Copyright 2015 by Jacqueline D. Lipton & John Tehranian Printed in U.S.A. Vol. 109, No. 2 DERIVATIVE WORKS 2.0: RECONSIDERING TRANSFORMATIVE USE IN THE AGE OF CROWDSOURCED CREATION Jacqueline D. Lipton & John Tehranian ABSTRACT—Apple invites us to “Rip. Mix. Burn.” while Sony exhorts us to “make.believe.” Digital service providers enable us to create new forms of derivative work—work based substantially on one or more preexisting works. But can we, in a carefree and creative spirit, remix music, movies, and television shows without fear of copyright infringement liability? Despite the exponential growth of remixing technologies, content holders continue to benefit from the vagaries of copyright law. There are no clear principles to determine whether any given remix will infringe one or more copyrights. Thus, rights holders can easily and plausibly threaten infringement suits and potentially chill much creative activity. This Article examines the impact of copyright doctrine on remixes with an emphasis on crowdsourced projects. Such an analysis is particularly salient at this juncture because consumers are neither as passive nor as isolated as they once were. Specifically, large-scale crowdsourced projects raise issues relating to copyright and fair use on a scope and scale never before imaginable. As such, this Article reflects on the particular problems raised by the growth of crowdsourced projects and how our copyright regime can best address them. We conclude that future legal developments will require a thoughtful and sophisticated balance to facilitate free speech, artistic expression, and commercial profit. To this end, we suggest a number of options for legal reform, including: (1) reworking the strict liability basis of copyright infringement for noncommercial works, (2) tempering damages awards for noncommercial or innocent infringement, (3) creating an “intermediate liability” regime that gives courts a middle ground between infringement and fair use, (4) developing clearer ex ante guidelines for fair use, and (5) reworking the statutory definition of “derivative work” to exclude noncommercial remixing activities. AUTHORS—Jacqueline D. Lipton, Baker Botts Professor of Law and Co- Director, Institute for Intellectual Property and Information Law, University of Houston. John Tehranian, Irwin R. Buchalter Professor of Law, Southwestern Law School and the Biederman Entertainment and Media Law Institute. The authors thank Derek Khanna for his contributions. 383 N O R T H W E S T E R N U N I V E R S I T Y L A W R E V I E W INTRODUCTION ............................................................................................................. 384 I. REMIXING AND CROWDSOURCING ......................................................................... 390 A. Risk and Reward in Remixing: The Recent History .................................... 390 B. Remixing and Crowdsourcing 101 .............................................................. 393 C. Crowdsourcing and Consumer Interests in Copyright Works..................... 399 II. EXPRESSIVE CROWDSOURCING AND COPYRIGHT LAW ........................................... 405 A. Copyright Infringement ............................................................................... 405 B. Creative Crowdsourcing: The Trouble with Several Arguments Against Infringement Under Current Law ............................................................... 407 C. Remixing and Fair Use ............................................................................... 410 D. Star Wars: Uncut: A Case Study in Crowdsourcing and Copyright ............ 417 III. REFORMING COPYRIGHT AND FACILITATING REMIX .............................................. 424 A. Reworking Strict Liability ........................................................................... 425 B. Tempering Remedies for Noncommercial Infringement ............................. 427 C. An Intermediate Liability Approach ........................................................... 430 D. Clarifying Fair Use ..................................................................................... 437 E. Tempering the Derivative Works Right ....................................................... 440 CONCLUSION ................................................................................................................ 442 INTRODUCTION The concept of derivative works in copyright law is inherently problematic. Section 106(2) of the Copyright Act secures for copyright holders the exclusive right to “prepare derivative works based upon the copyrighted work.”1 The Act then defines a derivative work as any “work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted.”2 Thus, the very statutory definition of what constitutes a derivative work seems to reserve—to the copyright holder—the exclusive right to “transform” an original work. At the same time, however, a related section of the federal copyright regime says something entirely different. The fair use doctrine, codified in § 107 of the Act, involves a four-part balancing test. Courts have read the first factor—“the purpose and character of the use”3—to consider whether a 1 17 U.S.C. § 106(2) (2012). 2 Id. § 101 (emphasis added). 3 Id. § 107. 384 109:383 (2015) Derivative Works 2.0 particular use is transformative in nature.4 The more transformative the use, the more likely a court is to absolve a defendant from infringement liability. As the Supreme Court has explained, “[T]he goal of copyright, to promote science and the arts, is generally furthered by the creation of transformative works. Such works thus lie at the heart of the fair use doctrine’s guarantee of breathing space within the confines of copyright . .”5 Thus, on one hand, copyright’s derivative works doctrine seems to grant the exclusive right to engage in transformative use of a work to that work’s copyright holder. On the other hand, the fair use doctrine seems to suggest that transformative uses of works are precisely the types of works that copyright law should immunize from infringement liability. In short, copyright law sends us mixed messages. This Article analyzes the impact of this inherent tension within the Copyright Act on the practice of creative remixing, with a view toward suggesting legal reforms to attenuate some of the extant ambiguities in the law. The discussion is particularly timely in light of the House Judiciary Committee’s announcement in April 2013 of its plans to conduct a comprehensive review of American copyright law6— a review that is active and ongoing.7 4 See, e.g., Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 579 (1994); Castle Rock Entm’t, Inc. v. Carol Publ’g Grp., Inc., 150 F.3d 132, 142–43 (2d Cir. 1998). 5 Campbell, 510 U.S. at 579 (“[T]he more transformative the new work, the less will be the significance of other factors, like commercialism, that may weigh against a finding of fair use.”). 6 Press Release, U.S. House of Representatives Judiciary Comm., Chairman Goodlatte Announces Comprehensive Review of Copyright Law (Apr. 24, 2013), available at http://judiciary.house.gov/ index.cfm/2013/4/chairmangoodlatteannouncescomprehensivereviewofcopyrightlaw [http://perma.cc/ PUL5-XZ4K]. 7 The Judiciary Committee continues to review a wide variety of copyright-related issues, including the scope of fair use, copyright remedies, music licensing, moral rights, termination rights, resale royalties, and copyright duration. See, e.g., Hearing on Copyright Remedies Before the Subcomm. on Courts, Intellectual Prop., & the Internet of the H. Comm. on the Judiciary, 113th Cong. (2014); Hearing on Moral Rights, Termination Rights, Resale Royalty, & Copyright Term Before the Subcomm. on Courts, Intellectual Prop., & the Internet of the H. Comm. on the Judiciary, 113th Cong. (2014); Hearing on Music Licensing Under Title 17 Part I & II Before the Subcomm. on Courts, Intellectual Prop., & the Internet of the H. Comm. on the Judiciary, 113th Cong. (2014); Hearing on the Scope of Fair Use Before the Subcomm. on Courts, Intellectual Prop., & the Internet of the H. Comm. on the Judiciary, 113th Cong. (2014). Recent high-profile copyright disputes appear to have only increased the Committee’s resolve to conduct a broad reexamination of copyright law. For example, in response to the recent Supreme Court decision in the Aereo case, House Judiciary Committee Chairman Bob Goodlatte stated: Today’s Supreme Court decision reinforces the importance of the House Judiciary Committee’s ongoing review of our copyright law. The review is essential in determining whether the laws are still working in the digital age. It is my hope that we can identify improvements to our copyright laws that can benefit both the content community and the technology community, as well as consumers, by maintaining strong protections for copyrighted works and strong incentives for further innovation. Press Release, U.S. House of Representatives Judiciary Comm., Goodlatte Statement on Supreme Court Decision in Aereo Case (June 25, 2014), available at http://judiciary.house.gov/ 385 N O R T H W E S T E R N U N I V E R S I T Y L A W R E V I E W Not surprisingly, an examination of the history and evolution of copyright law sheds some light on this apparent internal contradiction in the scope of protection given to derivative