The exclusive rights granted to copyright owners are not without certain restrictions. There are several exceptions to the copyright owner's exclusive rights scattered throughout the Copyright Act. The most significant and, perhaps, murky of the limitations on a copyright owner’s exclusive rights is the fair use exception. There are numerous other exceptions and limitations to the copyright owner’s exclusive rights in the Copyright Act, including exceptions to:
allow libraries and archives to make copies for preservation purposes;
allow the owner of a copy of a computer program to make a back-up copy of the program;
allow certain performances and displays for the purposes of classroom education, religious services, and transmissions to the handicapped and to the blind;
allow certain authorized entities to reproduce and distribute copies of certain works in specialized formats exclusively for use by blind or other persons with disabilities;
allow purchasers of legal copies to re-distribute or otherwise dispose of those copies (commonly referred to as the first sale exception); and
other exceptions and limitations.
There are also several compulsory licenses in the law, including compulsory licenses that allow:
reproduction and distribution of nondramatic musical works in the course of making and distributing sound recordings;
cable systems and satellite operators to retransmit copyrighted programming without infringement liability if they pay a statutory licensing fee;
public performance of nondramatic musical works by means of jukeboxes; and
use of certain works in connection with noncommercial broadcasting;
Fair Use Exception
Much has been written about the fair use exception. It is simply not possible to discuss it in great detail here. What we provide is an overview of the fair use exception to provide the reader with enough information to get a high-level understand of what the fair use exception is and how it applies.
Fair use is an affirmative defense to an action for copyright infringement. It is potentially available with respect to all manners of unauthorized use of all types of copyrighted works in all media. The fair use exception permits a party to use a work without the copyright owner’s permission and without compensating the copyright owner for such use in certain circumstances. The copyright law identifies certain types of uses, including criticism, comment, news reporting, teaching, scholarship, and research as examples of activities that may qualify as a fair use.
There is no bright line test for determining when a particular use constitutes a fair use under the law. Whether a particular use constitutes a fair use is determined on a case-by-case basis. In each case a court, in determining whether a particular use made of a work is considered to be a fair use, will look at: (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (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 upon the potential market for or value of the copyrighted work. Each of these factors is briefly discussed below.
Factor 1: The Purpose and Character of the Use
Historically the first factor has played a significant role in fair use determinations. In more recent cases that role seems to have dramatically increased to the point where it may be the predominant reason for a finding of fair use. The first factor considers whether use is for commercial purposes or nonprofit educational purposes. On its face, this analysis does not seem too complex. However, over the years a relatively new consideration called “transformative use” has been incorporated into the first factor. Transformative uses are those that add something new, with a further purpose or different character, and do not substitute for the original use of the work. If the use is found to be a transformative use, it is almost always found to be a fair use. In recent years, the dividing line between the type of transformations of a work that fall within the derivative use right and the types that are considered to be a transformative use has grown unclear. Safe to say, this is an evolving area of the law that has made the already murky doctrine of fair use even murkier.
Factor 2: The Nature of the Copyrighted Work
Of the four fair use factors, this factor is the least complex and thus also the easiest to evaluate. The more creative a copyrighted work is the more likely there will be a finding of fair use. Thus, when the copyright work being used is a work of fiction this factor favors the copyright owner, but when the work is a factual work it favors a fair use finding. The publication status of the work also plays a role with this factor. When the copyrighted work is unpublished the use is less likely to be a fair use.
Factor 3: The Amount Used
This factor considers the amount of the copyrighted work that was used in relation to the copyrighted work as a whole. Where the amount used is very small in relation to the copyrighted work, this factor will favor a finding of fair use. On the other hand, where the amount used is not insignificant in relation to the copyrighted work, this factor will favor the copyright owner.
There are several important factors to take into account here:
This factor not only considers how much quantitatively was used but also what qualitatively was used. So, for example, if the portion used was the “heart” of the work, this factor will likely weigh against a finding of fair use even if that portion was otherwise a very small amount.
Historically, using an entire work was generally not a fair use. However, there have been some recent cases that have called this tenet into question.
This amount used is considered in relation to the copyrighted work, not in relation to the alleged infringing work. As a result, whether the amount used constitutes a small or large percentage of the alleged infringing work is irrelevant to this factor.
Factor 4: The Effect of the Use on the Market
Historically this has been the most significant of the four fair use factors. However, this may no longer be the case as many recent court decision have been focused more on whether the use is considered to be “transformative” under the first fair use factor. This factor not only considers whether the defendant’s activities may harm the current market, but also considers whether the use may cause any harms to potential markets that could be exploited by the copyright owner if the use were to become widespread.
To help libraries and educational institutions apply these factor and determine what is and is not fair use the Copyright Office has published guidelines. These guidelines can be found in Copyright Office Circular 21.
First Sale Exception
The first sale exception is an exception to a copyright holder’s distribution and display rights. The first sale exception provides that when someone lawfully purchases a copy of a copyrighted movie, book, song, computer program or other copyrighted work, the purchaser may generally sell, lease, loan, gift, display or otherwise dispose of his or her copy of the work.
The first sale exception is what allows consumers to give copies of copyrighted works that they own to a friend, throw them in the garbage, sell them at a flea market etc. and art galleries to publicly display paintings without paying or getting permission from the copyright owner of the work to display the work. But the first sale exception is also limited in scope. For example:
The exception does not apply to licensed works: The first sale doctrine applies only to the “owner of a particular copy.” To qualify as an owner, ownership of the copy must be transferred by some means, for example, through a sale or as a gift. The first sale defense does not apply where the goods are licensed, because a license does not transfer ownership rights in the copy. For example, because most software is licensed, not sold, someone who purchases a software license is not the “owner of a particular copy,” as defined in the copyright law, (they are an “owner of a license to use a copy” of the software) and the first sale defense does not apply. Because most digital content is also obtained through a license, the first sale doctrine would likewise not apply to that licensed content as well. Just because the first sale defense is inapplicable does not necessarily mean the licensee cannot redistribute the licensed copy. There may be a provision in the license agreement that allows the licensee to redistribute the copy under certain circumstances.
The exception does not apply to digital transmissions: The first sale exception only applies to the copyright owner’s distribution right. It does not apply to the reproduction right. When someone transmits a copy from one point to another over a network, like the internet, the transmitter retains the original copy of the work and the recipient of the transmission gets a new copy. Because a new copy is generated by the transmission and the reproduction right is not covered by the first sale exception, the first sale exception does not excuse the transmission of a copyrighted copy of a work. The law is clear that the first sale exception only applies to those situations where the owner of a copy disposes of physical possession of the particular copy. So, for example, emailing a friend a copy of a music file or a magazine article would not be excused by the first sale exception.
The exception does not apply to rental of software and sound recordings: Although the first sale exception generally allows rental of purchased goods, there is a limited carve out to the first sale exception that applies to computer programs and sound recordings. Copyright owners of computer programs and sound recordings retain the right to control the rental, lease or lending of a copy when it is for the purpose of direct or indirect commercial advantage. This is commonly known as the rental right.
The exception only applies to certain types of displays: With regard to displays, the first sale exception only applies to copies publicly displayed directly or by the projection of no more than one image at a time, to viewers present at the place where the copy is located.
The exception does not apply to unauthorized copies: The copyright law states that the first sale exception only applies to copies that are “lawfully made.” As a result, the first sale exception would not apply to the distributions or displays of illegally made copies. It should be noted that the making of a copy that was permitted by the fair use exception would be considered to be “lawfully made” and therefore would be covered by the first sale exception.
Exceptions for Libraries and Archives
The copyright law includes numerous exceptions for libraries and/or archives. There are various conditions that apply to each that must be satisfied for the library and/or archive to take advantage of the exception. These exceptions include
Archival Copies: A library may reproduce and distribute a copy of an unpublished work if the sole purpose is preservation and security, and if the copy reproduced is currently in the collection of the library.
Interlibrary Loan: A library may make single copies of copyrighted works and enter into interlibrary arrangements. (However, the library cannot engage in copying to such an extent that it would substitute for a subscription to or purchase).
Replacement Copies: A library may reproduce a published work (in facsimile form) solely for the purpose of replacing a copy that is damaged, deteriorated, lost or stolen, if the library has, after reasonable efforts, determined that an unused replacement cannot be obtained at a fair price. (The exemption does not apply to digital copies).
Articles and Short Excerpts for Users: A library may reproduce and distribute a copy of one article or other contribution to a copyrighted collection or periodical issue, or a copy of a small part of any other copyrighted work at the request of a user, provided: (1) the copy becomes the property of the user; (2) the copy is used for the purpose of private study, scholarship, or research and to the extent it is not used for that purpose the library or archives doesn’t know that the copy is being used for a different purpose; and (3) the library or archives must prominently display a copyright warning at the place where orders are accepted and on its order form.
Out-of-Print Works for Scholarly Purposes: A library may reproduce and distribute a copy of an entire out-of-print work if it has determined that a copy of the work cannot be obtained at a fair price, provided: (1) the copy becomes the property of the user; (2) the copy is used for the purpose of private study, scholarship, or research and to the extent it is not used for that purpose the library or archives doesn’t know that the copy is being used for a different purpose; and (3) the library or archives must prominently display a copyright warning at the place where orders are accepted and on its order form.
News Programs: A library may reproduce and distribute by lending a limited number of copies of an audiovisual news program.
Exceptions for Educational Institutions
The copyright law includes several exceptions that apply to educational institutions. For example, the law allows a non-profit educational institution to perform or display a copyrighted work in the course of face-to-face teaching activities in a classroom or similar setting. It also allows the transmission of a performance or display of a copyrighted work if (1) the performance or display is a regular part of the systematic instructional activities of the non-profit educational institution; (2) the performance or display is directly related and of material assistance to the teaching content of the transmission; and (3) the transmission is made primarily for reception in classrooms or similar places or by persons to whom the transmission is directed because of their disabilities.
Back-Up Copying Exception
The law provides that it is not a copyright infringement for the owner of a copy of a computer program to make (or authorize someone else to make on their behalf) a back-up copy, RAM copy or some other adaptation of the computer program provided one of these two conditions are met:
the copy is created as an essential step in the course of using the program (e.g., a RAM copy made when a PC is turned on) and it is not used in any other way, or
the copy is for back-up purposes only and all back-up copies are destroyed when the person no longer legally possesses the software.
This exception applies only to owners of a computer program but there is another provision in the law that applies to owners and lessees of machines that contain computer programs. This provision allows the owner or lessee of a machine to make (or authorize someone else to make on their behalf) a copy of a computer program for purposes of maintenance or repair of that machine, if:
the copy is used in no other manner and is destroyed immediately after the maintenance or repair is completed; and
any computer program or part thereof that is not necessary for that machine to be activated is not accessed or used other than to make such new copy by virtue of the activation of the machine.
It is important to note that this exception for backup copies only applies to computer programs and not to other copyrighted works, such as digital movies, music, or photographs or ebooks.
Exceptions for Certain Performances and Displays
Certain performances and displays are exempt from infringement liability. These include:
performances and displays of certain works in the course of religious services;
performances of certain works by governmental or non-profit agricultural or horticultural organizations;
performance of certain musical works in retail outlets for the sole purpose of promoting retail sales;
performances or displays of copyrighted works by certain public establishments (e.g., restaurants and bars) under a certain size using a limited number of speakers;
transmission of performances of certain works to disabled persons; and
performance of certain works at non-profit veterans’ or fraternal organizations for charitable purposes.
Exceptions for the Blind
The copyright law permits certain authorized entities to reproduce and distribute copies of previously published, non-dramatic literary works in specialized formats exclusively for use by “blind or other persons with disabilities,” without the need to first obtain permission from the copyright owners of such works.
Cable and Satellite Compulsory Licenses
The copyright law contains compulsory licensing provisions that allow cable systems and satellite operators to retransmit copyrighted programming without infringement liability if they pay a statutory licensing fee. These licenses are clearly restricted to “cable systems,” and “satellite carriers,” which the law makes clear does not encompass services transmitting over the public internet.