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Attorneys

Court Rejects Adoption of a Public Policy Test Component to Fair Use Doctrine

July 19, 2006

By Dale Campbell

The United States District Court of Colorado issued summary judgment in favor of several big-name producers and movie studios and against several "clean movie" companies in the business of creating sanitized versions of movies. (Clean Flicks of Colorado LLC, et al. v. Stephen Soderbergh, et al., Case No. 1:02-CV-01662, in the United States District Court of the District of Colorado.)

The litigation was initiated by several clean-movie companies, seeking declaratory relief that their process of editing objectionable content and reselling the edited copies fell within the "fair use" defense to copyright infringement. The defendant movie studios ("Studios") filed a cross-complaint for infringement under both 17 U.S.C. section 106(1) for violating their right to reproduce the copyrighted works, as well as infringement under section 106(2) for violating their right to create derivative works.

The original plaintiffs resold sanitized digital versions of movies in hardcopy format. The sanitized versions were created by disabling the copy protection software on an original DVD, copying the content onto a hard drive, then removing the objectionable excerpts either by skipping the offending passage, cropping images, or deleting offensive words. The clean movie companies would then make multiple copies of the edited versions for resale or rent to the general public, along with an original version of the movie, thereby enabling the clean movie companies to argue that the sale of the edited version did not deprive the Studios of a sale.

The Studios cross-complained for infringement and named as cross-defendants a second group of movie editing companies that had developed a different editing methodology. These companies did not permanently edit a physical version of a digital movie, but instead sold hardware and software that ran simultaneously while playing an original DVD, causing the DVD to skip past or mute the offending portions of the movie. No hard-copy version of the edited movie remained. This second class of cross-defendants was dismissed from the case when Congress enacted the Family Movie Act of 2005, which provides an exemption for the editing of motion pictures by a member of a private household if no fixed copy of the altered version of the motion picture is created. This statute protected those parties selling technology that enabled such private editing.

The Studios sought summary judgment against the remaining clean movie companies. The companies sought, as their primary defense, to create a new public policy test within the previously accepted fair use doctrine. The companies argued that the fair use doctrine allows a party to use copyrighted material for the purpose of public criticism and that public criticism could include the substantial copying of such material. The companies further argued that they were providing a more socially-acceptable alternative for family viewing without exposing children to unwanted and potentially harmful content. As such, the companies argued that their edited versions constituted fair criticism of the offending material.

The companies relied on Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569 (1994), which emphasized the fair use doctrine be evaluated on a case-by-case analysis, weighing the following four factors in determining fair use: (1) the purpose and character of the use, including whether the use is transformative or merely supersedes the original; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use on the market of the copyrighted work.

The companies argued that their "socially-acceptable" version did not deprive the owners of the copyrighted work from sales in light of their practice of pairing the edited version with an original copy. The Court found that this argument, while superficially attractive, downplayed the original author’s "intrinsic value of the right to control the content of the copyrighted work, which is the essence of the law of copyright." In short, the copyright owner has the right to determine the market for his or her work.

The Court also found that the fair use doctrine did not apply because (1) there is nothing transformative about the edited version, it simply deleted minor portions from the work as a whole; (2) the creative expressions of movies favored the Studios; (3) the substantial amount of the copyrighted work that was utilized in the final edited version compared to the minor portion that had been edited; and (4) the author’s inherent right to determine the market for the creative work.

In short, the Court found that the fair use doctrine "is not applicable here because the infringing parties are exploiting the market for movies that is different from what the Studios have released into and for an audience that the Studios have not sought to reach."

The Court issued an injunction precluding the continued sale of hard copies of edited versions of the Studios’ works as a violation of section 106(1). Interestingly, the Court found that the clean movies did not violate the Studios’ rights to create derivative works under section 106(2) because the infringing copies are not used in a "transformative manner" and therefore do not constitute derivative works.

One issue left unanswered is whether creation of the initial digital master copy of the DVD constituted an infringement. This question arose because the clean movie companies also asserted the "first sale doctrine" defense, which protects the purchaser of any use of an authorized copy, but does not permit the making of additional copies. The Studios made it clear that they were not seeking a resolution of that issue at this time, but only seeking an injunction precluding the sale and distribution of multiple copies. Nevertheless, the Studios reserved the right to argue that the initial copying and creation of the master copy is a violation of the Digital Millennium Copyright Act, Public Law No. 105-304, 112 Stat. 2860 (1998). This potential argument has generated amicus briefs filed by numerous creative organizations, including the Electronic Frontier Foundation, expressing concern that any finding that the initial copying of the protected work constituted infringement would chill the creative process and impair an individual’s ability to create an interim copy in the process of creating a new, non-infringing transformative work. The Colorado Court, as well as the Studios, left that issue to be determined at a later date.