Saturday, 14 July 2012

How tech law principles are starting to mould copyright

This has been a hectic couple of weeks for copyright.  Ten days ago the EU Court of Justice published the UsedSoft decision, which will have us thinking in a completely new way about exhaustion of rights online.  On Thursday this week the Canadian Supreme Court delivered five separate copyright judgments on subjects ranging from fair dealing to communication to the public, each in its separate way reinforcing a more user-centric, less author-centric, approach to copyright. 

The Canadian decisions could have come straight out of the pages of the Hargreaves Review.  They stressed the need in copyright for:
“a balance between promoting the public interest in the encouragement and dissemination of works of the arts and the intellect and obtaining a just reward for the creator”, which requires recognising the “limited nature” of creators’ rights (SOCAN v Bell Canada [2012] SCC 36 at [8], quoting the 2002 SCC case of Th├ęberge.)  
This reflected:
“a move away from an earlier, author-centric view which focused on the exclusive right of authors and copyright owners to control how their works were used in the marketplace … Th├ęberge focused attention instead on the importance copyright plays in promoting the public interest, and emphasized that the dissemination of artistic works is central to developing a robustly cultured and intellectual public domain.”
The Canadian decisions also evince, in common with the ECJ’s UsedSoft decision, a desire to mould copyright in the digital and online area so that it applies in the way that it did (and still does) to physical copies.  “The traditional balance between authors and users should be preserved in the digital environment.” ESA v SOCAN  2012 SCC 34 at [8].

It is by now a commonplace observation that, thanks originally to the accident of technology that both accessing a digital copyright work and any dealings with it require the making of at least transient copies, copyright enjoys greater reach over digital copies than over hard copies. 
This extended ambit gives us the bizarre (to anyone other than techie copyright lawyers) spectacle of courtroom debates over exactly how many fragmentary milliseconds of what kind of copyright works are held in a memory buffer at any given moment (see e.g. FAPL v QC Leisure [2008] EWHC 1411 (Ch) and ITV v TV Catchup [2011] EWHC 1874 (Pat)).
It also gives copyright owners more far-reaching control over online consumer behaviour compared with offline and provides new opportunities to extract royalties.  It was an attempt to double-dip royalties for downloaded online games that provoked the disfavour of the Canadian Supreme Court in ESA v SOCAN.   

Both the ECJ and the SCC kicked back hard against what they perceived as imbalance between hard copy and digital copyright outcomes.  The ECJ strove to achieve ‘functional equivalence’ between a fully paid permanent download and a sale on physical media.  It said that what would otherwise be a communication to the public would be converted into a distribution to the public if a ‘transfer of ownership’ (defined in economic rather than legal terms) had taken place.  The ability to rely on the first sale doctrine in order to acquire second-hand software applied in equivalent situations, regardless of whether the transactions took place on physical media or by download. 
The SCC invoked a similar concept of ‘technological neutrality’ in several of its judgments, two of which together held that the right of communication to the public applied to streaming but not to downloads.  The principle of technological neutrality:
“requires that the Copyright Act apply equally between traditional and more technologically advanced forms of the same media. … In our view, there is no practical difference between buying a durable copy of the work in a store, receiving a copy in the mail, or downloading an identical copy using the Internet.  The Internet is simply a technological taxi that delivers a durable copy of the same work to the end user.” (ESA v SOCAN)
It is, probably, no coincidence that these user-centric decisions were made in cases concerning tariff-setting and an attempt to control further dealings in legitimately purchased items.  In these cases the rightsholders’ positions could easily be portrayed as unmeritorious attempts to reap an advantage from an over-technical application of copyright.  In piracy cases, on the other hand, rightsholders can reckon on a more sympathetic audience for pleas that expansive rights and remedies are required in order to restrain unbridled infringement. 

Tech lawyers have for many years advocated that laws affecting technology should, all other things being equal, be technology neutral and should seek to achieve functional equivalence online and offline.  
As long ago as 1999 the US UETA model law for electronic transactions was based on the notion of achieving functional equivalence between electronic transactions and their paper counterparts. 
Technological neutrality is also a desirable goal, mostly as a guiding principle for drafting legislation.  The drafter should seek a level of generality that will ensure that the legislation does not become out of date or skewed in its effect as technology develops.  While it can be dangerous to elevate technological neutrality to a principle that overrides all other considerations, the Canadian Supreme Court's invocation of the principle was appropriate in order to correct a perceived legislative skew resulting from an unforeseen accident of technology.
Courts have previously shown themselves to be willing to reach outside the four corners of copyright statutes in order to beat copyright into better shape.  We can think of implied licence, non-volitional copying, the fundamental right of freedom of expression, public interest, public benefit, derogation from grant and principles extracted from the Electronic Commerce Directive. 
Now we can add to the list two technology law doctrines, the deployment of which at the highest judicial levels perhaps, along with Hargreaves, heralds a sea change in attitudes to the appropriate scope and function of copyright.

Friday, 6 July 2012

UsedSoft - not just about software?

Tuesday's decision of the EU Court of Justice in UsedSoft has set the software industry aflutter by largely giving the green light to resale of permanent software licences, regardless of whether the original provision of the software was on a physical medium such as CD or DVD or was downloaded, so long as the original purchaser renders its copy unusable. 

The principle applied in UsedSoft is that the original transaction 'exhausts' the rightsowner's ability to control further dealings with the copy.  The Court has held that this even extends to permitting a resale of the bare licence, where the purchaser owner downloads a new copy of the software from the rightsowner's website.  For fuller details of the decision see here.

But buried in the middle of the judgment is what at first sight appears potentially to be an even more radical statement, suggesting that the same principle may apply not just to computer programs but to all copyright works.  At paragraph 52 the Court states: 
"the existence of a transfer of ownership changes an ‘act of communication to the public’ provided for in Article 3 of [the Copyright in the Information Society directive] into an act of distribution referred to in Article 4 of the [Infosoc] directive which, if the conditions in Article 4(2) of the [Infosoc] directive are satisfied, can, like a ‘first sale … of a copy of a program’ referred to in Article 4(2) of [the Software] Directive 2009/24, give rise to exhaustion of the distribution right."
The key statement is that an act of communication to the public 'changes' into an act of distribution if there is a transfer of ownership.  The court said that transfer of ownership includes a download from the internet where the rightsholder has also "conferred, in return for payment of a fee intended to enable him to obtain a remuneration corresponding to the economic value of the copy of the work of which he is the proprietor, a right to use that copy for an unlimited period".

The Infosoc Directive specifically states that an act of communication to the public does not give rise to exhaustion.  But if there is no act of communication to the public because it has changed into an act of distribution, then it would seem that the 'no exhaustion' exception can be sidestepped.

In principle the broad economic test of transfer of ownership applied in UsedSoft could then also be applied to works within the Infosoc Directive, such as music and video.

This could suggest that fully paid-for permanently licensed authorised downloads under the Infosoc Directive, such as of music and video, are capable of being exhausted thus allowing purchasers to transfer them like secondhand CDs or DVDs. The bright line for exhaustion would then seem to be not between physical copies and downloads, but between downloads (when they satisfy the economic value test described above) and streaming or other service-type online offerings.  

However there are some obstacles in the way of applying exhaustion to online downloads of non-computer program works.  First, Recitals (28) and (29) of the Infosoc Directive lean very strongly in favour of a distinction between tangible and non-tangible copies:
“(28) Copyright protection under this Directive includes the exclusive right to control distribution of the work incorporated in a tangible article. The first sale in the Community of the original of a work or copies thereof by the rightholder or with his consent exhausts the right to control resale of that object in the Community. This right should not be exhausted in respect of the original or of copies thereof sold by the rightholder or with his consent outside the Community. …
(29) The question of exhaustion does not arise in the case of services and on-line services in particular. This also applies with regard to a material copy of a work or other subject-matter made by a user of such a service with the consent of the rightholder. Therefore, the same applies to rental and lending of the original and copies of works or other subject-matter which are services by nature. Unlike CD-ROM or CD-I, where the intellectual property is incorporated in a material medium, namely an item of goods, every on-line service is in fact an act which should be subject to authorisation where the copyright or related right so provides.”
This apparent distinction between tangible and non-tangible is reflected in the reference in Article 4(2) of the Infosoc Directive to the distribution right being exhausted on first sale or other transfer of ownership within the EU of an 'object'. 

The Advocate General in his Opinion discussed these provisions of the InfoSoc Directive and concluded that they did not prevent a download being regarded as a distribution capable of being exhausted. If that is right, then UsedSoft could admit of a possibility not mentioned in recitals (28) and (29), that of an online download that is not in the nature of a service.

However applying exhaustion to online non-software would also do violence to the Agreed Statement interpreting Articles 6 and 7 of the WIPO Copyright Treaty, which the Infosoc Directive implements:
"As used in these Articles, the expressions "copies" and "original and copies," being subject to the right of distribution and the right of rental under the said Articles, refer exclusively to fixed copies that can be put into circulation as tangible objects."
Ultimately the Court in UsedSoft based its decision on the narrower ground of the Software Directive being a lex specialis that takes precedence over the lex generalis of the Infosoc Directive.  In doing so it left open, albeit in somewhat sceptical terms, the possibility that the exhaustion of the distribution right under the Infosoc Directive concerns only tangible objects: "even supposing" that to be right "that would not be capable of affecting the interpretation of Article 4(2) of the Software Directive, having regard to the different intention expressed by the European Union legislature in the specific context of that directive".

At a more general level the distinction between tangible and non-tangible is the very distinction that the Court in UsedSoft has rejected in favour of an economic value test.

The Court in UsedSoft did make a distinction between computer programs and works under the Infosoc Directive.  It said:  "The use of a computer program, unlike the use of other works protected by copyright, generally requires its reproduction." 

It is unclear whether the Court meant this to favour or oppose the possible application of exhaustion to non-program downloads.  If anything the implicit lack of need to take account of the reproduction right would suggest that it would be conceptually easier to apply exhaustion. 

However in fact the enjoyment of other works on a computer does, as with computer programs, involve transient reproduction.  So it would seem that in the way that the Court invoked the Article 5(1) 'lawful acquirer' provisions of the Software Directive in Usesoft to bypass the reproduction right, in order to achieve the same result it would have to find a way of doing the same with the Article 5(1) 'lawful use' provisions of the Infosoc Directive.

We can speculate that UsedSoft may open up the path to genuine file-shifting of all sorts of copyright works - not the type of illegitimate file-sharing that multiplies and proliferates infringing copies by uploading to public sites, but person to person transfers where the original purchased copy is deleted: the functional equivalent of passing on second hand CDs or DVDs.  Whether this is the direction that is in fact signposted by UsedSoft will have to await further debate and court rulings.

[Updated 29 June 2013 to include reference to WIPO Copyright Treaty Agreed Statement.]