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4. Digital Preservation and Dissemination of Sound Recordings

Sections 4.1–4.3 of this report address in detail library preservation and dissemination activities with respect to copyright-protected works (including pre-1972 sound recordings restored to copyright protection, post-1972 sound recordings, and any musical, literary, or other works that underlie sound recordings and have not yet entered the public domain). Although pre-1972 U.S. sound recordings are not copyright protected, the scope of federal copyright law can be relevant to state law protection, as discussed above. Section 4.4 focuses on the possible effect of fair use and equitable doctrines. Section 4.5 focuses on sound recordings that have no protection under federal law, discussing permissible activities with respect to those recordings as compared with such activities with respect to copyrighted works.

4.1 Digital Preservation and Replacement Copies: Copyright-Protected Works

As discussed in section 2.4.2, a qualifying library or archives may make up to three copies of an unpublished work in its collection for preservation and security or for deposit and research use at another library. A library may also make up to three copies of a published work to replace one that is damaged, deteriorating, lost, or stolen, or whose format has become obsolete, if the library determines, after "reasonable effort," that an unused original cannot be obtained at a fair price. The copies may be in digital form, but a digital copy made pursuant to these provisions may not be made available outside the library premises.

The scope of these provisions is unclear in many respects, and there has been little litigation to provide guidance. Some of the ambiguities are discussed below.

4.1.1 What Is a "Reasonable" Effort?

The privilege in § 108(c) is contingent on a library determining "after reasonable effort . . . that an unused replacement cannot be obtained at a fair price." Other library privileges require similar "due diligence" efforts. For example, the special-use privilege for the last 20 years of copyright requires a library first to undertake "a reasonable investigation" to determine whether the work is subject to normal exploitation and cannot be obtained at a fair price. The definition of "obsolete," as discussed in section 4.1.2 below, similarly depends on an inquiry into whether playback equipment is "reasonably available." The statute does not define what is "reasonable." The legislative history of the 1976 Copyright Act does, however, shed some light on it:

The scope and nature of a reasonable investigation to determine that an unused replacement cannot be obtained will vary according to the circumstances of a particular situation. It will always require recourse to commonly-known trade sources in the United States, and in the normal situation also to the publisher or other copyright owner (if such owner can be located at the address listed in the copyright registration), or an authorized reproducing service.⁷⁸

The sources to which one would refer will vary with the particular type of work. At the current time, a "reasonable" investigation for a phonorecord presumably would also entail use of Internet search tools to identify Web and other retailers as well as any sources through which a knowledgeable purchaser would seek an unused replacement of the same work, in the same or a newer format that is commercially available.

4.1.2 When Is an Existing Format "Obsolete"?

The adjective "obsolete" means that the machine or device needed to "render perceptible a work stored in that format" is "no longer manufactured or is no longer reasonably available in the commercial marketplace."⁷⁹ In other words, if playback equipment is readily available in the marketplace, the format is not "obsolete." Because turntables remain available, under the current formulation of the law, long-play record albums (LPs), and even 78-rpm discs, are not in an obsolete format. In a recent rule-making proceeding, the Copyright Office concluded that this provision does not allow "preemptive archival activity to preserve works before they become obsolete."⁸⁰ It is permissible to copy individual recordings that are damaged or deteriorating; however, the law does not define "deteriorating."

4.1.3 May Libraries Rely on Others to Make Digital Copies?

If a library has a right to make a digital copy pursuant to § 108, may it rely on another library to make the copy? The terms of § 108(c) suggest that the privilege to copy published works belongs to the library with the damaged, deteriorating, lost, or stolen copy. In contrast, section 108(b), which relates to copying of unpublished works, specifically allows a library to make a copy for another library. Nevertheless, insisting that the library with the privilege to make and retain a copy of a published work must itself undertake the reproduction process seems like an overly technical reading that does not comport with common sense. A library whose copy of a particular work is lost or stolen would presumably have to make a copy from that of another library. The second library may understandably prefer to make a copy for the first library, rather than to yield control of its copy of the work and deprive its patrons of access while it ships the work to the first library and awaits its return. Even if not permitted by the strict terms of § 108, fair use would likely permit one library to make a replacement copy for another library, provided that the recipient library met the conditions for making a copy itself and that all aspects of the arrangement were nonprofit and noncommercial, and otherwise in compliance with the law.

Whether a commercial entity may make preservation copies on behalf of a library or an archives is a different question. Libraries sometimes contract out replacement copying (e.g., transferring works to microform or restoring film) for convenience, or because of the particular expertise provided by outside contractors. However, a third-party commercial contractor does not necessarily "stand in the shoes" of the party with a legal privilege.⁸¹ We are not aware of any claims made against libraries or third-party contractors with respect to these activities. It is possible that the outsourcing that has occurred to date has been limited in nature and scope, has had little if any economic impact on copyright owners, and therefore has not raised concerns. However, if the right holder were to object (e.g., where a third party is digitizing replacement material for a library when the copyright owner itself is preparing or planning to prepare a digital version of the work), it is important to bear in mind that there is no specific authorization for this third-party activity in the law. (Whether it is permissible would depend on the nature and scope of the third-party activities.)

4.1.4 Are Collaborative Digital Preservation Projects Permissible?

Collaborative preservation projects can avoid the need for different institutions to engage in duplicative work and can maximize the use of sometimes-strained library resources. Section 108(g), however, poses a potential obstacle to collaboration projects. Section 108(g)(1) states that the rights of reproduction and distribution provided to libraries under § 108 extend to the "isolated and unrelated reproduction or distribution of a single copy or phonorecord of the same material on separate occasions," but not to "the related or concerted reproduction or distribution of multiple copies or phonorecords of the same material, whether made on one occasion or over a period of time. . . ."

This provision appears to be directed more to the photocopying and distribution privileges set forth elsewhere in § 108 than to library preservation activities, and to reflect a concern that copies made by libraries should not substitute for a purchase or subscription to a work.⁸² In the case of preservation or replacement copies made pursuant to § 108(b) or (c), this is not an issue. Unpublished works will not be available for purchase or subscription, and copies of published works may be made only if an unused replacement cannot be obtained at a fair price. These considerations are not, however, reflected in the terms of § 108(g).

Accordingly, there is no simple, yes-or-no answer to whether collaborative digital preservation projects are permissible. Not all aspects of preservation programs involve copying: libraries can pool their resources to investigate such questions as the copyright status of a work and whether it is currently available on the market or subject to commercial exploitation,⁸³ or to create databases with information concerning works maintained in digital form that can serve as resources for libraries whose copies of those works have been lost or stolen, or have otherwise become unavailable. Such cooperation has existed with respect to analog preservation and replacement activities (in the form of master microform registries), and it is now beginning to develop in connection with digitized works. Moreover, § 108 does not represent the outer bounds of permissible library activities, so even if § 108(g) were read to limit the library privileges to noncollaborative activities, fair use is still available.⁸⁴ Presumably, fair use would allow some collaboration projects among libraries to digitize works, but such projects would have to be evaluated on a case-by-case basis and carefully managed to ensure, for example, that no participant came away with material that it was not entitled to make for itself.⁸⁵ The scope of dissemination would also be very relevant to a fair use determination.

4.1.5 Use of Digital Preservation and Replacement Copies

The statute states that digital copies made pursuant to § 108(b) and (c) may not be made available to the public in digital format "outside the premises" of the library. It does not, however, define the word premises. The legislative history indicates that the references to "the 'premises of the library or archives' in amended § 108(b)(2) and (c) mean only physical premises" and do not refer to online digital libraries "that exist only in the virtual (rather than physical) sense . . . ."⁸⁶ Typical definitions of the word premises are as follows: (a) a tract of land with the buildings thereon, and (b) a building or part of a building [usually] with its appurtenances [as grounds].⁸⁷

This suggests that the privilege would be limited to buildings owned or controlled by that library.

4.2 Special-Use Privileges under § 108(h): Copyright-Protected Works

Section 108(h) of the Copyright Act allows a library, archives, or nonprofit educational institution to make and use copies of copyright-protected works in the last 20 years of their term. It allows broader use of the copies made than do § 108(b) or (c), but an institution must meet several conditions to trigger the privilege.

If it meets the conditions of § 108(h), the authorized institution may "reproduce, distribute, perform or display a copy of the work" in pursuit of preservation, scholarship, or research objectives. Thus, a library is authorized to perform or display a copy made under this provision (in contrast to § 108(b) or (c)), and there appears to be no restriction on distributing these copies to other libraries for collection-building purposes.

To qualify for these expanded-use rights, the institution must undertake a "reasonable investigation" to determine whether the work is subject to normal commercial exploitation or available at a "fair price." It must also check with the Copyright Office to see whether the copyright owner has filed any notices to that effect. The availability inquiry under § 108(h), unlike that of § 108(c), is not limited to unused copies.⁸⁸

4.3 Dissemination via Internet Streaming: Copyright-Protected Works

May libraries and archives stream copyright-protected sound recordings over the Internet? We will consider here two forms of Internet streaming that a library or an archives might engage in: (1) on-demand, interactive streaming services in which users can individually request to have specific sound recordings streamed to them; and (2) noninteractive streaming, or "webcasting," where the webcaster, not the users, determines the sound recordings that are streamed, and multiple users can access the stream. The term webcasting is used differently by different people. In some cases, it refers to any streaming over the Internet;⁸⁹ in others, it refers more specifically to noninteractive, nonsubscription audio transmissions.⁹⁰ We use the term in the latter sense and assume that any webcasting that a library would do would meet the requirements for the compulsory license of performance rights in sound recordings (for example, not only the recordings transmitted but also their order would be determined by the library, not by end users, and the schedule would not be published in advance).⁹¹ This discussion does not address digital downloads. It assumes that the streaming involved would not result in a complete, usable copy of the streamed work in the end user's computer.

The following discussion of streaming and webcasting sound recordings relates to sound recordings protected by federal copyright law, including U.S. sound recordings created on or after February 15, 1972, and foreign sound recordings whose copyrights were restored. We discuss pre-1972 U.S. sound recordings in section 4.5. State law governs the permissibility of streaming those works. The discussion in this section also relates to copyrighted works underlying sound recordings, regardless of whether or not the sound recordings are protected by federal copyright law.

Streaming (whether or not interactive) involves the following copyright-relevant events. First, a copy of the work to be streamed (for example, a sound recording, including the underlying musical composition) must be made on the server. Streaming usually requires multiple server copies to serve users with different technological capabilities (e.g., different media players, different bandwidths). Second, streaming involves reproductions made in the buffer of the recipients' computers (though the copyright significance of those copies is a matter of debate, as discussed in section 4.3.1, below). Third, streaming involves a public performance of the streamed works.

We consider below the ways in which streaming may implicate copyright rights, whether the proposed streaming activities would fall under any exception or privilege the law grants to libraries and archives, and if it does not, from whom a license would be obtained.

4.3.1 Interactive, On-Demand Streaming

4.3.1.1 Sound Recordings

Public performance. On-demand interactive streaming would be considered a public performance of copyrighted sound recordings and would not be subject to the compulsory license available for certain digital audio transmissions. Systematic, on-demand streaming of copyrighted sound recordings does not fall under any exceptions generally available to libraries and archives.⁹² It would require negotiating a license with the copyright owners of the sound recording.

Reproduction onto server to enable streaming. Reproduction onto a server for the purpose of digital streaming to remote users does not appear to fall under a specific library exception. Copies made pursuant to library preservation exceptions under § 108(b) and (c) may not be made available outside library premises. A copy made pursuant to § 108(h) could be placed on a server, but this provision is currently of limited use, since there are virtually no sound recordings in their last 20 years of copyright protection. Finally, § 112(a) allows the creation of an ephemeral copy of a "transmission program" to facilitate a transmission allowed pursuant to an exception to copyright, a compulsory license, or an agreement with the copyright owner. Since public performance by means of an on-demand digital transmission is within the sound recording copyright owner's exclusive rights, there is no right to make a copy under § 112(a) absent an agreement with the copyright owners.⁹³ For sound recordings of musical compositions, the copyright owner will generally be a recording company. In the case of the Robert Frost recording of Frost poems (example 3, above), the copyright owner of the sound recording may be Frost's publisher or the Frost estate or heirs.

Buffer copies. As discussed above, on-demand streaming would require negotiation of an agreement with the sound recording copyright owners. Any such agreement would presumably embrace buffer copies. The question of whether making those copies is an independent event for copyright purposes is discussed in the next section, in connection with musical works.

4.3.1.2 Musical Compositions

Public performance. Streaming entails a public performance of the musical composition being streamed. Public performance licenses would have to be obtained from the performing rights societies (ASCAP, BMI, SESAC).⁹⁴ ASCAP and BMI operate under antitrust consent decrees and cannot deny licenses to users who request them; the only issue is the amount of license fee to be paid.

Reproduction onto server to enable streaming. Reproduction onto a server for the purpose of digital streaming to remote users does not fall under § 108(b) and (c). It may be permissible under § 108(h) during the last 20 years of copyright protection, but the conditions in that provision (see section 2.4) must be met. Even for copyrighted musical compositions that do not qualify for the expanded-use privileges in § 108(h), § 112(a) allows the creation of an ephemeral copy of a transmission program to facilitate a permitted transmission (including performances licensed by the performing rights societies). However, it is doubtful whether on-demand streaming could qualify as a "transmission program," defined as "a body of material that, as an aggregate, has been produced for the sole purpose of transmission to the public in sequence and as a unit."⁹⁵ In any event, § 112(a) would authorize the making of only a single copy, which may be insufficient for streaming purposes.

It is also unclear whether the § 115 compulsory license for musical compositions can be interpreted to encompass the necessary server copies.⁹⁶ If not, permission to make additional server copies would have to be sought from music publishers, many of which are represented by the Harry Fox Agency. This is an area where the law is still developing.

Buffer copies. There is a controversy over whether the copy created in the buffer of the recipient's computer in the course of on-demand streaming implicates the reproduction right. The Copyright Office takes the position that although a reproduction may be made, it is merely incidental to the performance and does not, or should not, have independent economic significance. Music publishers dispute this view, pointing to, among other things, the ease with which streams in buffers can be captured and retained, and to the definition in the law of "digital phonorecord delivery," which seems to distinguish between digital phonorecord deliveries in general and those "where the reproduction or distribution of a phonorecord is incidental to the transmission which constitutes the digital phonorecord delivery."⁹⁷ This issue is unresolved.

In order to move forward in the face of these legal ambiguities and to enter the on-demand streaming market, the Harry Fox Agency, the National Music Publishers Association, and the RIAA entered into an interim agreement in 2001 that allows on-demand streaming of musical compositions (including the right to make the necessary server and buffer copies) in exchange for payments by the RIAA to the copyright owners of the musical compositions. The agreement also covers "limited downloads" (i.e., downloads limited in terms of time or number of plays). It envisions that payment will be adjusted when the legal ambiguities are resolved and a royalty rate is established. The agreement does not address any webcasting issues.⁹⁸

4.3.1.3 Other Types of Underlying Works

For other types of underlying works, such as literary or dramatic works, the analysis is essentially the same as that for musical works.

Authors of literary works usually enter into contracts with book publishers to license their works for reproduction in various forms. Many book-publishing agreements encompass the right to license audio recordings of the work, but in some cases those rights are retained by or have reverted to the author or his or her heirs. Frequently, the same party holds the reproduction rights and the performance rights, unlike the case with musical compositions. Nonetheless, it may be more difficult to locate the right holder of a literary work than the right holder of a musical composition because the literary publishing industry has no licensing agencies akin to the Harry Fox Agency, ASCAP, or BMI. Permissions usually have to be sought in the first instance from the publisher. This would be the case for someone seeking to use the Frost poems that underlie the Robert Frost recording in example 3, above.

4.3.2 Webcasting

We turn next to the copyright implications of webcasting (where the particular recordings streamed, and their order, are determined by the webcaster), to consider whether they differ from those of interactive, on-demand streaming.

4.3.2.1 Sound Recordings

Public performance. A compulsory license is available for subscription digital audio transmissions and nonsubscription digital audio transmissions that meet the statutory requirements (for example, the transmission is accompanied, if feasible, by copyright information, and the transmitting party meets a number of specific statutory requirements that diminish the risk that the transmissions will be copied). For example, the transmitting party may not (1) publish its program in advance, (2) play more than a specified number of selections by a particular performer or from a particular phonorecord within a specified time period, or (3) seek to evade these conditions by causing receivers to automatically switch program channels.⁹⁹

Reproduction onto server to enable streaming. Reproduction of sound recordings onto a server for webcasting is covered by the statutory license in § 112(e).¹⁰⁰

Buffer copies. Buffer copies are apparently regarded as falling within the statutory license.

4.3.2.2 Musical Compositions

The analysis of rights in musical compositions as they relate to webcasting is similar to that for on-demand streaming, although webcasts may be more likely to qualify as "transmission programs." Section 112(e) relates only to sound recordings, not to musical compositions or other underlying works. Apparently, owners of rights in musical compositions have not been asserting claims with respect to buffer copies made in the course of webcasts.¹⁰¹

4.3.2.3 Other Types of Underlying Works

The analysis is similar to that for on-demand streaming.

4.4 Fair Use and Equitable Doctrines

4.4.1 Fair Use

Could streaming of sound recordings qualify as fair use? A comprehensive program to systematically digitize and stream sound recordings over the Internet without regard to their copyright status would have little claim to fair use; however, it is not easy to determine when a more modest program might qualify under fair use. Fair use determinations are fact based, so it is difficult to do anything but make general observations and assumptions about possible digital preservation and dissemination programs.

The first fair-use factor, the purpose and character of the use, favors nonprofit, educational, and scholarly uses. This factor also favors "transformative" uses that analyze, supplement, or otherwise build on, rather than merely reproduce, the original. Transformative use is not essential to fair use, though the first factor usually weighs more heavily in favor of fair use where there is a transformative aspect. The first fair use factor would likely favor library copying and streaming of sound recordings limited to research or scholarly uses.

The second fair use factor, the nature of the copyrighted work, would likely favor copyright owners, as the subject works are predominantly creative rather than factual.

The third factor—amount and substantiality of the portion of the work used in relation to the work as a whole—would also favor copyright owners, if the entire works were used. The assessment of this particular factor could change if only small excerpts were used (especially if the excerpts were not of particularly high quality), but such excerpts may not satisfy the scholarly and research goals of libraries and their patrons.¹⁰²

The fourth factor, which is the effect on the potential market for or value of the copyrighted works, is the hardest to assess. Sound recordings (and underlying musical or other works) vary significantly in their market potential. Digital technology has brought about renewed interest in older works, and rereleasing older sound recordings can be done with a smaller financial investment on the part of copyright owners than previously required. Digital technology may give new life to older works that had little apparent market potential 10 or 15 years ago.

How might widespread use of copyrighted works in a particular manner, without apparent objection by copyright owners, affect a fair use determination? Assume, for example, that it is common practice for libraries to make available 30-second audio clips on the Web, and that copyright owners have raised no objection to this practice.¹⁰³ A custom of permitted use (indicating apparent acquiescence by a particular copyright owner or similarly situated copyright owners) can sometimes favor a fair use defense.¹⁰⁴ However, copyright owners' failure to take action with respect to a particular practice does not necessarily indicate that they consent to it. In the early stages of a new technology, enforcement costs that copyright owners would incur may outweigh the likely return from the use, and a practice develops whereby users proceed without permission. Over time, however, copyright owners set up enforcement mechanisms.¹⁰⁵

Internet streaming is a relatively new technology. It is too early to assume that certain practices (e.g., streaming by libraries or nonprofit institutions, without authorization, of 30 seconds of a sound recording) have become customary or that copyright owners acquiesce in them. These practices do not yet appear to be widespread or generally accepted, and many copyright owners may simply be unaware of them. The owners may also have decided to focus enforcement resources in other areas, such as infringement through file sharing, which is a serious threat to their business. In short, as of this writing, these practices do not appear to be sufficiently established to warrant a conclusion that they are common practices for which copyright owners' acquiescence can be inferred (i.e., de facto fair use).

The availability of a fair use defense cannot be predicted with certainty. As with collaborative preservation projects, some streaming projects might qualify, depending on factors such as the categories of subject works, who will have access to the materials, and under what circumstances. But the structure of the Copyright Act (e.g., the limitations placed on copies made under § 108(b) and (c), and the limitations placed on works streamed pursuant to § 110(2), including the technological protection requirements), lead to the conclusion that fair use could not justify a comprehensive program to digitize copyrighted sound recordings and to make them publicly available over the Internet.¹⁰⁶

4.4.2 General Equitable Defenses

Can failure to object to certain uses of their works in the past preclude copyright owners from taking action in the future? For example, if record companies fail to prosecute unauthorized uses of sound recordings that are in the public domain in their country of origin but still protected in the United States by common law or federal copyright, have they abandoned their rights in the United States?

Right holders can, by their conduct, evidence an intent to give up their copyright—or at least certain rights under their copyright—thereby precluding them from succeeding in an infringement action. There are several relevant equitable defenses to copyright infringement, including abandonment, estoppel, waiver, and laches. There is considerable overlap between these defenses, each of which is described below.¹⁰⁷

Abandonment. Abandonment of copyright requires an intent to give up copyright rights and an overt act demonstrating that intent.¹⁰⁸ That overt act might be, for example, publication of the work by the author together with an unequivocal statement that the work is "dedicated to the public domain." Failure to prosecute copyright infringement by third parties has not been considered evidence of abandonment by the courts.¹⁰⁹ The application of the abandonment defense was at issue in the Capitol Records v. Naxos case discussed above, but the Second Circuit Court ruled there were still factual issues to be determined by the district court.

Estoppel. Estoppel is a legal bar to proceeding on a claim that is inconsistent with the claimant's previous statements or conduct. To establish the defense of estoppel, a defendant must demonstrate that
(1) the party to be estopped (i.e., the right holder) knew the facts of defendant's infringing conduct and did not object;
(2) the right holder intended that his conduct would be relied upon, or act in such a way that the defendant had a right to believe the right holder intended his conduct to be relied upon;
(3) the defendant was ignorant of the true facts; and
(4) the defendant relied on the right holder's conduct to his detriment.¹¹⁰

This defense is relevant only as between the right holder and a specific defendant. It requires proof of knowledge of specific infringing activities. One cannot establish waiver with respect to a particular defendant's activities by demonstrating that a right holder knew of infringing activities by a different party and did not object, or that another party relied on the right holder's conduct to his detriment.

Waiver. Similar to estoppel, waiver requires proof of "intentional relinquishment of a known right with both knowledge of its existence and an intention to relinquish it."¹¹¹

Laches. The word laches refers to undue delay in asserting legal rights. To establish a laches defense, a defendant would have to prove that a right holder failed to assert his rights in a diligent manner and that the defendant was prejudiced by the reliance on the right holder's inaction. One cannot assert a defense of laches on the basis of a right holder's failure to take action against another party.¹¹²

In each case, the defense, if proved, is a complete defense to copyright infringement. However, the defenses are very fact-specific, requiring a demonstration of an overt act, in the case of abandonment, or of a knowing relinquishment. Thus, some right holders may by their conduct have given up rights, but others have not. These defenses may be effective in the context of specific infringement suits but do not provide the basis for a comprehensive business strategy.

4.5 Pre-1972 Sound Recordings without Federal Copyright Protection

How does protection for pre-1972 sound recordings that lack federal copyrights differ from the protection described above? Is there greater ability on the part of libraries to make digital copies or to stream those copies?

To the extent that such recordings embody other works (principally musical works), the copyright status of those underlying works must be taken into account. Accordingly, the analysis above with respect to musical and other works that underlie copyrighted sound recordings is applicable as well to pre-1972 sound recordings. But what about the sound recordings themselves?

There is no simple answer to the question whether libraries can copy and stream pre-1972 sound recordings without violating state law. Our preliminary research demonstrates that there is a substantial body of state law that pertains to pre-1972 sound recordings. Laws vary from state to state. Most states appear to have criminal laws concerning sound recordings, and many also have relevant civil laws. Determining the scope of permissible use under state laws—specifically, whether digital preservation copies can be made, and whether they can be streamed to users from library servers—requires a more comprehensive survey of these state laws. What is permissible in one state may be illegal in another.

On the basis of our limited review of state law, we can, however, make some tentative observations:

State criminal laws: Our review suggests that digital preservation and streaming of pre-1972 sound recordings by nonprofit libraries is unlikely to violate state criminal laws. The criminal laws in the states we surveyed generally focus on for-profit distribution of copies of sound recordings, done with intent. Criminal laws are strictly construed according to their terms; for this reason, provided a library does not sell the recordings or use them for profit or commercial advantage, it will not violate these laws, even if its activities result in commercial harm to the right holder. However, the laws of other states may vary from those we reviewed (and California's law would bear further investigation, as discussed below). It is essential to do a complete state survey to responsibly assess potential criminal liability.

State civil laws: Most state civil law in this area is common law, developed on a case-by-case basis. Because its contours (e.g., what rights are covered, what exceptions exist) are not strictly defined and are subject to change, it is difficult to assess the risk of civil liability for digital copying and dissemination of pre-1972 sound recordings. The cases we found involved defendants who sought to gain commercially from the use of plaintiffs' sound recordings. But the elastic nature of common law leaves open the possibility that commercial harm to the right holder can be the basis of a claim, even if the user does not derive a commercial benefit. Moreover, a state could rely on federal copyright law for guidance, and commercial benefit is not an essential element of a federal copyright claim. For example, in Capitol Records v. Naxos, discussed in section 3.3, the New York Court of Appeals held that marketplace competition or commercial benefit is not essential to a common law copyright claim (as they are to an unfair competition claim), and the court looked to federal law for guidance on the scope of the common law rights.

A survey of state laws will reduce the uncertainty concerning the scope of state law protection and likely suggest ways to minimize the risk of liability in connection with digital preservation and dissemination of pre-1972 sound recordings. But our research suggests that even a detailed survey will not completely resolve these issues. New legislation to establish a library privilege to preserve and appropriately disseminate these materials would be very desirable.

In the meantime, it seems unlikely that activities within the bounds of what is permitted under § 107 or § 108 concerning copyrighted sound recordings would be actionable under state law with respect to pre-1972 sound recordings. Indeed, it is unlikely that such activities would even elicit a claim.

What should the state law survey address? Concerning state criminal laws, among the issues to be explored are (1) What specific conduct concerning pre-1972 sound recordings is prohibited under state laws? (2) Do any states criminalize conduct performed for reasons other than profit or private financial gain, or imply such motive from the value of works copied or distributed without authorization?¹¹³ (3) What is the significance of the exemption for not-for-for profit and governmental institutions in California's record piracy law? What significance, if any, does it have in other states whose criminal laws are similarly worded but lack a similar exemption?

Concerning civil liability, important questions to be investigated include (1) Are there statutes or cases related to civil protection of pre-1972 sound recordings, and what is the scope of that protection? (2) To what extent have state courts looked to federal copyright law to inform decisions concerning sound recordings? (3) Do "unfair competition," "misappropriation," or similar torts that might be asserted extend to conduct that causes financial harm to the right holder, even though it may not be done for, or result in, profit to the user?

Finally, one must bear in mind that while the focus of this report is dissemination by digital streaming, there are other ways in which a library might disseminate pre-1972 sound recordings. No analog transmissions or broadcasts are covered by the sound recording performance right for copyrighted sound recordings, and we assume that right holders of pre-1972 sound recordings do not regard analog performances as within the scope of their rights (or do not regard them as an economic threat), since radio stations make analog transmissions every day, and we are not aware of any claims.¹¹⁴ Thus, if digital transmissions are not implicated, it appears that only rights in the underlying works would have to be obtained for analog transmissions, and where the underlying works are musical compositions, that can be achieved with blanket licenses from the performing rights societies. (Of course, no license is necessary for musical compositions in the public domain, such as the Mahler, Telemann, and Bach compositions in examples 2, 4, and 5, above.)

FOOTNOTES

⁷⁸ House Report, above note 21, at 75-76. There is little legislative history for § 108(h); presumably this language is relevant also to the "reasonable investigation" standard of that provision.

⁷⁹ § 108(c)(2).

⁸⁰ Recommendation of the Register of Copyrights in RM 2002-4; Rulemaking on Exemptions from the Prohibition on Circumvention of Copyright Protection Systems for Access Control Technologies (October 27, 2003) at 63, http://www.copyright.gov/1201/docs/registers-recommendation.pdf.

⁸¹ See, for example, Princeton University Press v. Michigan Document Services, Inc., 99 F.3d 1381, 1386 & n.2 (6th Cir. 1996) (en banc), cert. denied, 117 S. Ct. 1336 (1997). See also note 21, above.

⁸² See House Report, above note 21, at 75: "[S]ection 108 would not excuse reproduction or distribution . . . if the photocopying activities were 'systematic' in the sense that their aim was to substitute for subscriptions or purchases." This concern is made explicit in § 108(g)(2), which preserves libraries' right to participate in interlibrary arrangements, provided they do not receive copies for distribution "in such aggregate quantities as to substitute for a subscription or purchase" of a work.

⁸³ The permissibility of copying a work may change over time. For example, it may become commercially available.

⁸⁴ § 108(f)(4). See Gasaway, above note 27, at 653.

⁸⁵ This would not be an easy task. Careful management would have to be undertaken to ensure that such projects did not improperly become a collection-building mechanism for libraries, or that changing circumstances did not affect the permissibility of making digital copies. A work might become commercially available, for example, eliminating the justification for making replacement copies, or subject to commercial exploitation and therefore not available for use under § 108(h).

⁸⁶ Committee Print of the House of Representatives Committee on the Judiciary: House Comm. On the Judiciary, 105th Cong., 2d Sess., Section-by-Section Analysis of H.R. 2281 As Passed by the United States House of Representatives on August 4, 1998, at 48–49 (1998) [hereinafter, House Manager's Report].

⁸⁷ Webster's Ninth New Collegiate Dictionary (Merriam-Webster 1985).

⁸⁸ No case has directly addressed whether a sound recording may be copied under § 108(h) when the underlying work is protected by copyright and not in the last 20 years of its term. However, in Russell v. Price, 612 F.2d 1123 (9th Cir. 1979), the court held that copyright owners of George Bernard Shaw's play Pygmalion, which was still covered by copyright, could prevent distribution of the film version of the play, even though the film had fallen into the public domain, id. at 1128. Similarly, in Filmvideo Releasing Corp. v. Hastings, 668 F.2d 91 (2d Cir. 1981), the court held that even though films based on the Hopalong Cassidy stories had fallen into the public domain, a license for television exhibition had to be obtained from the owners of the copyrights in the underlying books, which were still protected by copyright, id. at 92. Of course, § 108(h) provides only a limited privilege and may not deprive copyright owners of the underlying work of economic rights in the same way that a contrary result in the cases discussed above might have done. On the other hand, the structure of § 108(h) clearly demonstrates Congressional concern that the expanded privileges should not harm the economic interests of copyright owners whose works may be subject to this privilege, and the copyright owner of a protected work still subject to commercial exploitation could be adversely affected by broad use under § 108(h) of a sound recording embodying that work.

⁸⁹ Bonneville Int'l Corp. v. Peters, 347 F.3d 485, 489 (3d Cir. 2003) ("This real-time transmission of sound recordings over the Internet is known as 'streaming' and 'webcasting,' and the transmitter of an Internet stream of music is known as a 'webcaster.'") (footnote omitted).

⁹⁰ House Manager's Report, above note 86, at 50 ("the digital sound recording performance right applies to nonsubscription digital audio services such as webcasting. . . ."); U.S. Copyright Office, Public Performance of Sound Recordings: Definition of a Service, 65 Fed. Reg. 77292, 77296 (December 11, 2000) ("noninteractive nonsubscription service[s] streaming music over the Internet" are "now known in the industry as webcasters. . . .").

⁹¹ A library could take requests without the service being deemed interactive, as long as the requested recording is not transmitted within one hour of the request or at a time designated by the library or the requester. § 114(j)(7). In other words, the greater ability that users have to plan in advance, the more likely the transmission will be deemed interactive.

⁹² Narrowly targeted streaming activities would be permissible if they fell under a specific exception, for example, streaming to enrolled students by a qualifying entity as part of systematic mediated instruction that meets the conditions of the distance education exemption in § 110(2), discussed in section 2.4 of this report.

⁹³ Server copies can be made pursuant to § 112(b) and (f) for transmissions that qualify under the distance education exception in § 110(2). For purposes of this report, it is assumed that activities under § 110(2) are not sufficient to meet the Library's preservation and dissemination mandate, but this area deserves further study.

⁹⁴ Such licenses would not, however, encompass playing original cast recordings in their entirety, for that would entail a dramatic performance or "grand" right. E-mail correspondence from I. Fred Koenigsberg, White & Case, General Counsel, ASCAP (November 19, 2004) (copy on file with author).

⁹⁵ § 101.

⁹⁶ See generally Statement of Marybeth Peters, Register of Copyrights, before the Subcommittee on Courts, The Internet and Intellectual Property, House Committee on the Judiciary, 108th Cong., 2d Sess. (March 11, 2004), at http://www.copyright.gov/docs/regstat031104.html [hereinafter, Statement of Marybeth Peters].

⁹⁷ § 115 (c)(3). See Statement of Marybeth Peters, above note 96; Kohn & Kohn, above note 36, at 1328-32.

⁹⁸ The legal conclusions on which the agreement is based are not universally accepted. See, for example, Statement of Marybeth Peters, above note 96, at 9–10.

⁹⁹ § 114(d)(2). Thus, playing the entirety of an original cast album would not be permitted under the statutory license.

¹⁰⁰ § 112(e) authorizes creation of an ephemeral copy of a sound recording transmitted under a § 114(f) statutory license. It allows a single reproduction unless the terms and conditions of the statutory license allow for more.

¹⁰¹ While these copies may be technologically indistinguishable from buffer copies created in on-demand streaming, they are perceived to be less likely to result in copies that are retained and reused by end users (and thus less threatening to music copyright owners' financial interests).

¹⁰² For some users whose goal is simply to identify a particular work and determine its general style or whether it is the same as or different from another work, a short excerpt may be enough. Other users, however, may need to study—and possibly to transcribe—the entire work.

¹⁰³ This premise is included for the sake of discussion. We have no basis at this time for concluding that this is a common practice and we understand that some copyright owners do object to such uses.

¹⁰⁴ Wendy Gordon, Fair Use as Market Failure: A Structural and Economic Analysis of the Betamax Case and Its Predecessors, 82 Colum. L. Rev. 1600, 1641 (1982).

¹⁰⁵ Id. at 1621.

¹⁰⁶ Making copyrighted works available over the Internet to users outside the United States also carries potential risk of liability to foreign right holders under the laws of other countries. What the U.S. courts might deem fair use could be an infringement elsewhere, and courts around the world are not in agreement as to where an infringement on the Internet occurs (e.g., the country of origin, country(ies) where the material is received).

¹⁰⁷ Our research on equitable defenses is derived primarily from federal law sources. Although we believe the principles described here would also apply in state court, we have not done a state law survey concerning the requirements to establish these defenses.

¹⁰⁸ Capitol Records, 372 F.3d at 483.

¹⁰⁹ Id. at 484, citing Paramount Pictures Corp. v. Carol Publishing Group, 11 F. Supp. 2d 329, 337 (S.D.N.Y. 1998); Goldstein, above note 10, § 9.3 at 9:12.

¹¹⁰ Nimmer, above note 10, § 13.07 at 13-280 to -8; Goldstein, above note 10, § 9.5.2 at 9:33-35.

¹¹¹ Capitol Records, 372 F.3d at 482 (New York law).

¹¹² See generally Goldstein, above note 10, § 9.5.1 at 9:26–33 (2005 Supp.).

¹¹³ Cf. 17 U.S.C. § 506(a).

¹¹⁴ If, however, high-quality, efficient nondigital "on-demand" transmissions to individual users could be technologically achieved, it might raise concerns for right holders under state laws.

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