Licensor Beware: Copyright Protections in Peril

Companies rely on copyright protection to protect software, data sets, and other works licensed to their customers. But reframing what constitutes “transformative use” and the extent to which licenses can limit such fair use could cut down on all safeguards. On October 22, 2022, the U.S. Supreme Court ruled that Andy Warhol Foundation vs. GoldsmithThe question in court is where does a copyright holder’s right to create derivative works stop and “fair use” of the work begins? Companies that license datasets or data feeds should exercise extreme caution, as court rulings may limit their contractual remedies.

warhol vs goldsmith

In 1984, Vanity Fair commissioned Andy Warhol to create art depicting Prince for a magazine cover, using a Goldsmith’s photograph of Prince as an “artist reference for illustrations to be published in November at Vanity Fair” Licensed from Goldsmiths with express rights. 1984 issue. Warhol created 12 silkscreen paintings, two of his screen prints on paper, and two of his drawings based on photographs of the Prince of Goldsmiths.

The Andy Warhol Foundation (AWF) retains ownership of the copyrights of Goldsmith’s photographic work licensed to Vanity Fair and Condé Nast after Prince’s death in 2016. Goldsmith sued AWF for copyright infringement, claiming that the license did not authorize Warhol to create more than one work, and that Goldsmith received no additional compensation. He argued that Warhol’s other uses of Goldsmith’s photographs were transformative and protected by fair use.

Section 107 of the Copyright Act lists the following factors for determining what is fair use:

1. Purpose and Nature of Use.
2. the nature of the work;
3. The amount of original work used.
4. Market impact of original works.

Given the first factor, courts consistently hold that transformative use of copyrighted material is fair use. See, for example, Campbell v. Acuff-Rose Music, 510 US 569 (1994). In order to determine whether a work is “transformative,” courts must determine whether the new work “simply replaces the object of the original creation,” or whether the new work has a new expression, meaning, or message. A decision must be made as to whether to transfer and modify the original. may not be licensed, sold or used without

Fair use was born as a “fair reason rule” that allows courts to avoid harsh enforcement of copyright laws that stifle creativity.of google vs oracle, the Supreme Court ruled that Google’s use of 11,500 lines of code from Java SE (Java is owned by Oracle) in developing Google’s Android operating system was transformative enough. (although the court did not determine whether an application program interface (API) is copyrightable). Justice Stephen Breyer’s majority opinion distinguishes between code implementation and code declaration, and code implementation requires more skill and creativity than code declaration. The court ruled that Google’s direct copying of only “what users need to put their accumulated talents to work in new and innovative programs” is an innovative use.

Impact on Licensors

of Warhol The lawsuit highlights the uncertainty of contractual remedies given Warhol’s patent infringement and extended license from Goldsmiths. This was because the contract restricted Warhol from using Goldsmith’s photograph for her one-time use.logical extension of Warhol and Google The decision calls into question the protection that copyright truly provides when licensees can reconstruct protected works and claim that the new work is transformative.

License agreements usually have a limitation of liability clause. THESE TERMS CONTAIN EXCEPTIONS TO THE LIMITATION OF LIABILITY IF LICENSEE BREACHES THE TERMS OF THE AGREEMENT OR LICENSEE’S USE OF THE DATA VIRUSES LICENSOR’S INTELLECTUAL PROPERTY RIGHTS, INCLUDING COPYRIGHTS. Licensor’s business model relies on these exceptions to the limitation of liability to transfer risk to Licensee. However, if the use is transformative, Licensee is not infringing Licensor’s intellectual property rights. Licensor alleges that even if the new work is transformative and does not infringe the licensor’s copyright, the licensee’s new work violates the terms of the agreement permitting use only for internal business purposes. to file a claim for breach of contract against Licensee.

But disagreements among federal appeals courts as to whether copyright law broadly preempts state law claims, including claims for breach of contract, further complicates contract protection. All Federal Circuit Courts apply the same preemption test, which examines whether a breach of contract claim contains “redundant elements” that make it “qualitatively different” from a copyright infringement claim, but The Circuit Court disagrees on the existence or non-existence of contractual promises per se. Just enough “extra stuff” to avoid copyright preemption. ML Genius Media Group vs. Google LLCNo. 20-3113, (2d Cir. 10 March 2022), compared with Utopia Providers Sys., Inc. vs. Pro-Med Clinical Sys., LLC596 F.3d 1313, 1327 (11th Cir. 2010).

Therefore, if the Supreme Court rules in Warhol’s favor, Licensor will have no remedy against Licensee for copyright infringement claims if the use is deemed transformative. and Such licensors may have no remedy for claims of breach of contract. This is because such claims are not qualitatively different and are therefore preempted by copyright law.

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Companies that rely on copyright protection should watch the consequences of copyright protection. Warhol How line splitting is resolved with respect to cases and preemption.if Warhol If the decision broadens the meaning of transformative use and splits lines in favor of preemption, licensors will need to find new ways to pass the risk on to licensees. Additionally, licensor attorneys must find new ways to offer contractual remedies that avoid being preempted by copyright law.

Image Source: Deposit Photo
Image ID: 150879398
Author: Ropixel