Copyright as trade regulation.

• Author: Stadler, Sara K.

This Article identifies conflicting strands of the public interest in copyright, then proposes to mediate those conflicts by conceiving of copyright law as a prohibition against acts of unfair competition. Under this conception, copyright infringement would consist of the infliction of competitive harm in a "relevant market," a market this Article proposes to define by asking what rights creators are entitled to expect when they engage in the act of creation. As regards "printed works" (that is, works created for the purpose of existing in copies), this Article argues that creators are not entitled to expect the right to exclude others from engaging in acts of private copying, acts which, standing alone, do not serve as market substitutes to any significant extent. Instead, creators are entitled to expect only the right to distribute those copies to the public--for only acts of public distribution are behaviors that threaten to cause the sorts of competitive harms that Congress should seek to redress. This Article concludes by revealing how such a copyright law might help to resolve a few of the issues at the very center of the copyright debate: the pervasiveness of personal copying, the rise of contractual and technological access controls, and, of course, the "death" of the fair use defense.

INTRODUCTION I. LOCATING THE PUBLIC INTEREST IN COPYRIGHT A. The Inducement of Creation B. Access to the Products of Creation C. Open and Populous Markets in Copyrighted Expression II. TOWARD A THEORY OF UNFAIR COMPETITION IN COPYRIGHT A. Of Copyright and Public Acts B. The Language of Competition C. The "Predatory Competitive Practice" of Public Distribution III. ON THE UTILITY OF COPYRIGHT AS TRADE REGULATION A. Solving the "Problem" of Personal Copying B. Preempting the End Run Around Copyright C. Breathing Life into the Fair Use Defense CONCLUSION INTRODUCTION

In section 107 of the Copyright Act, Congress codified the defense known as "fair use," under which qualifying, unauthorized uses of copyrighted works "for purposes such as criticism, comment, news reporting, teaching ..., scholarship, or research [are] not ... infringement[s] of copyright." (1) Scholars have described fair use, variously, as a remedy for "market failure," (2) and therefore a temporary substitute for functioning markets; (3) a doctrine slouching toward irrelevance (4) and even death (5) as markets become more sophisticated; a tool for advancing social goals when a finding of infringement promises to produce "bad results"; (6) and a doctrine that is empty of substance (7) and therefore "dangerous" (8) because it creates the illusion that there are limits to an increasingly unlimited entitlement. In other words, copyright scholars cannot agree on what, exactly, the fair use defense is for. What hope is there for the courts?

Nowhere is this disagreement more apparent than in the dispute over the Google Library Project, in which Google proposes to scan every book owned by several university libraries and the New York Public Library. (9) The resulting digital images would constitute a powerful research tool: not only would the images be searchable by keyword but researchers also could view the results of their searches online in image form--along with bibliographic information enabling them to purchase (or borrow) the books of greatest interest. (10) In short, "[t]he Library Project [would] make it easier than ever before for users to locate the wealth of information buried in books." (11) Because some of those books would be copyrighted, Google has announced that if a search produced a "hit" on a copyrighted work, researchers could view only a few sentences from that work, in the form of "snippets" surrounding the search term. (12)

When Google announced its project, authors and publishers objected, arguing that Google would be engaging in repeated acts of infringement via the wholesale copying (scanning) of works in which it did not own the copyrights. (13) This was a valid objection, for the Copyright Act, in section 106, gives copyright owners the "exclusive right[] ... to reproduce the copyrighted work in copies" and to authorize others to do the same. (14) The word "copies" is defined broadly, in section 101, to include any "material objects ... in which a work is fixed by any method now known or later developed." (15) Because computer memory (whether volatile or nonvolatile (16)) is a "material object," digital scans of books stored in computer memory are "copies" for the purposes of section 106. In response to these objections from authors and publishers, Google proposed a change to its policy under which copyright owners who did not wish their works to be scanned could "opt out" by November 1, 2005, the date on which Google planned to begin the expensive process of digitization. (17) Unsatisfied with this solution, a group of authors sued Google on September 20, 2005, (18) and a group of publishers filed a similar lawsuit a month later, on October 19. (19) The cases (together, "the Google case") are pending in the United States District Court for the Southern District of New York. (20)

Because the acts in which Google has engaged almost certainly constitute prima facie infringement, the fate of its library project likely depends on the application of the fair use defense. Section 107 of the Copyright Act instructs courts to decide whether a disputed use is fair by evaluating four statutory factors. (21) The Supreme Court has placed the most emphasis on the first (the commerciality of the use) and the fourth (the effect of the use on the market for the original), and it is easy to see why: commercial uses are more likely than noncommercial ones to compete with sales of the copyrighted work. Further, any such competition is likely to result in lower prices and reduced market share for everyone, and these market effects, in turn, are likely to diminish the profits of those erstwhile monopolists, the creators (and their assigns). Faced with the prospect of earning lower profits, at least some potential creators are likely to forego the act of creation in favor of other, more profitable pursuits, thus leading to a decline in the number or the quality of works created. Nobody wants that.

The fair use defense would be easy to apply if commercial uses usurped the market for the copyrighted work, while noncommercial ("nonprofit educational") (22) ones did not. But there are two problems with a fairness test for which commerciality is the linchpin: First, the definition of "commercial" is becoming increasingly broad. One might think that scholarly activities, at least, would be comfortably on the gratis side of the line. Yet courts have found even the activities listed in section 107--including scholarship--to be commercial when users gain an indirect economic advantage by failing to pay the copyright owner for a license, thus depriving her of potential licensing revenue. (23) As a number of scholars have noted, this inquiry is circular. (24) If depriving the copyright owner of licensing revenues were enough to make a use "unfair," then the fair use defense would be no defense at all, for by definition, the fair use defense comes into play only when a defendant fails to pay for a license. Recognizing this, (25) courts have asked whether the defendant has deprived the copyright owner of licensing revenues only in "traditional, reasonable, or likely to be developed markets." (26) The problem with this seemingly narrower inquiry, however, is that copyright owners themselves can define whether markets for their works are "likely to be developed" by developing those markets themselves. In other words, copyright owners themselves can define away the market failure for which fair use is the remedy.

The only exception to this rule appears to be that "'[c]opyright owners may not preempt exploitation of transformative markets,'" (27) which reveals the second problem with using commerciality as a test of fairness: commerciality (or lack thereof) does not appear to be dispositive of fairness either way. As the Supreme Court warned in Campbell v. Acuff-Rose Music, Inc., "the mere fact that a use is educational and not for profit does not insulate it from a finding of infringement, any more than the commercial character of a use bars a finding of fairness." (28) The "purpose and character" of the use in Campbell was a 2 Live Crew parody of the Roy Orbison classic "Oh, Pretty Woman," but it was commercial nonetheless: the song was being offered for sale in music stores nationwide, and 2 Live Crew (or more likely, its record company) was making money. (29) Whether the rap group also was competing with Roy Orbison and his music publisher was another question. Although it remanded this question to the district court, the Supreme Court seemed to think the answer was no. "[A] s to parody pure and simple," the Court wrote, "it is more likely that the new work will not affect the market for the original in a way cognizable under this factor, that is, by acting as a substitute for it." (30) Why not? Because a parody is transformative, not competitive. It does not "'supersede[]'" the original, but instead "adds something new, with a further purpose or different character, altering the first [work] with new expression, meaning, or message." (31) According to the Court, "the goal of copyright, to promote science and the arts, is generally furthered by the creation of transformative works"' (32)--even commercial ones.

What does this mean for Google? Under existing law, Google must show either market failure (33) or transformation in order to prove its entitlement to the fair use defense. This presents a considerable challenge. Consider market failure first: knowing that the district court is likely to ask whether Google has entered a market that is "likely to be developed" by the plaintiffs, (34) at least one of the plaintiffs has hastened to develop such a...