What's fair here is not fair everywhere: does the American fair use doctrine violate international copyright law?

• Author: Newby, Tyler G.

As part of the Uruguay Round of negotiations of the General Agreement on Tariffs and Trade, signatory nations elevated the enforcement of copyright and other intellectual property rights to unprecedented international prominence with the inclusion of the Trade Related Aspects of Intellectual Property (TRIPS) agreement. With respect to copyright, the TRIPS agreement added a viable enforcement mechanism--the Worm Trade Organization (WTO)--to the minimum standards provided in the earlier Berne Convention for the Protection of Literary and Artistic Works. However, a new provision of the TRIPS agreement--Article 13--appeared to narrow the exceptions to the Berne minimum standards that signatory nations may recognize. In this note, Tyler G. Newby examines the potential impact of Article 13 on the American doctrine of fair use of copyrighted works. Newby first argues that the public benefit and the maintenance of the balance between an author's monopolistic rights in a copyrighted work and the Copyright Act's underlying policy of encouraging invention are at the core of the American fair use exception. Next, Newby analyzes the language and history of Article 13 and the recently-drafted Worm Intellectual Property Organization's copyright treaty, arguing that both are broad enough to encompass the American fair use doctrine. Newby then considers the application of Article 13 to the popular practice of reverse engineering of computer programs, which is judicially recognized as fair use in some circumstances in the Unites States, but recognized as noninfringing in only more limited contexts, or not at all, abroad. Newby ultimately argues that because of the important public policy considerations embedded in American fair use doctrine, as well as the evolving nature of the issue of software reverse engineering internationally, the practice should not be subject to the WTO dispute resolution process.

INTRODUCTION

Consider the following scenario. Sonco, a major Japanese electronics company, has recently developed a revolutionary, hand-held personal computer, multimedia, and communications device with capabilities and storage capacity that are unparalleled by any other single device on the market. The HandyMan, as Sonco calls it, uses an operating system that the company developed exclusively for the device. Instead of selling the HandyMan already bundled with software applications, the company distributes the device at no initial cost to the consumer. However, in order for the HandyMan to have any use, its owner must download specific software applications from Sonco's Web site for a modest fee. For instance, if an owner wants to use the HandyMan to send e-mail, the owner must purchase and download Sonco's e-mail program. Furthermore, if users want to use the device to access the Internet (other than to download Sonco software), they must subscribe to Sonco's Internet service provider (ISP) partner for $25 per month.

Even with the ISP subscription and software download costs, the HandyMan is competitively priced with other hand-held computing devices with fewer capabilities. The device is an instant success with consumers, and, within a year, it develops a significant market share among other handheld computers. Seeing opportunity, several American software companies seek software development licenses for the HandyMan. However, Sonco refuses to grant any software development licenses, choosing to develop internally all applications for the HandyMan.

On advice of counsel, Nanosoft, a small Silicon Valley software company, develops a personal accounting application for the HandyMan in spite of Sonco's refusal to grant development licenses. To do so, Nanosoft must "reverse engineer" the HandyMan operating system's machine-readable object code into human-readable source code in order to find the string of code that allows application programs to work on the operating system. In doing so, Nanosoft must copy copyright-protected portions of the HandyMan code. Sonco learns of Nanosoft's activities, and it brings suit in a United States district court in the Ninth Circuit, claiming copyright infringement. Relying on Ninth Circuit precedent, the district court finds that Nanosoft's copying is fair use and grants summary judgment in favor of Nanosoft. The Ninth Circuit affirms, and the Supreme Court denies certiorari.

Fearing that the outcome of this case will destroy the HandyMan's business plan, Sonco complains to the Japanese government about what it perceives to be the American courts' utter disregard for its copyrights. Agreeing with the company, Japan brings a formal complaint before the World Trade Organization (WTO), alleging that American copyright law, as it pertains to computer program reverse engineering, violates international agreements on copyright. Japan seeks to impose trade sanctions on the United States until it changes its copyright law. How should the WTO decide the case? More importantly, should the WTO have the authority to decide such a dispute at all? The answer to the first of these questions is entirely unclear under current international intellectual property law. This note will attempt to show that the answer to the second question should be a resounding "no."

On April 15, 1994, parties to the Uruguay Round of negotiations of the General Agreement on Tariffs and Trade (GATT) created an instrument that, for the first time in history, established both international minimum standards for protection of intellectual property rights and an international enforcement mechanism to ensure that member states adhere to those standards.(1) In addition to creating new international minimum standards, the Agreement on Trade Related Aspects of Intellectual Property (TRIPS) component of GATT incorporates certain preexisting multilateral intellectual property treaties, and permits members to bring disputes relating to the agreement before the World Trade Organization (WTO) for resolution.(2) With regard to copyright, in particular, the TRIPS Agreement incorporates the substantive protections of the Berne Convention for the Protection of Literary and Artistic Works.(3) As part of its incorporation of the Berne Convention's minimum standards, the TRIPS Agreement requires that members provide for exceptions to the copyright owner's exclusive right to authorize reproductions of his work(4) that are analogous, at least in part, to the exception known as fair use in the United States.(5) In addition to adopting Berne Article 9(2)'s limitation on the scope of these exceptions,(6) Article 13 of the TRIPS Agreement expressly limits the scope of exceptions that members may create to any exclusive right of the copyright owner. This article provides that "Members shall confine limitations or exceptions to exclusive rights to certain special cases which do not conflict with a normal exploitation of the work and do not unreasonably prejudice the legitimate interests of the right holder."(7)

The scope of the restrictions on exceptions to the exclusive fights of authors and copyright owners that are contained in Berne Article 9(2) and TRIPS Article 13 remains to be seen. Some commentators have posited that these articles permit exceptions to exclusive rights such as the American doctrine of fair use(8) which permits what would otherwise be infringing uses because of public policy considerations. American fair use jurisprudence has developed into a broad and highly fact-specific exception to copyright's exclusive fights--an exception that is far more expansive than the limitations on copyright that exist in other countries. While the exception is codified in section 107 of the Copyright Act of 1976,(9) the statutory factors are not determinative, and the exception is ultimately an "equitable rule of reason."(10) This note will examine whether Article 13 of TRIPS and Article 9(2) of Berne establish an international fair use standard and whether the United States fair use doctrine complies with this standard. Because fair use covers a broad range of subject matter, this note focuses on one area over which there has been and most likely will continue to be disagreement, both internationally and domestically: reverse engineering of computer programs. Because findings of fair use often imply important public policy considerations, this note argues for a very liberal reading of TRIPS Article 13 and Berne Article 9(2). Furthermore, this note takes the position that interpretation of these articles, as they apply to the reverse engineering of software, should not be subject to the WTO dispute settlement process. Because these are issues that have not even been resolved at the domestic level, their resolution at an international level should be left to multiparty negotiations.

This note will first provide background on the fair use exception, both in the United States and abroad. Part II will then discuss how TRIPS Article 13 and Berne Articles 9 through [10.sup.bis] relate to the American fair use doctrine. Finally, Part III will examine whether current U.S. fair use law, as it has been applied to the reverse engineering of computer software, is in accordance with TRIPS Article 13. The note ultimately concludes that because of the evolving nature of this issue, and the importance of the fair use doctrine to American copyright policy, the application of fair use to software engineering should not be subject to the WTO dispute resolution process.

1. RELATION OF TRIPS AND BERNE TO FAIR USE

   1. Fair Use Background

      1. United States.

         The American fair use exception to the copyright owner's exclusive rights is a broad, largely judicially created doctrine that defies a simple definition or description.(11) Since the doctrine is broad enough to fill a treatise chapter, this section will provide only an overview of the doctrine, and Part III will more closely explore the application of the exception to the issue of computer software reverse...