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A Few Lessons in Publishing and Copyright from 2017

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by Steve Gillen, Lawyer & Partner, Wood Herron & Evans —

Steve Gillen

As we ring in 2018, a look back on what we learned about publishing and the law

In with the New Year, out with the old. But before we toss 2017, let’s look at a few lessons it left us at the intersection of publishing and the law: a lesson from Cindy Lou Who about fair use and parody, a message from the Copyright Office about DMCA agent registrations, a lesson in copyright transfer terminations from a diverse group of rights holders, and a lesson from Amazon about the potential danger of concentrated market power.

Cindy Lou Who

Cindy Lou Who, you may recall, is a character in the Dr. Seuss classic, How the Grinch Stole Christmas! You know her as the naïve, kindhearted 2-year-old who teaches the curmudgeonly Grinch a lesson about the true meaning of Christmas. You might not recognize her 40-plus years later, as a lascivious, trailer-trash, addicted, child-abandoning, Grinch-murderess in the unauthorized Matthew Lombardo play Who’s Holiday!, a profane, adult-themed sequel that the good Dr. Seuss would have found deeply disturbing.

Needless to say, playwright Lombardo did not have permission to borrow one of the characters, some of the context, and the rhyming couplet style so recognizably evocative of the classic tale he lampoons. Instead, he relied on the defense of fair use, a highly complicated copyright doctrine that protects the use, for purposes of criticism or commentary, of limited portions of copyrighted works. Lombardo’s use was challenged by Dr. Seuss Enterprises, and a federal district court affirmed the applicability of the fair use defense and found in favor of Lombardo.

True parody is a prime example of the sort of unauthorized adaptation of a copyrighted work that is protected as a fair use. What Cindy Lou Who teaches us about parody is that, somewhat counterintuitively, the more offensive the parody, the more likely it is to be protected. This is because the more offensive it is, the less likely it is to serve as a market substitute for the parodied original, the less likely it is to displace sales of the original, and the more likely it will constitute protected criticism or commentary.

New Safe Harbor Rule

Under the Digital Millennium Copyright Act (DMCA), operators of websites that allow user-generated content to be posted are insulated from liability for copyright infringement under certain conditions. The lesson here is a simple one. If you own or operate a website that allows users to post content online (text, images, video, etc.), then you are exposed for copyright infringement claims that result from unauthorized posting by your contributors. You can insulate yourself from these claims by complying with the DMCA safe harbor rules, but there is a new twist as we enter 2018. The Copyright Office has implemented a new electronic agent registration system. Even if your company has registered an agent in the past, you must now re-register that agent through the new electronic system. To avoid a lapse in protection, this new agent registration should have occurred before the end of last year, but if you haven’t done it yet, you should do it now. Filing fees have been significantly reduced to $6 per agent, regardless of how many domain names are registered for a single company. Under the new system, registrations must be renewed every three years or they will lapse.

If your company has never implemented this protection under the DMCA, now is as good a time as any to register a takedown agent, set up a system for docketing renewals, and review your implementation of the DMCA Takedown Procedure to ensure it satisfies all the requirements of the law so that the safe harbor is there when and if you need it.

Termination of Copyright Transfers

More than 2,000 authors of copyrighted works first published in the 1980s reminded us of an author’s statutory right to claw back rights granted three decades ago by recording their notices of termination with the US Copyright Office in 2017—from Isaac Asimov, to Stephen King, to authors of a textbook, to the author of a Harlequin romance novel, more authors (or in some cases, their heirs) are taking advantage of this newly matured opportunity. What is this termination right they took advantage of?

An overhaul of US copyright law in 1978 provided authors or their heirs a five-year window in which any copyright grant made by the author may be terminated and the rights originally granted may be clawed back by the author. This window opens approximately 35 years after the work was first published. So, this dramatic change in law lay mostly dormant until about 2011.

The termination right only applies to the initial work, so any revised editions or other derivatives published under the authority of the original grant may continue to be sold by the publisher regardless of termination. However, once the termination occurs, the rights granted to the publisher in the original work revert to the author, and no new editions or adaptations with content derived from the original may be released. To initiate a termination, notice must be sent to the publisher at least two years before the date the termination is to take effect. This notice of termination must also be recorded with the Copyright Office before its effective date.

While a provision in the copyright law preserves and protects the author’s termination right from any agreement to the contrary (i.e., agreements not to exercise this right will be unenforceable), once notice is served, publishers may immediately open negotiations with authors in an attempt to avoid losing the relevant works. And, there may be a number of arguments and strategies available to publishers who wish to limit the impact of a termination, or avoid it altogether. The language of the enabling statute leaves many questions unanswered, and most of the questions that will arise as a result have not yet been litigation tested. Whether authors are simply unhappy with their current publishers, or think they are entitled to better contract terms, termination notices will likely become more numerous in the near future. Despite the unknowns, publishers should take time now to evaluate works that will soon be entering the termination window, and consider whether to be proactive in some cases and raise the issue with certain key authors to foster good will, build trust, and reduce the likelihood that an author will decide to move their works elsewhere or force more favorable contract terms.

Amazon and Market Power

Finally, in 2017, Amazon taught us that just because it’s your book doesn’t mean buyers shopping on Amazon will buy it from you. Early last year, Amazon made a change to its purchase protocols and decided to allow third-party resellers to compete for priority position in filling orders placed through amazon.com. Before the change, Amazon filled these orders first from its own inventory, which was generally purchased directly from the publisher. After the change, third-party resellers were allowed to compete for this prime selling position based on a confidential algorithm that reportedly took into account price, availability, the seller’s Amazon rating, and delivery time. Amazon defended the protocol change by noting that books sold this way must be new, or, more precisely, in “new condition” (many interpreted this particular language to mean “sort of new,” and Amazon was initially vague about what it meant and how it would be policed). Publishers have been suspicious about how the third-party resellers are getting “new condition” books to resell. They could come from several places: returns and excess inventory sold off at deeply discounted prices by the publishers themselves; deeply discounted bulk purchases; sales into foreign markets on condition that they not be redirected to US markets; and outright counterfeits.

This was possible for two reasons, one legal and one business. The legal enabler is something called the doctrine of first sale, which holds that a copyright owner, having sold an authorized copy of the subject work, loses the ability to further control what happens to that copy. In other words, once a publisher remainders copies or makes a bulk sale, it loses the ability to control what happens to those copies downstream. Contract law may provide some recourse against the buyers of books sold subject to some limitation on further sale, but there is no copyright cause of action against downstream purchasers. This may suggest a fresh look at how you handle excess inventory and bulk sales. Only counterfeits are susceptible to a copyright cause of action and good luck policing that activity, much of which happens offshore.

The business factor is Amazon’s market share. More than 40 percent of book sales now happen online, and more than 40 percent of that online market is controlled by Amazon. Both shares are trending up, so soon more than 20 percent of total book sales could come from sources other than the publisher. Hard to say where this development is heading, but I see storm clouds on the horizon.

Want to know what these trends mean for 2018? Read this checklist for the new year.

Checklist for 2018
  • Understand the boundaries of parody to ensure your work is protected under fair use.
  • Register a DMCA takedown agent, set up a system for docketing renewals, and review your implementation of the DMCA Takedown Procedure to ensure it satisfies all the requirements of the law so that the safe harbor is there when and if you need it.
  • Take time to evaluate works that will soon be entering the termination window, and consider whether to be proactive in some cases with certain key authors.
  • Watch the Amazon market closely to stay on top of share trends that will impact your business.

Steve Gillen is a lawyer and partner in the intellectual property firm of Wood Herron & Evans and has focused his practice on publishing and media matters for 35 years. He is a member of IBPA, a frequent contributor to IBPA Independent, and author of the book Guide to Textbook Publishing Contracts © 2016. He can be reached at sgillen@whe-law.com and 513-707-0470.

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