Thursday, February 22, 2007

Fair Use and Fee Shifting

Well, it's been a pretty busy week for Mr. IPNotions. Not so much online, but I've been scampering around IRL, and now I'm gonna talk about (some) of it.

On Wednesday, I went to the Modest Proposals 3.0 conference at Cardozo. There were five really interesting proposals made, but I want to focus on Mike Carroll's "Fixing Fair Use" proposal.

Unfairly distilling a significant paper, a four-page proposed statute, and an hour's worth of speech and question-and-answer to a three-line summary, the Professor Carroll's proposal comes down to setting up a three-judge panel to adjudicate fair use questions ex-ante the putative use, resulting in narrowly binding but published decisions. The decision is formally reviewable by Circuit courts, and de facto reviewable by District courts.

The proposal was evocative of a presentation Professor Nimmer made last year (when I was still in flagrante LL.M.) that he called FUDGSICLE. I don't remember how the acronym unpacked, but his idea (again, unfairly distilled) was to set up voluntary, non-binding arbitration on the question of fair use ex-ante the putative use, resulting in decisions probative to any later inquiry into good-faith or willfulness. As I recall, in fact, Nimmer's proposal was that (for instance) if the arbitration panel deemed a particular use fair, then the copyright holder would be barred in later litigation from claiming bad faith or willfulness.

Carroll and Nimmer are both addressing a very real problem with fair use. Or rather two connected problems: the lack of certainty ex-ante the use (multiplied in any risk analysis by the potential for large statutory damages), and the high cost of defending against a charge of copyright infringement. And they both address the problem in a similar way, to wit, by introducing an element of certainty ex-ante (at a reduced cost) and relying on copyright holders to act in reasonable self-interest by only bringing suit in the very close cases, where the holder has a good chance of flipping the previous determination.

The issue I have involves the tendency of copyright holders - especially large IP-based businesses - to have an almost trademark-like protect-or-lose overzealousness when it comes to enforcing copyright. Neither of these ex-ante proposals prevents the copyright holder from holding the threat of an expensive suit in court over the heads of the risk-averse and/or cost-averse putative user. Disney or Viacom or someone will send a letter that comes just short of actually threatening suit (avoiding declaratory judgment actions) and that's usually more than enough to scare most users off. If you've already included the work in the new work, then go back and edit or just don't publish; if you haven't, then you find another way. In either case the fair use exception/limitation/defense/whatever is basically eliminated.

Setting up a cheap system for ex-ante determinations without making that system mandatory does little to eliminate the effectiveness of that kind of threat, particularly because the threat is leveraging not the possible loss attendant to a failure on the merits, but the certain loss attendant to defending the case - attorney's fees.

So what needs to be done is that these ex-ante determination processes need to be given teeth with regard to attorney's fees, so as to neutralize that part of the threat.

Right now, under Section 505, the court has discretion to award a prevailing party fees. In practice, it doesn't happen that often, and that's due in large part to the overwhelming reluctance to deviate from the US rule in US courts. That's fair, usually, but in the context of copyright cases - and the different ways they generally come to the court (or should come to the court) - it would be worthwhile to maybe skew that a little.

So, for instance, under Professor Carroll's proposal, the initiation of the fair-use adjudication process could trigger an automatic fee shifting provision in the event the matter goes to District Court, such that the party that initiates the inquiry in District Court (short-circuiting the Carroll adjudication process) would be liable for some or all of the attorney's fees of the other side in defending that case, to the extent that the defense had to do with fair use.

Under Professor Nimmer's idea, a party who acts in a manner to instigate suit after a a determination by the arbitration panel could be held for the attorney's fees of the other party if they prevail.

In either case, the ex-ante determination of fair use would then have the weight sufficient to defeat the threat posed by the cost of defense. Let's just put the metaphor in the blender: It would turn the Sword of Damocles into a shield. But not, you know, a shield hanging over your head...

--Ben D. Manevitz

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