Electronic Newsletter of the

Intellectual Property Committee

ABA Section of Antitrust Law

Professor Picker is the Paul and Theo Leffmann Professor of Commercial Law at The University of Chicago Law School and Senior Fellow, The Computation Institute of the University of Chicago and Argonne National Laboratory. Detailed information on the AT-IP Listserv and the Intellectual Property' Committee's website is provided below the article. 

By Professor Randal C. Picker

On June 25, 2001, in a 7-2 decision, the U.S. Supreme Court ruled in favor of freelance writers who argued that the inclusion of their articles in electronic databases infringed the writers’ copyrights in the articles. The decision exposes the publishers to damages and, absent agreement with the writers, may force the publishers to remove the articles from the databases. Most of these articles will be pre-1995 articles, as industry contracts after that time have expressly assigned electronic publication rights to publishers.

The decision turns on a narrow provision of the Copyright Act addressing the respective rights of a publisher of a collective work, such as a newspaper, and of the author of an individual story in that work. Section 201(c) of the Copyright Act resolved an ambiguity in prior law to make clear that copyright in the collective work was distinct from copyright in individual items within that work ("copyright in each separate contribution to a collective work is distinct from copyright in the collective work as a whole, and vests initially in the author of the contribution"). So the New York Times Co. would have a copyright in the newspaper it published each day—the collective work—but Jonathan Tasini—the plaintiff in the case—would also have a copyright in a freelance article of his published in the newspaper.

With the rise of electronic databases, such as LEXIS/NEXIS, the Times started to send its newspapers to electronic publishers so that the material would be widely available online. Tasini and his fellow freelancers contended that, as the holder of copyrights in the original articles, only they could authorize electronic publication. In contrast, the newspaper publishers believed that their rights in the collective print work sufficed for electronic publication as well.

This dispute rests on the second sentence of section 201(c): "In the absence of an express transfer of the copyright or of any rights under it, the owner of copyright in the collective work is presumed to have acquired only the privilege of reproducing and distributing the contribution as part of that particular collective work, any revision of that collective work, and any later collective work in the same series." So, for example, the Times could publish Tasini’s article in an early edition of its newspaper, a second "final markets" version of its newspaper, and again in the Times one week later.

The print publishers contended that this same language covered electronic publication in LEXIS/NEXIS databases. The Supreme Court majority held that it did not, while the two dissenters believed that it did. The majority opinion focused on two facts. First, electronic publication typically stripped an individual article of its original context, both the surrounding articles and the surrounding pages, so that it was presented free of the collective work itself. Second, a reading favoring freelancers would best implement the purported purpose of the 1976 revision to vest greater rights in individual authors.

The dissent emphasized that the statutory language could be read fairly in a number of ways, and that therefore policy considerations should play an important role in reaching a result. That reading favored an interpretation of section 201(c) that gave both individual authors and newspaper publishers the right to deal with electronic publishers. Negotiations with individual authors may be difficult given the sheer numbers, and that barrier may result in articles being dropped from the electronic databases.

In deciding in favor of the freelancers, the Supreme Court majority implemented its understanding of Congress’ Copyright Act, but in doing so, it mistakenly and somewhat woodenly vindicated an understanding of property rights out of sync with the purposes of federal copyright law. If copyright law were organized around some notion of natural law, ownership would flow directly from creation. But, instead, copyright sees no inherent virtue in handing an author a property right in a work she creates. Instead, property rights are merely an instrument we use to strive for the right balance between creation incentives and access to created works.

In this case, the incentive and access issues are relatively clear. The articles in question have already been created. On a going forward basis, publishers have addressed electronic publishing issues through contracts. As Justice Stevens notes in his dissent, these contracts routinely give paper publishers electronic publishing rights, and the compensation paid to authors has not changed one dime even though publishers can now access electronic markets. Creation incentives therefore were not meaningfully at stake in Tasini.

The access issues are straightforward. Direct after-the-fact negotiations with thousands of freelancers will be quite cumbersome. Those negotiations will take much time, as will the creation of the appropriate rights management and payments infrastructure. At best, all of this will result only in partial access. The Court’s decision in Tasini therefore sacrifices substantial access with no corresponding benefit in creating additional works of authorship. That is clearly the wrong way to match creation incentives and access opportunities.

The current terms of trade between authors and publishers also may help us understand two outstanding issues in the case. First, publishers now face liability for past infringement. As a conceptual matter, these damages should be zero. For better or worse, under the current contracts, most authors do not share, at least directly, in the payments that flow from the electronic publishing. There is every reason to think that they would have received nothing two decades ago under deals cut then had the parties had the foresight to contract about the electronic markets of the future. Giving the parties the payments they would have negotiated is one natural way of quantifying the damages in this case.

Second, one possible legislative solution to the access problem would be a compulsory license running from the freelancers to the publishers. Such a license would avoid the need for detailed negotiations with thousands of freelancers. To be sure, we may be able to create a rights middleman as we have in the music business—for example, ASCAP and BMI—to facilitate these negotiations. But given that current contracts uniformly require the transfer of electronic publishing rights, this rights market is much less attractive than that in music. If we were to impose a compulsory license, we would need to figure out the price to be paid to authors. Again, if the point of the license is to just avoid expensive negotiations and replicate what the parties would agree to, there is much to be said in favor of a price of zero. That is the market price for new works today, and might very well be close to the price for past works given the minimal bargaining power of the authors and the ability of the electronic publishers to play one author off against a second.

**************************************************************************************************************************************************Professor Picker is the Paul and Theo Leffmann Professor of Commercial Law at The University of Chicago Law School and Senior Fellow, The Computation Institute of the University of Chicago and Argonne National Laboratory.

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AT-IP Report is the electronic Newsletter of the Intellectual Property Committee of the American Bar Association, Section of Antitrust Law. The views expressed in the AT-IP Report are the authors' only and not necessarily those of the ABA, the Section of Antitrust Law or the Intellectual Property Committee. If you wish to comment on the content of this Electronic Newsletter, please write to the ABA, Section of Antitrust Law, Attention: Intellectual Property Committee, 750 North Lake Shore Drive, Chicago, Illinois 60611.