§ 2.06 Defenses to Criminal Copyright Infringement

• Jurisdiction: United States
• Publication year: 2020

§ 2.06 Defenses to Criminal Copyright Infringement

There are a number of important limitations to the exclusive rights of a copyright owner and defenses that a defendant can assert to a claim of civil copyright infringement. In particular, a defendant may raise as a defense: (1) five years statute of limitations period; (2) the "first sale" doctrine; (3) "fair use;" (4) laches or acquiescence;⁴²¹ (5) estoppel;⁴²² (6) abandonment;⁴²³ and (7) misuse or unclean hands.⁴²⁴ At least one defendant has successfully raised a willful ignorance defense.⁴²⁵ In addition, a number of defendants have unsuccessfully argued that Title 17, Section 506 of the United States Code is unconstitutionally vague as applied to them.

Although none of these are that likely to arise as defenses to criminal copyright infringement, misuse or unclean hands is the most likely defense to do so. Inherent in granting a copyright owner the exclusive right to reproduce the works is the risk that the owner will abuse the limited monopoly his copyright provides by restricting competition in a market that is beyond the scope of the copyright. An owner's attempt to expand his lawful protection impermissibly from competition contravenes not only the policy of copyright law, but also the central purpose of antitrust law.⁴²⁶ "Copyright misuse is a judicially crafted affirmative defense to copyright infringement" designed to combat the impermissible extension of a copyright's limited monopoly.⁴²⁷ Its purpose is to prevent "holders of copyrights from leveraging their limited monopoly to allow them control of areas outside the monopoly."⁴²⁸

The defense of copyright misuse, however, is not limited to discouraging anticompetitive behavior. Indeed, "[t]he question is not whether the copyright is being used in a manner violative of antitrust law, . . . but whether the copyright is being used in a manner violative of the public policy embodied in the grant of a copyright."⁴²⁹ The Ninth Circuit expressly adopted copyright misuse as an equitable defense to a claim of infringement in Practice Management Information Corp. v. American Medical Ass'n,⁴³⁰ noting that "copyright misuse does not invalidate a copyright, but precludes its enforcement during the period of misuse."⁴³¹

The copyright misuse doctrine "forbids the use of the copyright to secure an exclusive right or limited monopoly not granted by the Copyright Office."⁴³² The defense is often applied when a defendant can prove either: (1) a violation of the antitrust laws; (2) that the copyright owner otherwise illegally extended its monopoly; or (3) that the copyright owner violated the public policies underlying the copyright laws.⁴³³ There are a very limited number of published opinions that have addressed this issue, and while the doctrine has been applied sparingly,⁴³⁴ copyright misuse has been recognized as a valid defense,⁴³⁵ "the contours of which are still being defined."⁴³⁶

In addition, "a defendant in a copyright infringement suit need not prove an antitrust violation to prevail on a copyright misuse defense."⁴³⁷ As the Seventh Circuit interprets the defense:

"The argument for applying copyright misuse beyond the bounds of antitrust, besides the fact that confined to antitrust the doctrine would be redundant, is that for a copyright owner to use an infringement suit to obtain property protection, here in data, that copyright law clearly does not confer, hoping to force a settlement or even achieve an outright victory over an opponent that may lack the resources or the legal sophistication to resist effectively, is an abuse of process."⁴³⁸

[1] Statute of Limitations

The NET Act extended the statute of limitations from three years to five years.⁴³⁹ This is an important development because not only does it bring the statute of limitations for criminal copyright infringement into line with most other federal criminal offenses,⁴⁴⁰ but it also makes the statute of limitations for criminal copyright offenses two years longer than the three-year period for civil offenses.⁴⁴¹ Prior to the passage of the NET Act, the statute of limitations with respect to criminal and civil copyright infringement was three years. Thus, after a three-year period measured from the date of the last infringing act,⁴⁴² a party could not have been charged with either criminal or civil copyright infringement. Since the criminal statute of limitations has become two years longer than the civil period, a party can be charged with criminal copyright infringement, even though the statute of limitations with respect to civil infringement has run. This is the only instance in which an individual may be prosecuted for criminal infringement and could not be sued civilly. Thus, victims who have waited too long to sue civilly, can seek to have the government prosecute the alleged copyright infringer.

The Sentencing Guidelines permit the Court to include infringing acts that are outside the five year statute of limitations so long as the infringement was ongoing and the time barred acts are "part of the same course of conduct or common scheme or plan as the offense of the conviction."⁴⁴³

[2] First Sale Doctrine

One of the most important limitations on the exclusive rights of a copyright owner is the "first sale" doctrine codified at Title 17, Section 106(3) of the United States Code. It provides that the sale of a "lawfully made" copy terminates the copyright holder's authority to interfere with or control subsequent sales or distributions of that particular copy.⁴⁴⁴ This means that once the copyright owner has transferred ownership of a particular copy of a work, the purchaser of that particular copy of the work has the right to sell, display, or dispose of that particular work. It only applies where the copyright owner has transferred ownership of a particular copy and does not apply to a license. This distinction may be of particular importance in the digital context where licensing agreements are the norm. In general, the first sale doctrine does not apply to a licensee.⁴⁴⁵ However, because of a concern that the "licensing exception in the software context could swallow the statutory first sale defense," courts have "recognized . . . that some purported software licensing agreements may actually create a sale."⁴⁴⁶ To determine whether there is a legitimate license courts examine "whether the copyright owner (1) specifies that the user is granted a license; (2) significantly restricts the user's ability to transfer the software; and (3) imposes notable use exceptions."⁴⁴⁷

The Second Circuit held that the resale of digital files is not protected by the first sale doctrine, and violates the copyright holders exclusive reproduction rights under 17 U.S.C. § 106(1) unless excused as fair use.⁴⁴⁸

In Kirtsaeng v. John Wiley & Sons, Inc.,⁴⁴⁹ the Supreme Court held that copyright distribution and importation rights expire after the first sale, regardless of where the item was manufactured or first sold. In other words, the purchaser or other lawful owner of a copyright work lawfully manufactured abroad can bring the copy into the United States and sell it or give it away without obtaining permission to do so from the copyright owner.⁴⁵⁰ It does not, however, give the purchaser the right to make reproductions of that work. In a number of cases, copyright convictions have been overturned because of inadequacies in the government's proof on this issue.⁴⁵¹ The first sale doctrine may only be invoked by a defendant if he has been involved in the distribution of authorized copies. If copies are unauthorized, the first sale doctrine does not apply.⁴⁵² It also does not "extend to any person who has acquired possession of the copy or phonorecord from the copyright owner, by rental, lease, loan, or otherwise, without acquiring ownership of it."⁴⁵³

Courts disagree over the burden of proof of applying the first sale doctrine to criminal copyright infringement.⁴⁵⁴ A number of courts suggest that the United States must prove that the copyrighted work was not the subject of the first sale.⁴⁵⁵ Other courts, however, have held that the issue of first sale is an affirmative defense that must be raised by the defendant.⁴⁵⁶ This view is supported by the legislative history of the 1976 Act.⁴⁵⁷ As a result of the uncertainty surrounding this issue, it is recommended that defendants raise the issue of the first sale doctrine as an affirmative defense. Courts have uniformly rejected defendants' arguments that the government must account for the distribution of all copies of a work.⁴⁵⁸ The Department of Justice opines that evidence of reproduction of unauthorized copies is the best and easiest way of meeting, the government's burden under the first sale doctrine⁴⁵⁹ and the nature of the distribution system employed by the copyright holder may also negate the possibility of a first sale doctrine.⁴⁶⁰

[3] Fair Use

Another very important limitation on the exclusive right of a copyright holder is the doctrine of "fair use." "[T]he fair use of a copyrighted work, including such use by reproduction in copies . . . , for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright."⁴⁶¹ This limitation on exclusivity "allows the public to use not only facts and ideas contained in a copyrighted work, but also [the author's] expression itself in certain circumstances."⁴⁶² The principal purpose of the fair use doctrine is to allow later authors to use a previous author's copyright to introduce new ideas or concepts to the public.⁴⁶³ The common law right of fair use is now codified at Title 17, Section 107 of the Copyright Act and breaks it into four factors that a court must weigh in assessing whether use of a work is fair or infringing.⁴⁶⁴ The party asserting fair use bears the burden of proof.⁴⁶⁵

The first of the four enumerated factors is the "purpose and character of the...