AuthorZuercher, John

This article is concerned with the question of whether copyright law in the United States is currently equipped to achieve its original goal, set within the U.S. Constitution, to promote innovation and progress. This article suggests that copyright law is not equipped to achieve this goal because a paradox inherent in copyright law is hindering copyright litigation and causing uncertainty. The paradox is found in 17 U.S.C. [section] 106, which protects transformative works that are derivative, and 17 U.S.C. [section] 107, which protects transformative works as fair use. Ideally, the federal courts would solve this dilemma by interpreting the appropriate application of these competing protections through numerous case-by-case analyses. However, few cases are currently reaching the courts or are resulting in judicial opinions because the federal court system is ill-equipped for the task due to the expense, time, and damages involved in litigation. For effectiveness and to meet the goals of copyright, copyright litigation must become affordable, accessible, and timely, resulting in more judicial opinions and individual case analyses. To this end, I propose a two-fold plan including (1) reducing statutory damages in copyright cases throughout all levels of litigation, and (2) introducing a small claims copyright court.

INTRODUCTION I. DEVELOPMENT OF COPYRIGHT A. Origins of Copyright and the Economic Incentive Theory B. Development of Fair Use C. Derivative Use/Transformative Use Paradox II. THE STATUS QUO A. Number of Cases: B. Costs C. Time D. Statutory Damages E. Practical Assessment F. Status Quo in the United Kingdom: IPEC Analysis III. HYPOTHESES A. If Statutory Damages Were Reduced, the Incentive to File Cases with the Federal Court Would Also Be Reduced B. If the Cost/Benefit of Pursuing a Case in Federal Court is Too High, Copyright Owners Will Look for Alternative Methods of Enforcement IV. AN ALTERNATIVE TO THE STATUS QUO: REDUCED STATUTORY DAMAGES & SMALL CLAIMS COPYRIGHT COURT A. Reduced Statutory Damages B. Small Claims Copyright Court 1. Voluntary 2. Centralized 3. Costs 4. Panel of Copyright Experts 5. Time 6. Damages 7. Limitation of Appeal 8. Precedent CONCLUSION Introduction

Imagine for a moment that a woman, Anna, had a hobby she enjoyed doing in her free time. This hobby revolved around the creation of fan fiction online. Anna did not use any of the characters from the different works she wrote from, but instead would create new characters, with new stories of their own, within the same worlds. She received no compensation for these works, but over time she wrote several stories because she enjoyed being a part of a community that shared her interests and she could receive critiques on her writing, which she believed would help her to become a better writer. Then one day, Anna came across an odd letter in her mail. Opening it, she immediately saw in big, bold letters, "Cease and Desist." Suddenly, a lot of terrifying phrases were coming at her: copyright infringement, damages up to $150,000, and have your attorney contact us. Scared, Anna looked up a local attorney and scheduled a meeting. The lawyer told her that while it was possible her fan fiction might constitute copyright infringement on the author's exclusive derivative rights, it may also constitute fair use--which is an affirmative defense against a claim of copyright infringement. However, he explained that proving fair use required defending her case in court. While he thought Anna had a good case, the lawyer did not know if she would win, as there has never been a fan fiction case like it heard before the federal courts. He also warned her that a trial could take up to two years, cost her several hundred thousand dollars in legal fees, and force her to pay double that number in damages should she lose. Those figures were more money than Anna would make in the next five years of working and she barely had any free time as it was--certainly not enough time to spend in court. Defeated, Anna headed home, took down all her materials, and resigned herself to never writing fan fiction again. All the while wondering, what if her works did constitute fair use?

Currently, copyright law and the ability of creators to successfully rely on the flexible fair use standard is hindered by uncertainty. (1) Looking at U.S. Const. art. I, [section] 8, cl. 8, describing the purpose of copyright, "[t]o promote the Progress of Science and useful Arts," it seems like copyright would be a straightforward system. (2) The previous section explains the purpose and, directly following this phrase, there is a way to go about doing it: "by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." (3) However, as copyright law has developed over the last century, the protections offered by it have expanded from their simplistic origins of protecting solely against the direct reproduction of works. (4) Currently, the promotion of progress is a balancing test that provides incentives and a shelter for creative works, but at the same time, limits these in both time and scope. (5) The balancing test consists of weighing the exclusive rights of authors in their copyrighted works under 17 U.S.C. [section] 106 with the limitations on those exclusive rights under 17 U.S.C. [section] 107--or rather what [section] 107 is more commonly known as, the fair use factors.6 However, there is an inherent paradox in that balancing test. (7) 17 U.S.C. [section] 106(2) provides protection to creators of derivative works, defining derivative as "any ... form in which a work may be recast, transformed, or adapted." (8) This definition of derivative works became problematic in 1994, when the Supreme Court decided Campbell v. Acuff-Rose Music, Inc., as 17 U.S.C. [section] 107(1) was expanded to include the degree that the work is transformative. (9) The Court in Campbell stated

"if [the original work] is ... transformed in the creation of new information, new aesthetics, new insights, and understandings--this is the very type of activity that the fair use doctrine intends to protect for the enrichment of society ... The goal of copyright, to promote science and the arts, is generally furthered by the creation of transformative works." (10)

Therefore, while 17 U.S.C. [section] 106(2) and 17 U.S.C. [section] 107(1) seek opposite goals, courts apply them to the same subject, which is transformative works. (11)

The paradox above has been left to the federal courts to sort out amongst themselves. (12) Ideally, the courts would give the public a clear picture of their rights by hearing numerous copyright cases and gradually moving towards a workable balance of works classified as derivative and works that qualify for fair use treatment. (13) By its nature, fair use is a flexible doctrine that is constantly developing through the interpretations of individual court cases. (14) However, the federal courts are failing to hear cases to completion and issue judicial opinions, which would provide the type of meaningful discourse necessary to provide authoritative certainty to copyright owners and users in the United States. (15) Without some amount of certainty, the majority of creators are incapable of bringing copyright infringement claims or are too afraid to attempt to declare fair use, as such a claim can only be brought up as an affirmative defense in court. (16) This situation ultimately chills the creation of new works because, upon notice of copyright infringement, creators are unwilling to assert fair use and instead often engage in acts of self-censorship, unnecessarily obtaining and paying for licenses they may legally not require, or they stop creating new works altogether. (17)

Part I of this article will provide a brief background of the history and development of copyright law and fair use. Specifically, Part I will discuss the reasoning behind the original exclusive rights provided to creators and how they were gradually extended to include derivative rights and fair use. (18) This section begins by focusing on the utilitarian approach to copyright, which derives its basis from classical economic theory and inspired the writers of the Constitution. (19) The section then continues with the historical development of fair use and how the transformative use paradigm has become the defining standard. (20) Similar to the author's exclusive rights, fair use is a concept that has been developing over time. (21) It is only in the last twenty or so years that fair use has come to overtly and directly conflict with exclusive rights of copyright holders. (22) With a better understanding of the origins of an author's exclusive rights and fair use, we will hopefully proceed with a better understanding of how copyright law ended up in this paradoxical predicament.

Part II explains how the current plan, leaving the paradox up to the federal courts to sort out, is delaying any meaningful discourse on how anyone should interpret 17 U.S.C. [section] 106(2) and [section] 107(1) together. (23) Specifically, this section will explain that the problem derives from federal courts being the one and only option in regards to the venue for copyright cases and that the majority of filed copyright cases are either not pursued or not litigated to completion. (24) When people do not continue to litigate cases to their natural end, the courts are not creating any judicial policy, a necessity in developing the flexible fair use standard, leaving a chilling effect on the copyright environment. (25) While there are several factors causing the failure of the public to litigate their claims, the issue is mainly that the courts are not a practical option for most parties. (26) The federal courts require both an exorbitant amount of money and time to bring or defend claims. (27) Additionally, federal judges often lack the specialized knowledge...

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