternative is available even if the copyright owner has not recorded its copyrights with Customs.

Recordation of copyrights with the U.S. Customs Service can be a powerful means of protecting U.S. copyrights. A Customs detention leading to seizure and forfeiture may be faster, cheaper, simpler, and more effective than litigation.  Depending on the side of a Customs proceeding that a party might find itself, a decision on the best way to proceed may be influenced by the fact that Customs tends to be protectionist in its copyright enforcement philosophy, especially in the area of computer programs and computer technology.

C. Infringement Prevention Measures
Copyrighted works may be protected without litigation in other ways. On the technical side, for example, computer programs and digital recordings may be copy protected using various technical measures which prevent copying, and digital playback and recording devices can be fitted with security devices that prevent serial copying. Copyright owners may also intentionally insert errors or unique "signatures" into copyrighted text, maps, and computer code to aid in the detection of copying.

On the business side, some copyrighted works are maintained as unpublished works and are licensed as such under agreements that contain strict confidentiality provisions and restrictions against further distribution and disclosure. Other copyrighted works are maintained as trade secrets.

Copyright licensing also may be used not only as a method of turning copyrights to profit, but also to reduce infringement. For instance, computer program copyright owners often use various kinds of licenses to reap profits from copyrights while simultaneously exercising control over uses made by licensees of their copyrighted works. Copyright owners use various licensing techniques to enhance control over the use of their works. One example is "site licensing," whereby software users are granted licenses to make a certain number of copies for use at a particular location. Another example is "shrink-wrap licensing" (and its on-line cousin, "click-wrap licensing") whereby the copyright owner conditions the installation, downloading, and use of the work on the acceptance of the terms of the license.

XIV. Exploiting Copyright Assets

Most copyrights are exploited in an active manner, that is, the company produces a copyrighted work and sells it to the public. If a third party copies the work, the copyright owner uses the copyright to enforce its rights.

Copyrights also may be exploited more passively, through two primary means, licensing and security interests. The advantages of licensing are widely known. A company with a valuable computer program may license others to use it, publishers may enter into co-publishing agreements with other publishers, and motion picture companies may license others to distribute and show their films.

The law and business practices of copyright licensing is a very broad field, and therefore is beyond the scope of this article. The U.S. bankruptcy laws are worth mentioning here, however, because they cut across the field of copyright licensing. Specifically, the licensee of a debtor in bankruptcy may elect to continue to utilize licensed copyrighted works even if the bankruptcy trustee elects to terminate the license agreement as an executory contract. 11 U.S.C. § 365(n) (2000). Thus, copyright licensees should make sure that their license agreements take full advantage of these benefits of the bankruptcy laws.

A lesser known way to turn copyrights to a company's advantage is to pledge them as collateral for loans. In this regard, the statutory definition of "transfer of copyright ownership" includes copyright mortgages. 17 U.S.C. § 101. For many companies, mortgaging the company's valuable copyrights in film or music inventories, computer programs, architectural or technical drawings, or training programs may be a viable means of obtaining capital needed for expansion or the creation of a new product.

On the borrower's side, the drawbacks to mortgaging its copyrights are that if for one reason or another the company defaults on the loan, it may lose its valuable copyrights. Prospective borrowers also may find it difficult to locate a bank that will loan money based on intangible assets such as copyrights. Borrowers who do find willing banks may find that the bank insists on using a security agreement that greatly favors the bank, and may severely restrict the borrower's ability to transfer any of its copyrights in the normal course of business. On the bank's side, the chief concerns are in valuing the copyrights that the borrower wishes to pledge for the loan, and in finding a willing buyer in the event that the borrower defaults.

Assuming that a willing lender and borrower come together, the transaction should be secured in two ways. The bank should (1) record the security agreement in the records of the U.S. Copyright Office within one month after the date of execution and all of the copyrights in which the security interest is granted should be registered, and (2) perfect the security interest on the state level pursuant to Article 9-103(3) of the Uniform Commercial Code, especially for unregistered copyrights. The reason for recording in both the Copyright Office and on the state level is that the law is unclear as to whether one or the other form of recordation is sufficient to perfect a security interest in copyrights.  In re Peregrine Entertainment, Ltd., 116 Bank. 194, 199 (C.D. Cal. 1990). However, even if recordation on the state level is sufficient, by registering the copyrights and recording the security agreement in the Copyright Office, the bank obtains the benefit of 17 U.S.C. § 205(d), which governs priority among conflicting transfers. Section 205(d) reads as follows:

As between two conflicting transfers, the one executed first prevails if it is recorded, in the manner required to give constructive notice under subsection (c), within one month after its execution in the United States or within two months after its execution outside the United States, or at any time before recordation in such manner of the later transfer. Otherwise the later transfer prevails if recorded first in such manner, and if taken in good faith, for valuable consideration or on the basis of a binding promise to pay royalties, and without notice of the earlier transfer. 

After the loan has been paid off, the borrower should insist that a release of security interest must be filed wherever the security agreement was perfected.

XV. International Considerations

A. National Treatment
With U.S. adherence to the Berne Convention on March 1, 1989, the United States is now a signatory to the four basic international treaties for the protection of copyrights. The other treaties are the Universal Copyright Convention (U.C.C.), the Buenos Aires Convention, and the Geneva Convention for the Protection of Producers of Phonograms [i.e., phonorecords] Against Unauthorized Duplication of Their Phonograms. The basic effect of all of these treaties is that foreign authors are given "national treatment" under the laws of signatory countries. National treatment means that a country must protect the copyrighted works of foreign authors the same or better than it treats works of its own authors.

Formalities are prohibited under the Berne Convention, the most significant of the four treaties. Under the U.C.C., the use of copyright notice consisting of the symbol ©, the year of first publication, and the name of the copyright owner are deemed to satisfy any copyright formalities of member countries. Under the Buenos Aires Convention, a "statement that indicates the reservation of the property right" must be affixed to copies of the work. The phrase "All Rights Reserved" is most commonly used. Under the Phonogram Convention, the use of notice consisting of the symbol è, the name of the producer, and the year of first publication will satisfy any copyright formalities of any member country.

Most industrialized countries and many developing countries are members of the Berne Convention. A publication identifying the U.S. copyright relations with virtually all foreign countries is available from the U.S. Copyright Office, Library of Congress, Washington, D.C. 20559.

In addition to the four copyright treaties identified above, two treaties were adopted by the World Intellectual Property Organization (WIPO) in December 1996 and entered into force in March 2000. These new international agreements, the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty, extend new levels of protection for both copyright and copyright-related rights in digital environments. The United States implemented these treaties into law with the Digital Millennium Copyright Act, signed October 28, 1998. (See the following section for a discussion of the Digital Millennium Copyright Act.)

1. Restoration of Foreign Works
In December 1994, the Uruguay Round Agreements Act was enacted, which contained a provision that restores copyright protection in the United States to certain foreign works and sound recordings. In general, a foreign work or sound recording may be entitled to have its copyright protection restored in the United States if (1) it was first published in a country that is a member of the World Trade Organization (WTO), a country that is a member of the Berne Convention, or a country in which the President of the United States has issued a proclamation to restore protection; (2) the foreign work or sound recording is not presently protected by U.S. copyright law in the United States; and (3) the foreign work is protected in its country of origin. If a foreign work or sound recording meets these three requirements, its copyright protection was restored automatically on January 1, 1996. No action is required by the copyright owner to restore protection to the copyrighted work.

A foreign work may be protected in another country but not protected in the United States, for several reasons:

1) Prior to February 15, 1972, sound recordings were not entitled to copyright protection in the United States. Thus, U.S. and foreign sound recordings fixed prior to February 15, 1972 may have been protected in a foreign country but not protected in the United States by U.S. Copyright law.

2) Prior to March 1, 1989, the U.S. copyright law required the copyright owner to satisfy certain formalities (such as the affixation of copyright notice, as described in previous sections). If the owner failed to comply with one or more of these formalities, the work could fall into the public domain (i.e., it would not be protected in the United States). For example, a work could fall into the public domain if the owner published the work without proper copyright notice or if the owner failed to renew the copyright. Nevertheless that same work might be protected by copyright in the foreign country.

3) Foreign works are only protected in the United States if the United States has copyright relations with the country in which the work is first published, or in which the author is a national or domiciliary. Thus, if a foreign work was published in a foreign country before the foreign country and the United States established copyright relations, that work would not be protected in the United States but would be protected in the foreign country.

After copyright protection is restored to a foreign work, the owner of the work may seek remedies against infringements in the United States that occur on or after January 1, 1996, with one exception. This exception applies to a person who began exploiting a restored work in the United States prior to January 1, 1996 and continues exploiting that work in the United States after that date, or to a person who made or acquired one or more copies or phonorecords of a restored work prior to January 1, 1996. Such person is called a "reliance party." The owner of a restored work cannot enforce the copyright in the restored work against a reliance party until twelve months after the reliance party receives notice that the owner of the restored work intends to enforce its restored copyright.

Notice can be served by either providing a notice directly to the reliance party, and/or by filing a notice of intent to enforce the copyright with the U.S. Copyright Office, and the U.S. Copyright Office publishing the notice in the Federal Register. The minimum information that must be included in a notice is prescribed by section (e) of the Uruguay Round Agreements Act, Pub. L. No. 103-465, 108 Stat. 4809 (Dec. 8, 1994), codified in 17 U.S.C. § 104A, reprinted in 7 Melville B. Nimmer and David Nimmer, Nimmer on Copyright (1997). Specifically, section (e) requires that all notices of intent filed with the U.S. Copyright Office (1) must be signed by the copyright owner or the owner of the exclusive right; (2)identify the title of the restored work, any English translations of the title, and any alternative titles of the restored work; and (3) include an address and telephone number where the copyright owner can be contacted. If the notice is provided directly to the reliance party, section (e) also requires that the notice identify the work in which the restored work is used and identify the use or uses to which the copyright owner objects.

XVI. Present and Future Copyright Issues

A. Digital Works and the Internet
The Internet and other technological advancements present new and unique challenges to both the protection and exploitation of copyrighted works. The Internet increases the speed and ease by which copyrighted works can be copied and widely distributed. Any person with access to a computer and a digitized work can make a copy of the work and distribute it to the millions of people connected to the Internet.

Not only does the Internet make it possible to distribute and copy works faster and easier than ever before, but it also increases the quality of the copies delivered. When multiple analog copies or photocopies of a work are made, the analog copies or photocopies will deteriorate as each new generation of copies is made. Exactly the opposite is true of multiple digital copies. The quality of the first copy of a digitized work is no different than the thousandth copy; each copy is a perfect reproduction of the original copy of the work.

The Internet offers such a perfect reproduction and delivery system that it has propelled businesses to change the way they create, reproduce, store, and distribute their works and the works of others. Unfortunately, it has also dramatically increased the ease and frequency of infringement. Congress has responded with landmark legislation designed to prevent infringement and encourage copyright owners to make their works available on the Internet.

1. No Electronic Theft Act
On December 17, 1997, President Clinton signed into law the No Electronic Theft Act of 1997, Pub. L. 105-147, 111 Stat. 2678, which subjects to criminal penalties persons who during any 180-day period, unlawfully electronically reproduce or distribute more than one copy of a copyrighted work having a total retail value of $1,000, when they do so willfully and for commercial advantage or private financial gain. The criminal sanctions increase as the retail value of the works increases. 17 U.S.C. § 506(a). See Eldred v. Reno, 74 F.Supp.2d 1 (D.D.C. 1999), affirmed, 239 F.3d 372 (D.C. Cir. 2001), aff'd, Eldred v. Ashcroft, 537 U.S. 186 (2003) (where the court, in finding the Copyright Term Extension Act of 1998 constitutional, also withheld injunctive relief from enforcing parts of the Electronic Theft Act). Punishment for violation of the No Electronic Theft Act is provided by 18 U.S.C. § 2319, covering criminal infringement of a copyright. That section imposes a maximum five year sentence to first-time offenders and a maximum ten year sentence to subsequent offenders.

2. Trafficking
The Anticounterfeiting Consumer Protection Act of 1996 created criminal provisions for the trafficking of computer programs. Pub. L. 104-153, 110 Stat. 1386. As codified, the act makes it illegal knowingly to traffic in "a copy of a computer program or documentation or packaging for a computer program." 18 U.S.C. § 2318. Additionally, that section provides criminal penalties for counterfeit labels for phonorecords and copies of motion pictures or other audiovisual works.

3. Digital Millennium Copyright Act
A complicated bill that was the result of extensive negotiations between interested parties in the Internet community, the Digital Millennium Copyright Act ("DMCA") has 3 major provisions.

1) The law prohibits unauthorized accessing of copyrighted works by circumvention of technological protection measures (such as encryption) employed by the copyright owner to prevent access to or copying of their copyrighted works. Related provisions prohibit making available products, technologies, software, and services used to circumvent technological protection measures.

2) The DMCA also prohibits tampering with copyright management information embedded in the copyrighted works by the copyright owner.

3) The DMCA also limits the liability of "Online Service Providers" for money damages for certain acts of infringement if they comply with certain detailed requirements.

(a) The Circumvention of Copyright Protection Systems – New Section 1201
The "anti-circumvention" provisions incorporated in Title I of the Digital Millennium Copyright Act are found in the newly created § 1201 of the Copyright Act, 17 U.S.C. § 1201. Section 1201 prohibits the descrambling of a scrambled work, decrypting an encrypted work, or otherwise bypassing, removing, deactivating, or impairing a technological measure without the authority of the copyright owner, when that technological measure requires the application of information, or a process or treatment, with the authority of the copyright owner, to gain access to the work.

In essence, an "anti-circumvention" measure is a lock which prevents unauthorized access to the protected work. The owner of the work provides the user with a key to open the lock, such as an authorized password or decryption code. To access a digital work protected by an anti-circumvention device legally, the person wishing to access the work must have both:

1) the key to open the lock; and

2) the authorization of the copyright owner to use the key. Sections 1201(a)(2) and 1201(b) further prohibit the manufacture, importation, or offering to the public of anything (technology, product, or service) designed to circumvent technological measures that effectively protect access to or copying of copyrighted works covered under title 17of the U.S.C.

The usual defenses to copyright infringement, such as fair use, do not apply to anti-circumvention violations. Universal City Studios v. Reimerdes, 82 F. Supp.2d 211 (S.D.N.Y. 2000).

Sections 1201(d) through (k) carve out limited exceptions for libraries, reverse engineering, encryption research, security testing, and several other very limited situations.

Those who violate § 1201 are subject to a wide range of civil remedies and criminal penalties, including money damages, costs, and attorneys fees; injunctions; impounding, remedial modification; or destruction of the devices or products involved in the violation. Repeat offenders may be subject to treble damages. Willful violations committed for commercial advantage or private financial gain are subject to criminal penalties, but nonprofit libraries, archives, and educational institutions are not subject to criminal penalties.

(b) Copyright Management Information—New Section 1202
Section 1202 creates liability for any person who intentionally provides or distributes false "copyright management information" or who alters or removes accurate management information. 17 U.S.C. § 1202. Copyright management information is information conveyed with the copyrighted work, and may constitute any of the following:

1) information that identifies the copyrighted work, including the title of a work, the author, and the copyright owner;

2) information that identifies a performer whose performance is fixed in a work, with certain exceptions;

3) in an audiovisual work, information that identifies the writer, performer, or director, with certain exceptions;

4) terms and conditions for use of the work;

5) identifying numbers or symbols that accompanying the above information or links to such information, for example, embedded pointers and hypertext links; or

6) other information as the Register of Copyrights may prescribe by regulation, with an exception to protect the privacy of users.

Recognizing that certain broadcasters using older equipment would have great difficulty complying with the newly created requirements, § 1202(e) allows entities using analog equipment to escape liability if it is not technically feasible to avoid the violation or if avoiding the violation would create an undue financial hardship. Broadcasters using digital equipment are expected to conform with industry standards as they develop and will be guilty of violations if they deviate from those standards.

The same remedies and penalties apply to § 1202 violations as for § 1201, namely, a wide range of civil remedies and criminal penalties, including money damages, costs, and attorneys fees; injunctions; impounding; remedial modification; or destruction of the devices or products involved in the violation. Repeat offenders may be subject to treble damages.  Willful violations committed for commercial advantage or private financial gain are subject to criminal penalties, but nonprofit libraries, archives, and educational institutions are not subject to criminal penalties.

(c) Online Service Provider Liability
The Online Copyright Infringement Liability Limitation Act incorporated as Title II of the Digital Millennium Copyright Act immunizes Service Providers from third party liability for damages, costs, or attorney's fees under the Copyright Act, but only if the service providers comply with a series of technical requirements. A Service Provider that satisfies three threshold prerequisites set forth in 17 U.S.C. § 512(i) may be entitled to immunity from copyright infringement liability for (1) transmitting, routing, and providing connections to infringing material (or what the statute refers to as "transitory digital network communications"); (2) system caching; (3) information stored by a user (the "user storage" limitation; (4) linking or referring users to infringing material (the "information location tools" limitation); or (5) disabling access to or removing in good faith allegedly infringing material; but only if additional specific conditions applicable to each of the five new liability limitations also are met. Service Providers that qualify for any of the first four limitations also may be immune from injunctive relief, except in limited circumstances.

To meet the three threshold requirements under the Act, the Service Provider must adopt and implement a policy of terminating the accounts or subscriptions of repeat infringers; inform subscribers and account holders of this policy; and accommodate and not interfere with "standard technical measures" to protect the integrity of data (such as anti-copying technologies).

To benefit from liability limitations pertaining to information residing on the Service Provider's network or system at the direction of other users, the Service Provider also will need to designate an agent to receive notification of alleged acts of infringement and comply with specific rules governing notification, counter notification, and procedures for removing or blocking access to (or replacing or restoring access to) content alleged to be infringing. 17 U.S.C. § 512(c)(2).

Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. This article is for informational purposes and is not intended to constitute legal advice. This memorandum may be considered advertising under applicable state laws.

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