Richard Owens aptly describes how the vagueness of the boundary between lawful borrowing and unlawful copying makes it difficult for creators who build upon others’ previous works. He urges us to develop intellectual property laws with clearer rules defining such boundaries.
While I agree with the motivation for the plea, I’m not sure that if the goal is attainable. Not, of course, that we couldn’t have clear rules. We could, for example, rule that any borrowing of any idea or any expression requires permission. This would be a clear rule, but one that would plague creativity with transaction costs and surely stifle it. We could have no copyright at all—again a clear rule—but assuming that copyright is important, not one that will do much good either. So I’m not sure if we can avoid Learned Hand’s challenge of fixing a boundary without ever knowing precisely where.
But not being able to define clear rules doesn’t necessarily leave us helpless. Instead of confronting the problem from the front-end (creating clear rules) we can approach it from the back-end: the available remedies and the incentives that they create. I believe that the true culprits aren’t necessarily the vague boundaries between lawful borrowing and unlawful copying, but rather their combination with the remedies available once infringement had been established.
The problem is that mesmerized by the metaphor of property, courts tend to issue an injunction almost as a matter of course. Such injunctions provide huge incentives for copyright holders to sue those who build upon their work, regardless of the merit of their case. And the more successful the subsequent work is, the greater the incentive to sue becomes. If you can claim that a bestseller like the Da Vinci Code, which sold more than 60.5 million copies in print (as of May 2006) and has been translated into 44 languages, infringes your copyright, and you can get an injunction prohibiting its further distribution (and probably the film as well), only a fool wouldn’t sue. In the worst case you lose and pay your costs and perhaps part of the defendant’s (depending on the jurisdiction), but otherwise, you’re very likely to settle the dispute by granting a license or selling your rights, in return to some payment which may be bigger or smaller, depending on how bestseller the work is and how credibly you can hold up the publisher.
A better example even is Preston v. Century Fox Canada, in which the plaintiff, Preston, had claimed that 20th Century Fox,George Lucas his production company, Lucas Films infringed his copyright when in producing the "Return of the Jedi" they made unauthorized use of features of a film script he had authored. The main claim concerned Preston’s work titled “Space Pets” that included creatures called “Ewoks” which later appeared on the film. Eventually, the court found that Preston, on a balance of probabilities, failed to establish infringement, but the important point is that the stakes following the astonishing success of the film made it worthwhile for Preston to sue and for both parties to embark on costly litigation.
The problem then isn’t only the absence of clear rules, but the combination of vague rules determining liability with remedies that give early creators an ability to hold up subsequent ones, and increase the risks and costs of creativity.
Fortunately, a fresh decision from the US Supreme Court may signal an important step in the right direction towards solving this problem. In eBay v. MercExchange, decided four days ago, the Court held unanimously that the traditional four-factor test applied by courts of equity when considering whether to award permanent injunctive relief to a prevailing plaintiff applies to disputes arising under the Patent Act. The court also made clear that this holding is applicable to copyright as well. The four-factor test requires a plaintiff to demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law are inadequate to compensate for that injury; (3) that considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. Although the exact scope of the holding is yet to be determined given the different concurrent opinions (see here), the Court overturned the Court of Appeals holding that as a “general rule,” in patent disputes a permanent injunction will issue once infringement and validity have been adjudged and that injunctions should be denied only in the “unusual” case, under “exceptional circumstances” and “in rare instances”.
To the extent that courts will follow eBay and give due weight to the four factor test before awarding an injunction, eBay possesses the potential to address the problem of vague rules by diminishing the incentive to sue “[w]hen the patented invention [or copyrighted work] is but a small component of the product the companies seek to produce and the threat of an injunction is employed simply for undue leverage in negotiations” (eBay, Kennedy, J., concurring). In such cases “legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest.” (id).
Probably, to the extent that damages are calculated on the basis of what would have been charged for license fees, or what a reasonable royalty would have been, the expected payoffs from suing successful built-upon works would be significantly diminished, especially when ex ante, any work used in a production of a subsequent one would have many substitutes. Thus Dan Brown, even if copied a substantial part of Baigent and Leigh’s work rather than borrowed some of their ideas, would always have had the ability to borrow less (or copy something else); and George Lucas would have had the ability to use, say, feathery creatures named Chimops instead of fury creatures named Ewoks, and therefore the license fees for using Ewoks (or Baigent and Leigh’s work) would be so low to render the lawsuit not worth its while. Moving in appropriate cases from a property rule (injunction) to a liability rule (damages), might reduce the cost of creativity, which, as some have noted, always builds on the past.
In sum, while creating clearer copyright rules on what is permissible borrowing and what is unlawful copying is a laudable goal, given the inherent difficulties in doing so, addressing the problem from the back-end of remedies may be a better solution. Hopefully, the US Supreme Court’s recent decision is a step in this direction.