ARIZONA STATE UNIVERSITY
COLLEGE OF LAW
Wednesday, December 18, 2002 8:30 a.m.
This examination consists of a three essay questions that you are to answer in bluebooks (2-1/2 hours). The problems will be weighted 40-30-30 in determining the grade on the exam, but you may allocate your time to the problems as you choose.
You are permitted to have with you and to use during the examination your textbook, the statutory supplement, any class handout materials, your class notes, and any other written materials made by you or your study group (not photocopied from printed materials).
On both parts, please write legibly. PLEASE WRITE ON ONE SIDE OF A BLUEBOOK PAGE ONLY.
Problem 1 (40%)
Professor (P) is a world-famous microbiologist and university professor who has been working for the past 5 years on a series of experiments that she hopes will help confirm a revolutionary new theory she has developed involving recombinant DNA. She has discussed the theory and the results of her experiments only with Student (S), a graduate student doing a Ph.D. under P’s guidance. S is deeply devoted to P and is worried that other research groups may be working on similar theories and experiments. S has been urging P to publish her theory, and the experimental results to date, to insure that P (and, perhaps, S) will be recognized as having priority in the discovery. P has in fact produced a manuscript incorporating this suggestion but still hesitates to publish it because she does not regard the experimental evidence as absolutely solid.
S, who has read P’s manuscript, finally cannot stand the tension. S writes his own article paraphrasing P’s theory as closely as S can recall it. S also writes a summary of P’s experimental work (in which S has participated) and includes that summary in S’s article. S’s article begins with the following legend on the title page:
This article represents my best recollection from my reading of P’s manuscript of the theory of P on the subject and my best attempt to present P’s thinking on it. It also includes my own summary of experimental results that P and I have obtained (experiments that were largely planned by P in which I assisted P as a graduate student). I publish this article without P’s permission but in the hope of insuring that P will receive proper credit for her revolutionary new work from her scientific colleagues all over the world.
When S’s article appears, P is furious. P contacts her lawyer, registers her manuscript with the Copyright Office, and brings an action against S for infringement of copyright. S defends, arguing first that P’s employer, the university, and not P owns the copyright in the manuscript. S also argues that his activities did not infringe any copyright in the manuscript and that, if any protected elements were taken, their republication in S’s article was a fair use.
Analyze and evaluate S’s arguments.
S’s argument that the university, P’s employer, has strong support in the statutory language. Under the Copyright Act, a “‘work prepared by an employee within the scope of his or her employment” is a work made for hire. In the case of a work made for hire, the employer, and not the creating employee, is deemed by the statute to be the author of the work and therefore the initial owner of the work’s copyright. The Supreme Court in Reid says that “employee” and “scope of employment” are to be determined under the state (or common) law of agency, which looks to a long list of factors. We have no specific facts in this problem to allow evaluation of all of the Reid factors, but we do know that P is a professor and that an integral part of a professor’s job description is to carry on research that furthers knowledge. Assuming P receives a salary from the university, that she receives the normal benefits (health insurance, etc.), and that taxes are withheld – all of which seem highly likely – P is an employee of the university. If it could be shown that P worked solely on weekends and at home in developing her new theory and the supporting experiments, an argument might be mustered in terms of the Reid factors that P, although an employee, was working on her article outside the scope of P’s employment. But this would be a highly unusual situation, especially in view of S’s participation in the experiments. It is therefore unlikely that P would have much of an argument that her work was outside the scope of her employment, at least within the normal meaning of that phrase.
At least two cases, however, have held that there is a “professor’s exception” to the work made for hire doctrine. Without citing any basis in statutory language, these cases simply assert that, historically, the common understanding between all universities and all professors was that the professors retain the copyright in their academic works, regardless of where or how they were made. If this exception actually exists, P could take advantage of it and claim the copyright. Moreover, many universities have adopted policies that give copyrights in traditional academic works back to the faculty members who created them. If that is the case here, P might be considered the owner of the copyright pursuant to the contract. (Section 204 requires a signed instrument of conveyance to transfer copyright ownership. There may be an issue whether a general policy re-granting all copyrights to creating faculty members is sufficient as an “instrument in writing” under this provision. Section 204 does not specifically require that the work be specified in the instrument. Compare §106A(e)(1), requiring that the written waiver of moral rights in works of visual art “specifically identify the work.”) Finally, even if the university is the owner of the copyright, it is quite likely that the university will join in P’s lawsuit should P so request. Therefore, we must deal with the issues on the merits.
A first issue is the scope of protection copyright affords to P’s manuscript. Ideas are never protected by copyright law, and the notion of expression is much narrower in the case of historical, scientific, and other scholarly works than it is in the case of novels and plays. There is a balance between the desirability of incentives for production and the free flow of ideas, and the importance of free exchange is greater with works of this type. Only expression and not ideas are protected, and scholarly theories fall into the realm of unprotected ideas. In this case, for example, publication of P’s theory might be a spur to other workers sooner, whose advances on P’s approach might make society as a whole better off. Moreover, few scientists make money out of the publication for sale of their scientific manuscripts, so denying copyright protection on these facts would probably not interfere with the incentive to produce such works. Consequently, infringement should be limited to cases of verbatim or near verbatim copying.
S might try to assert that he is a joint author of P’s manuscript, given S’s active participation in the underlying experiments. A joint work is one “prepared by two or more authors with the intention that their contributions be merged into inseparable or interdependent parts of a unitary whole.” As a joint author, S would have the right to publish or otherwise exploit the work without P’s permission, subject only to accounting for any profits earned from such exploitation (not an issue here, as there are none). This is not a strong argument, however. Copyright protects the literary form of P’s work, not the content, and S contributed only to the discovery of experimental results, which are unprotected facts. Joint authorship requires a contribution of independently copyright-protectable material. In the joint work cases we studied, the subsidiary author contributed at least something along these lines, but the courts still held that the absence of intent by the primary author was sufficient to deny joint authorship status. Here it is not clear that S has added anything to the expressive content at all. While S’s article is a paraphrase of P’s, the “new” material may not be enough to make S’s article even protectable as a derivative work (had S taken P’s material with permission). Even if it is, it does nothing to show a common intent that P’s and S’s contributions be merged into a unitary whole. P, after all, wrote her draft article entirely independently of S and never asked for any assistance from him after the experimental work was done. Therefore, S’s joint authorship argument fails.
We turn then to the question of infringement. Because of the scientific nature of P’s article and the heavy portion of unprotected elements it contains, only a “dissection” approach to infringement, as opposed to the “look and feel” approach, makes any sense. Otherwise, we would risk finding substantial similarity, and thus infringement, based on similarity of unprotected elements alone. On the experimental portion of S’s article, it does not appear that S paraphrased P’s manuscript, because S’s report is really “my own summary” of P’s (and S’s) experimental activities, according the description in the fact situation. Those activities in themselves are not protected by copyright. However, in the theoretical section S has made his best efforts to present P’s thinking as best he can recall from having read the manuscript. Moreover, S has not attempted to add his own interpretations or explanations of P’s theory. Even as a scientific work, therefore, in which the scope of protection is narrow, S may have taken so closely from P’s work that he has infringed. [NOTE: A number of student answers tried to analyze infringement in terms of whether or not S had created an unlawful derivative work and looked to the DW definition for assistance. This caused confusion and was a complete waste of time. Whether S infringed 106(1)(the reproduction right) or 106(2)(the DW right) is determined by exactly the same factors under a proper copyright analysis. This is something we discussed in class many times. While I predicted that many would fall prey to this confusion – between the requirements for a copyright-protected DW and the elements of infringement based on substantial similarity of protected elements – I always regret seeing such predictions come true.]
If S has infringed, he may have a fair use defense. Under the four factors of section 107, S’s publication has little commercial aroma and is more like nonprofit educational use. His goal is to transmit important new information and ideas to the public. On the other hand, S’s work is not transformational in the 2 Live Crew sense, as he has sought to reproduce P’s work (or at least P’s thinking) as closely as possible. One cannot expect a lot of transformation, however, in presenting a scientific theory, because one would end up with a new theory. S has in fact transformed P’s language (which is all that the copyright protects) into his own paraphrase. I conclude that factor (1) is in S’s favor. Moreover, under factor (2), the nature of the work as a scientific article argues in favor of freer use, because of the benefits to society from the interchange of scientific and technological ideas. Factor (3) works against S, as he has essentially taken the whole of P’s work. Of course, much of the crux of what S took belongs to the realm of idea, which is not protected by copyright, and S’s expression is only a paraphrase of P’s. However, that paraphrase is of the whole of P’s work. On the other hand, S may have taken no more than necessary to achieve the factor (1) goal of making P’s theory available to the scientific community. Query whether the taking of P’s expression is necessary to achieve this goal, however (which is what we are assuming – otherwise the fair use analysis would be unnecessary). Finally, factor (4), which is generally conceded to be the most important of the four factors, weighs in S’s favor, because it is unlikely that anyone will buy S’s work instead of that of P, who is world famous as an expert in the area, if both are available. Furthermore, there is little market for individual scientific articles. While the Texaco case (which we did not read) held that the absence of a separate market for individual articles was insufficient to bring factor (4) over to the side of fair use, that case was predicated on the absence of market failure in the market for copies because of the ability of copiers today to license easily and at reasonable cost. The Michigan Document Services case, which we did read, adopted the same approach, namely, that the absence of market failure essentially denies a fair use defense. Our case, however, is fundamentally different from both these cases, because here there is a true market failure. P did not want to publish at any price, because economics was not a motivating factor for P. P was rather worried about her scientific reputation for accuracy. Such a desire by P is understandable but is not necessarily cognizable by copyright, any more than the desire by the copyright owner of “Oh Pretty Woman” not to have the song debased was copyright cognizabale. The four factors of section 107 therefore seem to argue in favor of S.
However, P’s work is unpublished, and the Supreme Court decision in the Harper and Row case seems to leave a much narrow range for fair use analysis in the case of unpublished works. The statute has now been amended to limit the expansive interpretations lower federal courts have placed on this aspect of Harper and Row. Section 107 is now explicit in saying that the unpublished nature of a work shall not bar a finding of fair use based on consideration of the four statutory factors. Moreover, this case is distinguishable from Harper and Row in that the plaintiff’s work there was about to be published for commercial exploitation when defendant beat plaintiff to the punch. That S himself was involved in the experiments may also give him a greater claim to fair use than he might otherwise have. On balance, I conclude that S’s publication, if otherwise infringing, was a fair use.
As far as remedies are concerned, an injunction against further publishing will be available but not much use to P. P will have a problem showing actual damages and is not entitled to statutory damages because the infringement occurred prior to registration for an unpublished work. So even if P wins, its more in the nature of a moral victory.
Problem 2 (30%)
Dentist is a highly skilled amateur photographer who spends many of her weekends and vacations taking nature photographs. She frames many of her best results and hangs them on a rotating basis in her dental office. She also often gives them as gifts to friends and family and occasionally sells photographs to galleries or museums. In every case where she makes more than one print of a given picture, she numbers them sequentially, signs each one, and never makes more than 30 copies. In one case Dentists made a photograph specifically for the purpose of exhibiting it in a competition, which she won (the “Competition Photo”). Museum bought the Competition Photo and another one of Dentist’s signed and numbered photographs. Museum also got a complete assignment of Dentist’s copyright in each photo. Some years later, Dentist learns that Museum has included both of her photographs as part of an exhibit entitled “Sentimental and Silly Photography from the ‘90’s.” Not only that, Museum uses Dentist’s photo as the backdrop for its brochure advertising the exhibit and offers reproductions of the photo to customers of the exhibit without crediting Dentist as the author. Assume the Visual Artists Rights Act of 1990 applies at all relevant times. Does Dentist have any rights against Museum? Discuss whether each photograph is a “work of visual art” and the further issues that would arise if it were to be treated as such a work.
Dentist has no § 106 rights left (until termination) but may have rights under § 106A. Section 106A applies to “works of visual art” (WVA), which category includes signed limited edition photographs. Both photos appear to comply with the requirement of § 101(2) that they be part of a series of no more than 200, as the facts specify that Dentist never makes more than 30 where she does make more than one. From here on, to determine whether either or both photos were WVAs, it is easiest to take them separately. The Competition Photo, at least, was made “for exhibition purposes only,” as the facts specify that Dentist made if for exhibiting in the competition. However, the facts do not make it clear whether the Competition Photo was signed, because we do not know whether she made more than one copy. The statute requires that photographs existing even in a single copy must be signed by the author in order to qualify as a WVA. [Only one or two answers spotted this issue, notwithstanding that many ritualistically stepped through the elements of the statute, including the language “existing in a single copy that is signed by the author”.] As to the second photo, we know it was “signed and numbered,” because the facts so specify. However, was it produced for “exhibition purposes only”? Does exhibition in her office constitute “exhibition purposes”? That, and making gifts, seems to be her main purpose in making photographs. On the other hand, we discussed in class that the issue is whether the particular copy asserted to be a work of visual art is made for exhibition purposes only. That may well be the case here. So, Dentist has rights under § 106A in the Competition Photo if it was signed and in the second photo provided that the copy delivered to Museum was made for “exhibition purposes only.”
Assuming that Dentist does have 106A rights in either or both photos, the paternity rights do not extend to reproductions of the work in posters, including advertising, pursuant to § 106A(c)(3). [The problem statement does not specify which photo was for the brochure, but it makes no difference to the analysis.] Therefore, Dentist would have no claims with respect to Museum’s use of her photo as advertising backdrop. A closer issue is presented by Dentist’s demand under § 106A(a)(1) to be named as author of the reproductions that are sold to customers. Straight reproductions for sale do not appear to fall within the § 106A(c)(3) limitations (unless the reproductions are posters or works made for hire). As we discussed in class, however, the term “work of visual art” necessarily means the physical copy of the work that qualifies (at most the first 200 in the case of photographs), so the many-copy reproductions sold in the shop would not be “works of visual art.” Moreover, the statute gives Dentist no rights against being held up to ridicule by having her works of visual art exhibited in a “silly photography” show. The photos themselves are not being distorted or modified, even though their display may injure Dentist’s reputation. Even modification of a work that results from its public presentation is not actionable under (106A(c)(2)), and here there is no modification. Dentist does have the right to be “credited” with the display of the actual work in the exhibition, but nothing in the facts indicates that she is not named as the author of either photo. It therefore appears that Dentist has no rights under § 106A.
Problem 3 (30%)
Author (A) finishes writing a novel in 1980 and transfers the entire copyright to Publisher (P) in exchange for a one-time cash payment of $10,000. P publishes the novel in that year and it becomes a huge success. It becomes a kind of classic, and by 2005 it is producing steady annual profits for P of $20,000/year. In 1985 P licenses Moviemaker (M) to make a film version of the novel. The deal between P and M is for a payment of $100,000 cash up front and 1% of M’s cash receipts from exploiting the film to the extent that such receipts ever exceed $100 million. (In other words, when and if sales reach $101 million, M must pay P under the license agreement 1% of $1 million, or $10,000. M gets the first $100 million of receipts “free” of any royalty obligation to P.) M completes the movie in 1990 and receipts from exploiting the film reach
$100 million in the year 2010, stabilizing at $1 million per year in 2010 and each year thereafter. Consequently, M begins paying P $10,000 per year in 2010. A learns about all this and demands the P pay A part of the initial $100,000 P received from M and an additional part of the $10,000 in annual royalties P is now receiving from M. P refuses, saying that P acquired the copyright free and clear in 1980.
In 2013, A duly sends a notice of termination under § 203 to P, terminating the 1980 copyright transfer in 2015. A also notifies M of the termination, demanding that M cease all distribution and performances of the movie after termination. To prepare for the upcoming termination, P causes 100,000 copies of the novel to be printed in 2014, which “stockpile” P intends to sell after the termination. The copyright transfer to P then terminates in 2015. After termination, P continues to sell copies of the novel that P “stockpiled” in 2014. M also continues to distribute and publicly perform the movie. A brings an action alleging copyright infringement by both P and M. Neither P nor M contests the validity of the termination in 2015. However, both assert the right to exploit the copies of the novel and movie, respectively, that remain in their hands. M further states that M is willing to continue paying the 1% royalty required by its contract with P and asks the court to determine whether M should pay that royalty to P or to A (or both).
Discuss the rights claimed by P and M to exploit copies of the novel and movie, respectively, after termination of the copyright transfer. If either has the right claimed, what rights, if any, does A have to compensation from such exploitation?
The facts of the problem make it clear that there is no issue concerning the validity of A’s termination (A “duly” sent the notice, neither party contests the issue, etc.). Therefore, the issue are what rights, if any, a licensee and a sublicensee have to continue to exploit a work after termination of a copyright transfer.
Section 203(b) states that upon the effective date of termination, all rights covered by the terminated grant revert to the author, but 203(b)(1) states that a derivative work prepared under authority of the grant before termination may continue to be utilized under the terms of the grant after its termination, but the privilege does not extend to the preparation of other derivative works based on the work as to which copyright transfer was terminated.
P has simply reprinted copies of A’s novel. Nothing in the facts indicates that P added any creativity to the novel at all. Consequently, P’s 2014 printing of 100,000 copies, while itself not an infringement because P still held the reproduction right at that time, did not result in the creation of a derivative work. Consequently, P cannot rely on 203(b)(1)’s privilege to continue to utilize the underlying work. That privilege extends only to derivative works created under the authority of the grant. Therefore, P’s sales of the copies stockpiled in 2014 might infringe the right of distribution, which has now reverted to A.
We must worry, however, about the first sale doctrine under § 109. That section provides that the owner of a particular copy, lawfully made, is entitled to sell or otherwise dispose of that copy without the authority of the copyright owner. Notwithstanding its popular name “first sale doctrine,” section 109(a) does not actually require that there have been a sale. Literally, it requires only ownership of lawfully made copies. (We might also say that the 100,000 stockpiled copies were “sold” by A to P pursuant to the initial license, for which A was paid $10,000.) This fact situation, however, points up what appears to be a major flaw in the termination provisions. After 34 years, P “knew” that a steady market for the novel existed, so P was not taking any serious risk in publishing the 100,000 copies when he learned that termination was near. Yet such competition from P after termination may seriously undermine the statutory goal of allowing A to get a second bite of the apple. Perhaps section 203 can be read as imposing an implied requirement of good faith and fair dealing that prohibit a licensee’s taking action near the end of his license that he knows, even intends, will interfere with the author’s exercise of the copyright after termination.
If P’s distribution is somehow infringing notwithstanding § 109, P is liable to A for damages as provided in § 504. Assuming A cannot show any actual damages, these would amount to the $20K annual profits the facts tell us P continues to earn. A is also entitled to an injunction against further sales. A could also seek statutory damages, assuming the copyright was registered (which almost surely was effected by P if not by A himself). The termination gives, however, no rights to A for P’s exploitation of the copyright prior to termination. P was the owner of the copyright between 1980 and 2015, and all proceeds received during that period, including the initial 100K from M, belong to P, because A did not bargain for a royalty in the initial contract.
M’s rights were dependent on the 1985 license from P and are therefore equally subject to termination. M, on the other hand, has indeed created a derivative work, in the form of the movie. M may therefore continue to “utilize” its movie under the terms of the grant. That means M must continue to pay 1% of its ongoing receipts, as required by the grant from P. The question is, who gets this 1% royalty?
In Mills Music v. Snyder, which we discussed in class (Question 4, page 380), the Supreme Court held that the identical language in § 304(c)(6)(A) – “may continue to be utilized under the terms of the grant” – meant that the royalty payment required from the derivative-work-creating sublicensee would continue to be split between the terminated publisher and the author, because the original grant from the author to the publisher specified such a 50-50 split. Here, the terms of the grant from A to P called simply for a one-time payment of $10,000, which was made. Literally, the “terms of the grant” would allow P to continue to receive all of the ongoing royalty payments made by M. Mills Music seems to compel such a result, harsh and contrary to apparent congressional purpose as it may appear. The dissenters in Mills Music argued that continued economic benefits were intended by the termination provisions to go to the author (or his heirs) and that the continued-use provisions were simply to permit derivative work authors (M in this case) to continue to exploit their works. Perhaps we can distinguish the situation, like Mills Music, where a royalty split was actually negotiated by the author at the time of the initial deal and our situation here, in which the author, perhaps out of ignorance or extreme need, failed to negotiate a royalty payment at all. The language “terms of the grant” refers to the terms of the terminated grant, which is the grant from A to P in this case. That grant said nothing about how to handle royalties from licenses validly granted during P’s ownership of the rights. It would unduly extend Mills Music to hold that the “terms of the grant” include terms added unilaterally by the subsequently terminated licensee requiring all royalties to be paid to that licensee. Consequently, because the “terms of the grant” between A and P do not address the question, the court is free to interpret the statute to arrive at a result that comports with its evident purpose – to give the author a second bite of the apple. M’s interests are fully satisfied by allowing M to continue to exploit the movie, subject to the 1% royalty. Indeed, if we inquire into the purpose of the 2-10 year “window” involved in the notice requirement, we will likely conclude that it was intended to allow people in P’s position to wind up the exercise of the rights in an orderly manner. This would include allowing P to sell copies already made before receiving the termination notice, at least up to the actual date of termination. But the notice provision surely was not intended to allow P to stockpile new copies that P could continue to sell after termination. A contrary interpretation would make § 203 a licensee-favoring provision, not an author-favoring provision that we know it was intended to be. It would also encourage undesirable game playing of the precise type in which P has engaged here. I conclude that M’s royalty payment should go to A, not to P.