Professor Peter S. Menell,1 University of California at Berkeley School of Law
October 11, 2012

The fair use doctrine seeks to facilitate socially optimal uses of copyrighted material.  As a practical matter, however, cumulative creators, such as documentary filmmakers and many contemporary musicians, are often reluctant to rely on the fair use doctrine because of its inherent uncertainty, the potentially harsh remedies for copyright infringement, and the practical inability to obtain assurance that borrowing constitutes fair use in advance of sinking large investments in production, distribution, and marketing of cumulative works.  Moreover, copyright owners have no obligation under existing law to respond to a cumulative creator’s inquiry.  Thus, a familiar refrain in professional creative communities is, “if in doubt, leave it out.”

For professional creators, the fair use doctrine operates less as a privilege than as a defense when clearance oversights occur.  Given the value of building on prior works, this reality frustrates copyright law’s goal of promoting progress in expressive creativity.  The problem has become more apparent as digital technologies enable lower cost integration of prior works.

Yet it would be an exaggeration to suggest that all remixes are sufficiently transformative to clear the notoriously amorphous fair use hurdle.  Some valuable cumulative works undoubtedly do not qualify as fair use or are sufficiently close to the threshold that fair licensing is the appropriate pathway to the marketplace.  Yet given that copyright owners are under no obligation to respond to a licensing offer, the licensing marketplace can seem particularly daunting, especially to the less experienced creator.  Consequently, many remix artists have chosen the black market over the legitimate market.  This choice undermines copyright law’s legitimacy, the flourishing of robust licensing and product markets, and payment to deserving creators.

Professor Ben Depoorter and I have recently proposed a novel fee shifting mechanism that would afford a limited, cost-effective process for pre-clearing works, promote fair negotiation over cumulative uses of copyrighted works, and reduce the exposure of cumulative creators from the inherent risks of relying on copyright’s de minimis and/or fair use doctrine.  See Peter S. Menell & Ben Depoorter, Copyright Fee Shifting: A Proposal to Promote Fair Use and Fair Licensing, available here. Our mechanism builds “cumulatively” on a long-standing feature of civil procedure (Federal Rule of Civil Procedure 68, which provides for fee shifting when a trial outcome is less generous than a pre-trial settlement offer) and the Supreme Court’s relatively recent decision in eBay v. MercExchange, 547 U.S. 388 (2006), which provides greater leeway for courts to award a licensing remedy as opposed to injunctive relief in intellectual property cases.

Under our mechanism, a cumulative creator has authority to make a formal offer of settlement to use copyrighted material.  If the copyright owner does not respond to the offer, the cumulative creator would be permitted to use the work provisionally by paying the settlement amount into escrow.  If the copyright owner rejects the proposed license fee and sues for infringement, the copyright owner will bear the cumulative creator’s litigation costs: (1) if the court determines that the use of the material qualifies as fair use; or (2) if the court determines that the fair use doctrine did not excuse the use but where the cumulative creator’s offer of settlement (the proposed license fee) exceeded the amount of damages that the court determines to be appropriate.  In the former case, the escrow amount is returned to the cumulative creator.  In the latter case, the copyright owner receives the infringement award from the escrow account and the remainder returns to the cumulative creator.

Our fair use fee-shifting proposal encourages copyright owners to take settlement offers seriously and negotiate around the fair use doctrine’s inherent uncertainties.  In so doing, this mechanism protects the reliance costs of cumulative creators, reduces transaction costs, and discourages holdout behavior.  Overall, our mechanism should enrich cultural production by increasing the use of copyrighted content in follow-on works while fostering markets for cumulative creativity and providing fair compensation to copyright owners of underlying works.