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Authors Are Victorious in Major Copyright Adjudication
by
Posted On October 4, 1999


In a stunning ruling, adjudicated on September 24, the U.S. Court of Appeals for the Second Circuit has determined that publishers and database producers may not place a freelance writer's print article into an electronic database without the author's permission. This decision overturns a lower federal district court ruling (http://www.tourolaw.edu/2ndCircuit/September99/97-9181.html).

The original 1993 lawsuit was filed by six freelance writers and the National Writers Union (NWU) (http://www.nwu.org) against The New York Times; Newsday; Time, Inc.; The Atlantic Monthly; Mead Data Central Corp. (the former owner of the LEXIS-NEXIS databases); and University Microfilms. From 1991 to 1993, the freelancers sold articles for publication in the print versions of The New York Times, Newsday, and Sports Illustrated. The publishers licensed the contents of their newspapers and magazines to University Microfilms and Mead for inclusion in various electronic databases. The case was brought against the publishers in an attempt "to determine whether publishers are entitled to place the contents of their periodicals into electronic databases and onto CD-ROMs without first securing the permission of the freelance writers whose contributions are included in those periodicals."

In 1997, the judge presiding over the lower court decision (http://www.igc.org/nwu/tvt/tvtrule.htm) concluded that publishers were permitted to load their printed works on electronic databases and CD-ROMs without seeking permission from the freelancers or making additional payments to the authors. The judge's ruling was based on an interpretation of Section 201(c) in the Copyright Act of 1976, in which she viewed electronic databases as revisions (this Section of the Copyright Act allows publishers to produce revised versions of their collective works without seeking permission from individual copyright holders).

In the new court ruling, the Second Circuit unanimously decided that an electronic collective work is not the same as a printed collective work. Databases are not revised products, as electronic works are not presented in the same selection and arrangement as printed publications. Publishers must seek permission from, and compensate, freelance writers for electronic reuse of printed works.

The NWU plans to begin the damages phase of the lawsuit, and will contact publishers on behalf of NWU writers whose works have been infringed. The NWU is seeking compensation for its membership and will be negotiating future licensing rights with publishers. Jonathan Tasini, president of the NWU and one of the plaintiffs in the case, has also sent a letter to 23 presidents of publishing companies and database producers (http://www.nwu.org/tvt/9909pub.htm), encouraging them to license electronic rights through the Publication Rights Clearinghouse (PRC), a transaction-based licensing agency for freelance writers who retain their own copyrights (http://www.igc.org/nwu/prc/prchome.htm). NWU is hopeful that this model will become "the industry standard for clearing rights on full-text databases, World Wide Web sites, and other media of the future."

In addition to the PRC, freelancers are being encouraged to register their works with the Copyright Clearance Center (CCC). Kristen Giordano, associate director of CCC's Rightsholder Services, emphasized CCC's primary function as "providing protection for all rights-holders, be they authors, publishers, musicians, photographers, etc." To assist the NWU in securing royalties for its membership, the CCC has recently completed a registration campaign, educating NWU freelancers about their rights and convincing them to register their works with the CCC. Details can be found on the CCC Web site (http://www.copyright.com/Services/AuthorServices.html).

Understandably, emotions are running high on the issue of authors' rights. Freelance writers are exuberant about this latest court ruling. In recent years, freelancers have become more aggressive in only granting first-print publication rights and negotiating payment for additional uses of their printed works in electronic formats. Since their livelihoods depend on fair compensation from the publishers, freelancers want to be compensated for profits emanating from additional revenues generated by electronic products.

In contrast, primary publishers are equally combative in retaining all rights to works, including first-time use in print publications and future uses in any type of electronic media. Secondary publishers (i.e., the database producers) have traditionally relied on the primary publishers to secure all rights. Subscribers to electronic databases and users who search databases are concerned that authors' separate negotiations for online rights could endanger broad, consistent access to electronic information, not to mention the integrity of databases if retrospective coverage from publications is missing. The legal ruling places several industries in a tailspin.

Debra Brown-Spruill, executive director of Public Affairs Information Service (PAIS) (http://www.pais.org), said: "The recent Court's decision … certainly gave me reason to immediately review our full-text and freelancer agreements. PAIS publishes both an abstracted and indexed retrospective database…. Freelancers contribute to the first and copyright applies to the second so the ruling was of great interest.... While PAIS has exercised reasonable efforts to protect copyright integrity in creating and distributing our database, there are larger questions raised by this decision that could affect product-development plans. A host of items are up for grabs. It is feasible that periodical publishers will have to identify articles for removal from existing database collections because they did not hold copyright as this ruling interprets. Current agreements held by periodical publishers with authors will have to be revisited. Future agreements will certainly be constructed with electronic or non-print rights considered. Authors could opt to wait and negotiate later for electronic rights."

She said: "Will the periodical publishers find themselves with a fee structure akin to the entertainment industry's granting residuals to authors? Will database distributors and/or publishers begin entering into separate agreements with authors working around journal publishers for electronic rights? There is no question that publishers of ‘collective works' will find themselves locked in reviewing product plans and—most critically—our contracts."

Dick Kaser is not only the executive director of the National Federation of Abstracting & Information Services (NFAIS) (http://www.nfais.org) — incidentally, an organization in which some of the defendants in the Tasini case are members — but he is also a writer/author who owns intellectual property. He commented that the "decision is bad PR for publishers. How can we simultaneously be down on Capitol Hill ranting and raging about intellectual property ownership while simultaneously creatively interpreting the contracts that convey the ownership of that property to us? In the category of attracting more flies with sugar than with vinegar, we'd gain a lot more respect from the public at large and those who lobby so actively against us, if we demonstrated that we fight as aggressively to protect the rights of authors, photographers, and other inventors, whose works we depend upon, as we fight to protect our own rights."

Regarding the case's ultimate impact on publishers, Kaser said: "The ruling really applies only to cases in which authors have retained copyright, not to works for hire and not to cases in which ‘all rights' have been transferred to the publisher. It does imply, however, that in order to continue providing complete electronic full-text document collections, publishers are going to have to clean up their subsidiary-rights-management functions. They are going to have to know what agreements they have for individual items…. There's also going to have to be a clearinghouse mechanism for the recording of usage and payment of royalties to authors. We have already figured out how to do this for each other, so it should not be all that challenging to come up with the systems. But it certainly will add an order of complexity to our dealings."

Kaser continued: "Furthermore, to the extent that this case raises with authors the whole issue of rights transference, I predict an increasing difficulty in getting authors to sign agreements in the future. Though this decision applies specifically to full-text electronic document collections, it carries some interesting interpretations about how databases relate to the printed publications they are often derived from. Once articles are stripped from their context (the issue of a newspaper or magazine) and loaded into full-text databases, the court, in this case, has considered them to be separate and distinct from the original compilation. Are digital collections of abstracts—taken out of the context of the secondary journal where they first appeared—also individual items? And what does this imply about copyright protection for them? Not only does this decision imply that publishers should review the standard agreements they have with authors but that online service providers (and database producers who link to full texts) should review their agreements with publishers for liability issues related to the content being licensed. If a publisher licenses content that they don't really have ownership to, then who is really responsible?"

David Mirchin, vice president and general counsel for SilverPlatter Information, Inc. (http://www.silverplatter.com) said: "This case exemplifies two accelerating trends in intellectual property law. First, ‘Contract is king.' This is very positive for publishers because it gives a high degree of certainty to their relationships with authors and users. Similar to the recent decisions on click-wrap and shrink-wrap licenses, parties can order their business arrangements by contract. Contracts will be respected. Second, the "compilation copyright" of database producers is very thin. It provides very little protection. This highlights one more reason why Congress needs to pass balanced database protection this session, such as H.R. 354, the Collections of Information Anti-Piracy Act."

He said: "What's a publisher to do in light of this important case? Publishers should be proactive. On Monday morning, they should open their file cabinets and blow the dust off their fundamental intellectual property agreements—which are the foundation for their entire business. These are the agreements by which authors fill the pipeline to the primary publishers, and the agreements by which the primary publishers fill the pipeline to the secondary publishers. Make sure that the authors or suppliers of information have given you all the rights which you make of their material. Revise your agreements going forward. For existing agreements which don't give you the necessary rights, you have two choices: Change your product concept, or negotiate a new agreement."

The Court of Appeals ruling, while clarifying authors' rights, has opened questions for publishers, database producers, users, and legislators. We will need to watch developments over the next several months to determine whether or not the primary and secondary publishers will appeal the ruling and/or pull all freelance works from their databases, potentially affecting all historical information stored in electronic format. Congress must be monitored as well; legislation may be enacted to revise sections of the U.S. Copyright Act relevant to this case.


Stephanie C. Ardito is the president of Ardito Information & Research, Inc., a full-service information firm based in Wilmington, Delaware, and a consultant on issues of intellectual property and copyright.

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