Rethinking copyright misuse.

• Author: Judge, Kathryn

INTRODUCTION I. HISTORY: ROOTS OF COPYRIGHT MISUSE A. Contextualizing the Adoption of Copyright Misuse B. Patent Misuse C. Possible Supreme Court Guidance D. The Role of the Judiciary E. Completing the Stage II. IDENTIFYING MISUSE A. The Cases 1. Lasercomb 2. Alcatel 3. Practice Management 4. WIREdata B. How Should the Doctrine Be Understood? 1. Anticompetitive conduct 2. Expansion of rights 3. Abuse of process 4. Principled guidelines 5. Limits on First Amendment protection 6. Potential counterarguments 7. Negotiability should influence finding of misuse III. REMEDIAL MEASURES A. Pliability Rules B. Liability Protection in the Field of IP C. The Best Rule for Misuse 1. Dominant approach 2. Napster approach 3. Proposed liability rule approach CONCLUSION INTRODUCTION

Over the last few decades, copyright has evolved in dramatic and unprecedented ways. At the heart of this evolution lies a series of changes in the statutory scheme that have substantially expanded copyright's scope. (1) There has also been a rise in private ordering as copyright holders increasingly use licenses to govern use of their copyrighted material and thereby supplant the default terms prescribed by the Copyright Act. (2) Mediating and contributing to this evolution has been the judiciary. The judiciary has long played an active role in protecting copyright policy, and the dynamism of the last thirty years has only accentuated the importance of the judiciary's role of interpreting and applying copyright law. The Supreme Court has led the way, but lower federal courts have also issued a number of formative decisions. (3)

One of the most significant moves by lower courts to protect the public policy embodied in copyright is the adoption by some of the doctrine of copyright misuse. Copyright misuse is an equitable defense to a copyright infringement claim based upon the doctrine of "unclean hands." While the doctrine's roots arguably go back half a century, copyright misuse was first successfully invoked by an alleged copyright infringer to escape liability in the 1990 ease Lasercomb America, Inc. v. Reynolds. (4) In Lasercomb, the Fourth Circuit held that the plaintiff had misused a software copyright when it included in its standard licensing agreement a term that forbade the licensee from creating a competing product. The court held that inclusion of such a provision, while not an antitrust violation, violated the public policy behind copyright and hence rendered the plaintiff's copyright unenforceable.

The doctrine has since reappeared in a number of cases dealing primarily, though not exclusively, with software copyrights. Both the Fifth (5) and Ninth (6) Circuits have accepted copyright misuse as an affirmative defense, and others (7) have recognized the doctrine's validity. However, as recognized in Nimmer on Copyright, "Lasercomb remains the exceptional case. Other courts--without denying that illegitimate, anticompetitive conduct could lead to a misuse defense--tend to deny the existence of such conduct on the facts before them." (8)

The mixed reception courts have given the doctrine may be attributable in part to confusion about what constitutes misuse. Copyright misuse can arise in two different but related circumstances. (9) The first type occurs when a copyright holder uses rights granted to him under the Copyright Act in a manner that violates federal antitrust law. (10) The second type arises when a copyright holder attempts to extend his copyright beyond the scope of the exclusive rights granted by Congress in a manner that violates the public policy embodied in copyright law. (11) However, the relationship between the two strands, and the degree to which competition policy underlies the public policy approach, has been a source of significant confusion. (12)

The hesitancy of courts to apply the doctrine may have been accentuated by the fact that, until recently, it has been assumed that a finding of misuse renders a copyright unenforceable, at least until the misuse has ceased and its effects have been purged. As the resultant limitation on enforceability could be excessively punitive relative to a minor transgression, courts may have resisted deeming such transgressions misuse.

This Note attempts to address and partially resolve these difficulties in two ways. First, it calls for a clarification of the policy goals protected by misuse and for the adoption, where possible, of rules (or standards) to protect the identified policy goals. Copyright misuse already has been most accepted in an area where we have a clear policy goal and a defined line to protect it--competition and antitrust law. Yet many of the cases invoking copyright misuse, while rationalized as necessary to protect copyright policy, fail to specify the public policy at stake and how the copyright holder's misuse undermines that policy. This clarification should not only assist courts in adjudicating copyright misuse claims, but should also enhance the doctrine's efficacy by putting copyright holders on notice of what constitutes misuse.

Examination of the cases applying and commentary discussing copyright misuse suggests that recognizing one additional policy aim and a couple of guidelines to protect it should be sufficient to encompass the great majority of violations the doctrine has thus far been asked to address. That policy is the protection of the values embodied in the First Amendment (13) and, consistent with dicta from the Supreme Court's recent decision in Eldred v. Ashcroft, (14) the protective guidelines are the idea/expression distinction and fair use. Specifically, this Note argues that any attempt by a copyright holder to expand the scope of his copyright to gain control over an idea or to deter fair use should constitute misuse.

Second, in order to make this potentially broad reading of copyright misuse palatable, I suggest courts consider invoking an alternative remedial measure upon finding misuse: denial of equitable relief. Because the doctrine of copyright misuse already has been identified as equitable in nature, it lends itself to such a remedy. (15) The purpose of introducing this additional remedial option is not to convert the exclusive rights held by a copyright holder from property rights into liability rights. Nor are the proposed modifications to copyright misuse intended to deter parties from contracting around the default allocation of rights embodied in the Copyright Act. Rather, the proposed regime aims to force copyright holders to choose between respecting certain elements of copyright law deemed particularly important to copyright policy or forgoing their right to seek injunctive relief under the Copyright Act. Thus, if a copyright holder chooses to use contract to create a private governance regime that controls virtually all use of his copyrighted material and the regime he creates fails to respect certain tenets identified as fundamental to copyright policy, he will be relegated to remedial options comparable to those he would have under contract law. (16)

This Note proceeds in three parts. Part I provides the background necessary to understand the doctrine's recent adoption. Part II summarizes the leading cases on copyright misuse and considers the substantive questions of what does and what should constitute copyright misuse. Part III examines the remedy associated with a finding of misuse and suggests that courts continue a pattern they have already started of shifting the remedy away from that used in patent misuse toward one better suited to copyright.

1. HISTORY: ROOTS OF COPYRIGHT MISUSE

   This Part sets the stage for understanding the doctrine of copyright misuse--why it is needed, where it came from, and how long it has been around. It begins with an examination of the evolution of copyright law in recent decades, both in terms of changes in the law governing copyright and changes in the way copyright holders exercise the rights the law grants them. Having established the potential need for a doctrine like misuse, I turn to the doctrine's roots. Thus Parts I.B and I.C examine patent misuse, the doctrine's more established relative, and a couple of Supreme Court cases that some have considered indicative of the Supreme Court's tacit approval of the doctrine of copyright misuse. After rejecting the notion that such approval can be implied, Part I.D looks at the role of the judiciary in shaping and implementing copyright law and how the adoption of copyright misuse fits with this role.

   1. Contextualizing the Adoption of Copyright Misuse

      Copyright has changed dramatically in recent years. Central to copyright's evolution over the last few decades is a series of changes to the statutory scheme governing copyright, each of which has expanded copyright's scope. The 1976 Act started the trend by making federal copyright protection begin from the moment of fixation, lengthening the term of protection from fifty-six to seventy-five years, and doing away with the requirement that a copyright holder renew his copyright to qualify for the full period of protection. (17) The 1989 Berne Amendments continued the trend, most significantly by eliminating the mandatory notice requirement and thereby eliminating the ability of Americans to presume that any work lacking a copyright notice was in the public domain. (18) With the Visual Artists Rights Act of 1990, (19) Congress expanded the bundle of rights granted to artists by adding the rights of attribution and integrity to that bundle; in the same year, Congress adopted the Architectural Works Copyright Protection Act, (20) which expanded copyright's scope to encompass architectural works. In 1994, Congress actually removed works from the public domain by restoring copyright in certain works published by Berne or World Trade Organization (WTO) nationals. (21) In 1998, Congress again lengthened the term of protection, this time by an additional twenty years, when it...