Summary of Approaches to Fair Use Analysis
We have discussed five approaches to fair use analysis. It is my conclusion that even the most lenient approach will offer little support for fair use Electronic Distribution in today's courtrooms.
1. Strict logical construction: in this case the court would accept as fair use those uses where the first three factors favored fair use in the nonprofit educational context, ignoring all evidence of harm to markets as logically irrelevant insofar as it represents payments that are not due if a use is fair, and so cannot be presumed “lost” because of the use unless it is otherwise determined to be unfair. Williams & Wilkins illustrates this approach.
2. Creative destruction: in this case the court would accept as fair use those uses where the consumers of copyrighted works are funding the making and distribution of the copies in question, and creation of the works in question does not depend on sales of copies.
3. Sony traditional revenues only: in this case, the court would accept as fair use only those uses that provide a clear social benefit, and when weighing the social benefit against the harms to the copyright owner, the court would limit the relevant market to current revenue streams.
4. Market dysfunction (broad interpretation of market failure): in this case the court would accept as fair use those uses that demonstrate market failure due to high transaction costs or market dysfunction due to inability to pay – inability to internalize social benefits or monetize a party’s interests; the relevant market would be both current and future revenue streams that might exist if the court finds for the copyright owners. No court has taken this approach.
5. Strict interpretation market failure: in this case, the court would accept as fair use only those uses that demonstrate near total and likely continuing failure of the market due to high transaction costs; the relevant market would be both current and future revenues that might exist if the court finds for the copyright owners. Texaco illustrates this approach where the use was not found to be fair; more recent cases involving Internet search engines (Kelly v. Arriba Soft & Google v. Field) illustrate this approach where the use was found to be fair.
Sony and creative destruction both offer fairly aggressive arguments for fair use. Creative destruction would even legitimize unauthorized peer-to-peer (p2p) music file sharing. In fact, that is exactly what Ku argues: that p2p file sharing has creatively destroyed the market for CD distribution because individuals make their own copies and pay for the distribution network themselves (computers, peripherals, ISP service). Further, sales of copies are in fact notoriously not a source of income for most musicians. One can also identify this phenomenon at work much earlier with respect to sheet music and the advent of photocopying. So, for example, a court using this analysis could find under the fourth factor that p2p file sharing of music does not harm the market for or value of copyrighted recordings.
Ku assumed that courts were more likely to implement creative destruction than the legislature would be to reform copyright law by placing a limit embodying this theory on copyright owners’ exclusive rights. Recent cases involving p2p issues would cast considerable doubt on this likelihood, however, because all have assumed that direct copying by p2p software users is infringing, including the Supreme Court in the recent case of MGM Studios, Inc. v. Grokster, Ltd.
Moreover, it seems unlikely that Electronic Distribution would qualify broadly as fair under creative destruction analysis. Creative destruction characterizes as fair those uses 1) where the user makes his own copies and pays for the distribution system, and 2) where revenues from the sale of copies is not required to fund the creation of the works the user copies. That description does not currently characterize all of the materials that educators must use in teaching. Scholarly articles arguably fit the description, though there would no doubt be argument to the contrary. Textbook and trade book publishers would vigorously refute the characterization.
Perhaps the market dysfunction argument, creatively and thoughtfully applied, is at least a possibility, but as indicated earlier, its advocates would have to define the subtle contours of a very challenging argument.
Finally, the circularity argument will likely fail, as indicated above, because it can so easily be gotten around by manipulating the first three factors to favor getting permission, thus eliminating the appearance of “… converting an otherwise fair use into an infringing one.”
If posting articles or book chapters for students to read over successive semesters would likely fail to qualify as fair use under every theory of fair use including the “strict logic” circularity approach to the fourth factor, how do we reasonably defend it? And what are the implications of such a likely failure for fair use policy? In general, how do we defend policies that describe a scope for fair use significantly beyond its likely interpretation in courts today?