Friday, February 02, 2024

WIPIP session 2: ™ Doctrine, © Fair Use

Barbara Lauriat, Borrowing Goodwill

Comparative/historical approach to doctrine/theory. There used to be a big difference between having a TM and passing off. Bone/McKenna’s history of goodwill: didn’t reflect her understanding of the history: seen goodwill used as a property right protected through the tort of passing off. Probably not “property” in the contemporary understanding if you go back far enough.

UK: TM protection depends on formalities/registration; registered TMs are property rights; goodwill in a business is a different property right protected through the tort of passing off; no generalized unfair competition law.

US: TM is use based even in the absence of registration; US courts identify goodwill as the property right protected by common law TM doctrines; generalized unfair competition protection (limited by confusion?). Increasing blurring between registered and unregistered rights.

1903 statement in treatise: in England, TM is practically synonymous with “registered TM.” After 1879, theres really no such thing as Anglo-American TM law because they are too different.

SCOTUS’s decision to ID protection of goodwill as the foundational justification for TM and unfair competition maintains TM owner’s actions and interests at the center of legal analysis.

Traditional narratives about goodwill are flawed b/c they don’t go back before the 19th century. They claim that’s when goodwill arrived as a concept. Bone says it was familiar from law of partnership from at least the early 19th century, but what was that concept that was incorporated into TM doctrine?

Goodwill has a very long history as an intangible, proprietor-focused, use-based asset independent of TMs and related doctrines. Not trying to view it from modern lens but what they did at the time with the concept.

OED: goodwill—the privilege, granted by the seller of a business to the purchaser, of trading as the successor. From 1500s. 1725: Daniel Defoe discusses how a widow gets money for the “good-will” of the shop if she didn’t want to carry on the trade. French in 1700s: good-will = custom or trade, habitual buying of goods from the same vendor. Lots of ads mention it.

In takings, goodwill was taken into account separate from the value of the land, e.g. 1802 law. Many cases in the 18th century use the term in non-TM cases as property.

Hanover Star v. Metcalf cited passing off cases from UK even though that was already a distinctly different doctrine from registered TM protection, by 1916.

Jake Linford: What is the payoff?

A: It’s hard to say. Likes Tushnet on problems distinguishing registered TMs from unregistered; passing off is more restrictive than unfair competition. Irony: by resisting in TM cases & Hanover Star calling TM property, you ended up with much more expansive rights.

Betsy Rosenblatt: Taxonomy of confusion—source v. sponsorship or approval. One could argue that passing off is about confusion as to source and the other goodwill stuff is about confusion as to sponsorship or approval, but maybe that is not the way to go; does that fit into the history?

A: nomenclature issue: “US TM goodwill” means something very different than “goodwill for the purposes of passing off.” Have seen arguments that US unfair competition law requires confusion and is thus narrower than UK, but that’s only true if you don’t interpret confusion super super broadly as we do.

RT: might this help us understand how counterfeiting of a registered TM could be actionable even without point of sale confusion? does trading on goodwill mean materiality?

A: around the world, trading on goodwill is proprietor-based, but does require trading that causes damage to good will, so some kind of materiality is required.

Bill McGeveran: mentions in wills and the like: are they rights in gross or coming with business being transferred?

a: it depends! In the 19th century, courts start to make these connections w/newfangled tm.

Mark Lemley: a surprising number of your examples involved women. Seems like relatively few women started business but youre entitled to pass goodwill and inherit it and continue to operate. And you could transfer the guild privilege which was supposed to be based on skill.

A: yes, super interesting! The guild system took care of its own; this was working-class stuff and didn’t enter the law often until the 18th century. In the guilds, they didn’t need to sell the goodwill b/c they had the guild privilege—a public house would need goodwill!


Peter Karol, What’s the Use: The Structural Flaw Undermining Warhol v. Goldsmith

SCOTUS understood the “use” to be the foundation’s commercial licensing. But licensing is neither a © use nor an act of infringement. It’s passive grant of permission/agreement not to sue. Incoherent to raise/evaluate fair use as to an act that wasn’t a use or infringement.

Error grew out of weird or misleading posture of the case and lower court treatments of the issues. DJ sought declaratory judgment that Prince Series as such was transformative, grounded in the artwork itself; a static claim w/o regard to specific use or purpose. We don’t know why or how he created. Counterclaim alleged that WF infringed by reproducing, publicly displaying, commercially licensing, and distributing the image, and by incorporating the photo into unauthorized derivative works. One of these things is not like the others! Licensing is not found in 106.

DCt follows WF’s line of thinking: it’s a static case. 2d Circuit rejects the notion that the task before it was to assess the Prince Series as artworks, but rather whether the law permits WF to “exploit” them w/o Goldsmith’s permission. Jacobs, concurring, says only contemporary commercial exploitation is before the court. SCOTUS oral argument: Goldsmith waived any claims as to creation.

Sotomayor says, 8 times, that the use at issue is commercial licensing. But real focus is on Conde Nast’s activities as publisher—the next quote is about how the purpose of the use was the same: “use in magazines to illustrate stories about Prince.”

There was no evidence of other use by WF itself. A license is a grant of permission to use, not a use in itself. Even under Chris Newman’s account, which critiques “covenant not to sue,” the licensor is not the user of the interest. Licensing is not covered by 106; “to do and to authorize” just relates to indirect liability. It is nonsensical to analyze fair use as a defense to something that is not copyright infringement to begin with.

If we wanted to fix it: acknowledge the issue and say out loud that the Foundation was the indirect infringer. Conde Nast was the indirect infringer; Goldsmith perhaps didn’t want to bite the hand that feeds her. Admittedly, this is an invention that was never litigated; the analysis of purpose would have to be a little different.

Jim Gibson: “authorize” could be read differently: licensing something that will obviously infringe should be deemed a 106 violation. We can call that a form of indirect liability, but that’s a big apparatus to put on one word.

A: that would be a hugely important precedent and a huge change to what we understand 106 to mean. They should say that out loud if they meant to do that. If licensing is direct infringement, that’s a really big shift—they do diligence on whether they own the asset, but not on whether their licensing would infringe.

Cathy Gellis: what is the actual use? Not sure it’s Conde Nast: the use in question should be Warhol’s. Goldsmith produced the original thing; Warhol used the original thing and turned it into something else. Then others used/licensed/profited from the new thing. But it should still go back to the creation. Potential liability years downstream if that doesn’t matter. Ticking time bomb of anybody who’s an assignee of something upstream if we no longer care about whether that use was fair or not.

A: agree on time bomb, but when they waived the claim against creation, courts said we don’t have to think about the 80s at all. Ignore the outstanding declaratory judgment action.

Tyler Ochoa: Pushing back on Warhol’s addition: only covers changes made to original and not underlying work. Need some licensing arrangement to pull use of underlying work into that. But we could interpret Court to say that CN’s use wasn’t fair.

A: true! But they weren’t a party and the court never said it, so we have to interpolate that.

Q: is there any causal relationship with other problems with the opinion?

A: not harmless error—affects the purposive analysis that many find problematic—they keep reducing it to “use on a magazine cover” “just like Goldsmith is in the business of licensing”—you can’t do that if CN is the counterparty.

Bruce Boyden: if it’s an indirect infringement claim, does it change the analysis? Knowledge would be an element for contributory infringement—they know a lot about what the direct infringer intends to do, but not other things.

A: quite possibly. [FWIW, I think vicarious liability is so broad in © that you might be able to get it done that way, w/o needing contributory liability.] The counterclaim doesn’t use the language of inducement.

Jeremy Sheff: Knowledge question comes up in patent law: do you have to know that there will be use or that the use will be actionable? Not clear there’s a clear © answer to that. Also, to the degree © is property-like, authorizing someone else to use a third party’s property is wrongful. But that may just mean Conde Nast has a claim against WF.

Pam Samuelson: what if Goldsmith changes her mind on remand? The statements in oral argument cited by the Court aren’t a real waiver of claim—she waives her right to certain remedies, and not the claim itself. What if she changes her mind? Asked one of Goldsmith’s lawyers, and he wouldn’t answer—the case is ongoing.

A: the litigator in me says you could never rely on it; but it was enough for the Court.

Glynn Lunney, Transforming Fair Use. 3 Justices were appointed solely on Roe v. Wade, and we’re stuck with them; there was no inquiry into anything else. Court has no conception of itself w/r/t interpretive methodologies, so we get incoherence. Realism: Sotomayor: “the problem of substitution, ©’s bete noire.” But the photo isn’t a perfect substitute for Prince, but serve the same purpose, depicting Prince (as if Goldsmith had a © in his features) and they vie for the same dollars. That defines substitution so broadly as to cover everything—pepper and salt are substitutes under this logic. The difference b/t Justice Story’s © and today: the derivative work right: why would substitution be the core problem? A motion picture is a complement, not a substitute, so why aren’t we talking about more than substitution in the first factor? Because of Google v. Oracle, which says there’s no substitution.

OK, Textualism: fair use transformativeness is at war with the derivative work right. How can transform both excuse a work as fair and render it infringing? Well, plucked one word out of statutory definition—reproduction, abridgement, condensation are ignored, and words like “sequel” are added out of nowhere. A translation of Romeo & Juliet is not a new meaning or message, it’s the same meaning in a different language. So too with book-to-movie. They’re not really committed to realism or textualism, but to their desired conclusion.

Purposivism: if Warhol is fair use, then so are many films made from novels, but Congress intended © owner of novel to have exclusive right to control making film based on novel. They’re presupposing this is an answer when it’s a question. Maybe Congress did intend that, but it doesn’t mean it’s true for all time—fair use is meant to be an ongoing limitation as tech and other features of the market change. Reproducing a whole work by mechanical reproduction is a classic infringement, by the time of Sony, the economics, tech, and nature of use have all changed, and what’s once paradigmatic infringement is now fair use.

He finds plenty of criticism in the contrast b/t the standard photo and the portrayal in the Warhol image. Courts are good at the facts and bad at the law; Court is deciding fewer cases and we therefore treat them as the oracle on the mountain. Every sentence takes on independent legal significance. We shouldn’t treat decisions like statutes, but the problem is that this is likely to be the only fair use decision for the next 10 years. One strategy: treat it as narrow on the facts.

Key facts: first magazine use was licensed. We can use balancing, including ease of licensing, to calibrate fair use—when first use was licensed, failure to obtain license second time could be presumptively unfair. That’s his hope for future. Stewart v. Abend & Harper & Row v. Nation could also fit in that model of presumptive unfairness. Presumptively fair: Campbell. True balancing: G v O, Sony.

Q: what do you make of the “iconic, larger than life figure” argument for transformation?

A: don’t listen to artists or lawyers; compare the two and say can parodic/critical character reasonably be perceived. If there’s enough difference between them, they should compete in the market so consumers could choose which is best suited to them—that’s market success, not market failure.

RTL Richard Primus’s concept of underruling might be useful. So just disregard the statements that nothing is presumptively fair use, even book reviews? In general courts can create general presumptions, right?

A: only as to the case or controversy before the Court. We’ve gotten into a bad habit of overreading SCT decisions b/c we have so few of them.

Zahr Said: whose accounts should we rely on to determine whether licensing is likely to be successful? Vying for same consumers: salt and pepper—pushback—salt is often used for preservation, sweat vegetables, etc. There’s a whole functional use that pepper isn’t part of. When we’re looking at a Court like this, you’d like an opinion to be tied to the record, but this Court doesn’t always do that. How do we know where to go to answer those critical questions?

A: Before Campbell, both parody and satire were fair use. In oral argument, O’Connor said we don’t have to consider satire in this case and counsel agreed—ethically, that was 2 Live Crew’s counsel’s job, to throw satire under the bus to give his client a better chance. If the adversary process fails because it throws nonparties under the bus, why should we honor that distinction 20 years later? Satirists never got their day in court.

Sharon Sandeen: your approach might help solve the procedural errors in the case/record.

A: just trying to minimize impact.

Q: lawyers defending this decision think this is better balancing under factor 1, instead of making transformativeness sovereign over all. New meaning doesn’t necessarily trump commerciality.

A: disconnected from incentive theories: these decisions will not get Dr. Seuss to write more books or Goldsmith to take more photos.

Pam Samuelson, Did the SG Hijack Warhol v. Goldsmith?

Lying is wrong, and the SG did it and got away with it. Some twisting of truth in SG’s brief about 2d Cir ruling. Most important sentence was in a footnote of Court’s opinion: G abandoned her larger claims so the Court didn’t need to address the larger issue on which it granted cert. It said very little to provide guidance about how to distinguish transformative fair uses from derivative works.

OSG said the only issue before the Court was the 2016 license, but the 2d Circuit opinion had held that all 16 works created in 1984 were unfair and nontransformative. AWF & G’s briefs were focused on 1984 creation; all amicus briefs except OSG’s addressed the creation issue on which SCT granted cert; nobody else got to brief it except in reply. The SG’s brief said the creation might have been fair or authorized under the artist reference license, in which case they wouldn’t be infringing; introduced the notion that every subsequent use must be assessed as fair or unfair. G’s lawyers reasonably might have decided to shift argument based on that.

103(a) is the missing issue: protection for a derivative work employing preexisting materials in which (c) subsists doesn’t extend to any part of the work in which such material has been used unlawfully—Anderson v. Stallone, owns no copyright in script at all. If that’s right, WF has no (c) in Prince series, and museums & galleries that own the works can’t publicly display or resell them? DCt, Ct App, & SCt all ignored §103, as did Goldsmith’s counsel.

G wanted her claim v. WF to seem modest; besides, if she won her derivative work claim, 103 kicks in automatically, and she could begin commercializing the Prince Series, make derivative works, & stop displays and resales w/o WF’s permission since it would no longer have rights.

AWF might not have wanted to raise this specter; may have been overconfident about fair use; didn’t want 2d Cir to take away its ©.

Maybe the narrowness has some benefits for appropriation art, but what on earth is the status of the Prince Series? If she abandoned her claims of infringement, that would implicitly include her opposition to WF’s SJ motion that the Prince Series were fair uses. Should the court now grant WF the declaration it seeks? What if on remand counsel says there wasn’t an abandonment? She gets some or all of the 2016 licensing fee, but not statutory damages or fee awards. To what extent is further licensing of W’s works encumbered by her photo ©? Only licensing to magazines that want an image of Prince? Do people need permission both from WF and G?

Alternatives: W’s creation was fair use; but © in fair use DWs only gives rights in their original expression. Licensing might be fair use if not in same market, but WF’s © is partly encumbered by G’s © when markets overlap. Another possibility: W’s creation was lawful b/c of the artist reference arrangement authorized them free from G’s claims. Restrictions between Vanity Fair and G’s agent can’t bind W, who had no notice.

Jim Gibson: do you think fair use is use-specific? I always thought it worked that way.

A: SG just threw it out strategically to get rid of an otherwise troubling case. We have to live with it; we haven’t really had a thorough conversation about this particular Pandora’s box.

Q: maybe bright side: injunctions shouldn’t be broad, as shown by G?

A: Big fan of limiting injunctive relief. But footnote 10 of Campbell, which talks about how something that goes a bit beyond fair use doesn’t necessarily need to be enjoined, doesn’t grapple with 103(a)’s automaticity, so we do need to think about that.

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