Notice and remedies in copyright licensing.

• Author: Ard, B.J.
• Position: Continuation of III. Substantive Reform Proposals A. The Ninth Circuit's Nexus through Conclusion, with footnotes, p. 347-380

1. Unclear Guidance

   MDY offers no clear explanation for why restricting the RAM copying that occurs while running software does not satisfy its nexus test. The opinion recognizes that the user does in fact "copy WoW software" whenever she runs the game. (170) Pursuant to the RAM copy doctrine, moreover, the court recognized that users may infringe if they create copies that do not fall within the scope of the license. (171) This understanding of RAM copies indicates a plausible nexus between any condition restricting gameplay and Blizzard's exclusive right to authorize copying of its software. (172)

   The court seems to be tacitly rejecting the RAM copy doctrine in this context and requiring that the restricted conduct infringe the copyright owner's exclusive rights on its own. In rejecting copyright liability, it curtly explained that "Glider does not infringe any of Blizzard's exclusive rights," as "the use does not alter or copy WoW software." (173) If this is the test, however, then the license condition does no work at all. Consider the single term that the opinion identified as a valid condition--one that "forbids creation of derivative works based on WoW without Blizzard's consent." (174) There is no denying that this term has a direct nexus to the copyright owner's exclusive right to create derivative works: it completely duplicates it. (175) By default, no one--licensee or not--has the right to make derivative works without Blizzard's permission (barring an exception like fair use). So far as copyright liability is concerned, a license that was simply silent about any such permission would therefore be equivalent to one expressly forbidding derivative works. At best, the term might give the licensee the option to sue in contract as an alternative to suing for copyright infringement. (176) A term so completely coextensive with the protections of copyright, however, ought to fail under the Ninth Circuit's own preemption jurisprudence. (177)

   If the nexus test upheld only those conditions that overlapped with existing copyright protections, moreover, then it would impose a de facto ban on termination conditions. (178) Michael Kenneally offers a keen articulation of this problem:

   Perhaps what the Ninth Circuit meant was that using a bot to play a computer game does not in and of itself infringe copyright in the way that making unauthorized derivative works does. It would, however, be quite radical to suggest that license restrictions prohibiting actions that are not in and of themselves infringing could never act as conditions. Not only would such a rule make attribution conditions powerless ... but it would also foreclose the common practice of conditioning copyright licenses on payment. (179) The court seemed to recognize this problem in its concession that payment terms might survive as a sui generis category of conditions. (180) Under this rule, Blizzard would be empowered to revoke its license for failure to pay a subscription fee--thereby subjecting non-payers who continued to use the software to infringement liability. (181) It would be unable, however, to revoke its license for failure to comply with a prohibition on the use of third-party software like Glider. The court's opinion is unsatisfying in its failure to explain why (or even whether) payment is the single form of collateral consideration that licensors are authorized to demand. (182)

2. Problems for License Innovation

   The problem with MDTs nexus test runs deeper than doctrinal confusion. It also makes it difficult for licensors to enforce novel terms regardless of their potential benefits for consumers and copyright policy. In framing this test, the MDY court ignored the key role that these terms--which often serve as alternatives to payment--play in advancing the creation and distribution of new works. It also overlooked the importance of copyright liability in making these terms viable.

   Consider the attribution requirement of the Creative Commons license and many other free licenses. Authors use these licenses to release works to the public free of charge, asking only that users credit the original author whenever they redistribute or modify the work. These exchanges advance copyright's goals by providing both the incentives and the means to create: the reputational rewards motivate many creators, and open license terms allow subsequent creators to generate countless thousands of derivative works. (183) Terms like these also facilitate the distribution of works by allowing nonmonetary pricing. Even if a user was unwilling or unable to pay money to use a work, he might offer compensation in the form of attribution.

   The prohibitions on commercial use that are common for educational or demonstration versions of software serve a similar role. (184) Proprietary soft ware creators share free versions of their work under these licenses in hopes that they will build awareness for their brand and attract purchases from those who are impressed with the demonstration version. Users pay for these copies not with money, but with a promise not to use this copy except for educational or otherwise non-commercial purposes. Flexibility in licensing allows copyright owners to experiment with product offerings and prices in ways that can increase the public's access to and engagement with copyrighted works. (185)

   Neither set of terms would fare well, however, under the Ninth Circuit's nexus test. Attribution is not an exclusive right of copyright. (186) To be sure, the creation and distribution of derivative works--with or without attribution --implicate the author's exclusive rights. (187) The author could therefore argue that the nexus is satisfied because attribution is something the licensee must do while exercising these rights. (188) But there is little to distinguish this position from Blizzard's, whose prohibition on cheating was something the licensee had to observe while exercising Blizzard's exclusive right to make RAM copies.

   If the attribution term were relegated to enforcement in contract, however, it would be toothless. (189) What are the expectation damages for misuse of a work given away for free? (190) There might be reputational damages for the lost chance to gain recognition, but these would be difficult to quantify and seldom worth suing for. (191) What the author really wants in a case like this is not money--particularly where she gives the work away for free--but an injunction requiring the offender to either provide proper attribution or cease the infringing use. (192) This too is easier to win in copyright than specific performance would be in contract. (193) Without copyright's fee-shifting opportunities, (194) 195 moreover, it would be hard to justify the expense of a suit with so little in the way of damages.

   Non-commerciality provisions would also fare poorly under MDTs test. Consider what little difference there is between a software restriction that prohibits cheating and one prohibiting commercial uses, both of which target a specific form of RAM copying. One might try to save the non-commercial use terms by reference to the Ninth Circuit's sui generis exception for payment terms. Because the licensor often offers an unrestricted version in exchange for monetary payment, it might argue that the restriction is essentially a payment term that ought to be enforceable in copyright. This answer is not satisfying, however, because by the same logic Blizzard could enforce an anti-cheating provision--or really any provision--so long as it charged a higher price for an alternative license without that provision. Under this reasoning, non-commerciality terms might be enforceable for commercial software developers (given that they typically sell higher-priced versions without the restriction), but ironically not for Creative Commons licensors (who often release their works subject to a non-commerciality restriction without selling an unrestricted version). It is counterintuitive that a term would be more enforceable merely because the licensor was willing to put a price on its waiv34. (195) Enforcing non-commerciality provisions like these would be a losing proposition in contract. Even setting aside statutory damages, copyright offers an elegant remedy in disgorgement of profits. (196) Disgorgement operationalizes the non-commercial term by depriving the licensee of any profits from unauthorized use. Contract, however, is limited in focus to the licensor's loss. (197) At best, the licensor could argue that it was cheated out of the purchase price for the full version of its software, and it might recover the difference. Even software that retailed for $1,000 could hardly justify the expense of the lawsuit. The licensee, moreover, would have little incentive to pay the full purchase price at the outset. Limiting enforcement to contract remedies would give the opportunistic licensee the option to simply pay later and even then only if she were caught. As to these opportunists, punitive damages could play a salutary role.

   2. Alternative Substantive Reforms

   Few would defend MDTs nexus. But some scholars seek to articulate an alternative substantive nexus that would be better tailored to copyright's goals and the high information costs of licenses. Identifying the right standards, however, is difficult. Even rules that accommodated today's free culture and free software licenses might prove stifling to future license innovation. And even the most judicious substantive intervention might not speak to failures of notice.

1. The Purposive Nexus

   Molly Shaffer Van Houweling offers a purposive nexus: "a copyright license condition that purports to impose a running restriction on use of a copy of a copyrighted work [would be] enforceable only where its enforcement would promote the purposes of the copyright holder's exclusive rights." (198) This approach--almost by definition -- would yield the right level of enforcement. It is...