Intellectual Property Law

Chapter 11 Lecture Notes

Major points addressed in the chapter materials include the following:

1. Copyright owners have the following exclusive rights:

• To reproduce the work
• To prepare derivative works based on the copyrighted work (often called the right
to adapt the work)
• To distribute the work
• To perform the work publicly
• To display the work publicly
• To perform the work by means of a digital audio transmission (in the case of
sound recordings)

2. Unauthorized exercise of any of these rights by another is an infringement of the
owner’s copyright in the work, whether or not the owner has secured a copyright
registration and whether or not the work is published. Any of these exclusive rights
may be transferred and they may be owned separately. A new trend among copyright
owners is to expressly grant licenses for others to use their works in limited ways, for
example, through the use of Creative Commons.

3. The most fundamental of the rights granted to a copyright owner is the right to
reproduce the work. A violation occurs whether or not the violator profits.

4. Authors, publishers, and others established the Copyright Clearance Center (CCC),
which serves as a clearinghouse to grant rights to reproduce and distribute
copyrighted books and periodicals. CCC grants permission or licenses to businesses,
universities, and others to use and reproduce works and then distributes the fees it
collects to the copyright owners.

5. Copyright owners have the right to prepare derivative works based on the copyrighted
work. The new derivative work is separately copyrightable as to its new elements.
Copyright in the derivative does not affect the copyright in the original work. Fan
fiction (unauthorized works by fans about preexisting characters and settings) is
clearly copyright infringement; however, some copyright owners encourage such (or
do not object to it) because it enhances interest in their works.

6. Copyright owners have the exclusive rights to distribute their works to the public. A
violation can occur even if the distributor acts innocently.

7. One limitation on a copyright owner’s right of distribution is the “first sale doctrine,”
which provides that once the owner has parted with ownership of copyrighted
material, the new owner can freely use, sell, or lend the work to another. The original
owner’s sale exhausts his/her exclusive right to distribute the work (although the
owner retains the right to reproduce and adapt the work and prepare derivative works
based on it). Thus, when a consumer buys a book, he/she may sell it, give it to a
friend, or destroy it; the consumer may not, however, create a sequel to the book (a
derivative work).

8. Once a first sale occurs, even abroad, the copyright owner’s right to distribute is
exhausted.

9. There are two exceptions to the first sale doctrine: The doctrine only applies to
lawfully made copies and phonorecords and the doctrine does not apply to
commercial rentals of records and certain computer programs such that these works
cannot be commercially rented.

10. Under the droit de suite doctrine, in many foreign countries, authors of works of fine
arts can share in appreciation in the value of the work even after they have sold the
work to another. California recognizes this doctrine, generally allowing artists to
share in the resale price for their works of fine art. Note, however, that the portion of
the California statute that regulated sales of works outside the state of California was
held unconstitutional in Sam Francis Foundation v. Christies, Inc., 784 F.3d 1320
(9th Cir. 2015). Moreover, in 2016, a federal court held that the entire California
Resale Royalties Act is unconstitutional because it is preempted by federal copyright
law. Estate of Robert Graham v. Sotheby’s, Inc., CV-11-08604, 2016 WL 1464229
(C.D. Cal. Apr. 11, 2016). Specifically, the court found that the Act conflicts with the
first sale doctrine and is preempted by the Copyright Act. At the time of the writing
of this text, most experts expected the case to be appealed to the Ninth Circuit.

11. Copyright owners have the exclusive right to perform the copyrighted work publicly.
Private performances by others (generally to small family or social gatherings) are
acceptable. Transmission of a rented movie to a guest in a hotel room is not a public
performance; it is interpreted as home viewing.

12. There are many exceptions to the exclusive right of a copyright owner to publicly
perform his/her work:

• The exception does not extend to sound recordings. In fact, the exclusive rights of
the owner of a copyright in a sound recording are limited to the rights to
reproduce the sound recording, to prepare derivative works based on it, and to
distribute copies or phonorecords of the sound recording to the public. The owner
of a sound recording copyright has no right to control performance or display of
the work and no right to receive performance royalties from airplay on terrestrial
radio even though royalties are received when sound recordings are played on the
Internet, satellite, and cable (namely, in the digital environment). With the
exception of AM/FM radio, each platform pays for the sound recordings they use.
Moreover, the owners of the copyrights in musical works (songs) receive royalties
arising out of the performances of their works in both the terrestrial AM/FM radio
and digital transmissions.

• There are numerous exceptions for not-for-profit educational and charitable
activities
• Exceptions exist for small businesses, restaurants, and bars (provided they meet
certain requirements as to the size of the establishment and the type of equipment
used—generally, one may use a radio or television of the type one uses in a
private home).

13. Because the playing of music in large businesses, clubs, on hold, and so forth is a
public performance (requiring the permission of the copyright owner of the music)
and because the copyright owner would have a difficult time keeping track each time
his/her work was publicly performed, performing rights organizations (such as
ASCAP, BMI, and SESAC) were formed to act as agents for music copyright owners,
grant licenses on their behalf, and collect license fees and remit the fees to the
copyright owners. A new organization, Global Music Rights, was formed in 2013.
The performing rights organization SoundExchange collects royalties for the owners
of sound recordings when their works are played on satellite radio, Internet radio
(such as Pandora), cable TV music channels, and similar platforms for streaming
sound recordings, namely, when their works are performed by means of digital
transmission.

14. Copyright owners have the exclusive right to display their works publicly (outside of
a family or small social setting). An exception exists allowing the owner of a lawful
copy of a work to display the copy publicly either directly or by the projection of one
image to viewers present at the place where the copy is located.

15. Other exceptions to the exclusive right to display generally relate to not-for-profit
educational or charitable uses or transmissions in small business establishments.
Similarly, the “home-style exception” allows one to receive a transmission of a work
in public (for example, listening to the radio in a public park).

16. Rights in sound recordings are quite limited. Once a sound recording exists,
purchasers may perform the recording without liability (generally because they have
already entered into licensing arrangements with ASCAP and BMI so that they can
play the underlying copyrighted musical work). Owners of sound recordings also
have the exclusive right to perform their works publicly by means of digital audio
transmission.

17. There are some other limitations on a copyright owner’s exclusive rights to his/her
work: Libraries and archives may generally reproduce works; libraries and archives
are not liable for infringement for unauthorized photocopying of copyrighted works
so long as a notice is placed on the equipment warning that making copies may be
subject to copyright law; transmission to hotel guest rooms of radio and television is
permissible; and radio and television stations may make a temporary or ephemeral
copy of a work. Similarly, an owner of a computer program may make a copy of it for
archival or backup purposes or to “load” it onto one’s computer.

18. Fair uses of copyrighted works (using a work for reporting, in a review, or in a
parody) are not infringement.

19. The United States, under the Berne Convention (and the statutory Visual Artists
Rights Act), recognizes moral rights of authors in works of fine arts. There are two
primary moral rights: the right of attribution (which ensures the author’s right to be
known as the author of a work); and the right of integrity (which ensures the work
will not be distorted, mutilated, or misrepresented in a way that would injure the
artist’s reputation).

20. The artist who creates the work of fine art owns the moral rights in it even after
selling the work to another. The moral rights cannot be assigned or transferred to
another, although the artist can waive moral rights (if the waiver is in writing).

21. Parties who wish to reproduce or distribute phonorecords of nondramatic musical
works can enter into voluntary arrangements with copyright owners but can also
obtain a compulsory license (whereby the user pays a statutorily set fee) when
voluntary arrangements are not pursued or the copyright owner will not negotiate or
cannot be located. This allows new renditions or “covers” of musical works. Statutory
license fees are set by the Copyright Office.