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Rosen v. eBay: The Fair Use Doctrine Effectuating First Sale Rights in the Digital Environment

· January 21, 2015

We’re taking part in Copyright Week, a series of actions and discussions supporting key principles that should guide copyright policy. Every day this week, various groups are taking on different elements of the law, and addressing what’s at stake, and what we need to do to make sure that copyright promotes creativity and innovation.

So far, the courts are taking Copyright Week very seriously. Yesterday morning the Ninth Circuit issued a favorable decision in Omega v. Costco, discussed here. Yesterday afternoon, a redacted version of the summary judgment order in Fox v. Dish Network was released. (We’ll discuss that decision in a separate post.) Finally, the U.S. District Court for the Central District of California issued a favorable decision in Rosen v. eBay last Friday. The Rosen decision included helpful holdings on the DMCA and fair use, the latter of which is today’s Copyright Week theme. In particular, the court employed the fair use doctrine robustly to vindicate first sale rights over e-commerce platforms.

Rosen is a photographer who sued eBay over two sets of photographs sold by third parties on eBay. The first set contained allegedly infringing prints of celebrity photographs. With respect to these prints, Rosen claimed that eBay was liable both for the sale of the infringing prints as well as the thumbnail images users made of the infringing prints in their listings on eBay. The second set comprised of back issues of magazines that contained Rosen’s photographs. With respect to this set, Rosen claimed that eBay was liable for the thumbnail images in the listings.

The court granted summary judgment for eBay on all of Rosen’s claims. The court found that because eBay’s systems were automated, it was not the volitional actor with respect to the sale of the infringing prints or the posting of the thumbnail images of them.

Further, the court rejected Rosen’s efforts to disqualify eBay from the Digital Millennium Copyright Act’s safe harbors from secondary liability. Rosen argued that even after eBay had removed the listings in response to his takedown notice, eBay retained copies of the images on its servers and some of these images remained viewable through Google searches. The court held that eBay’s retention of copies was irrelevant to whether it had disabled access to them. (The court also appeared to accept eBay’s argument that it had legitimate reasons for retaining copies of the images, including to repost them in response to a DMCA counter-notice.)

The court acknowledged that even though the listings were removed, some of the images may have still been viewable at URLs copied while the listings were live. Nonetheless, the court found that “this copying is clearly not a normal or expected use of eBay’s systems, and it is unclear that anyone not specifically compelled to exploit this workaround—as Rosen is—would ever use it.” The court concluded that “in light of the somewhat extraordinary lengths Rosen had to go to obtain copies of his images…eBay adequately disabled access to his images when it took down the listings….” Thus, the court interprets the DMCA’s disablement requirement in a common sense manner. The service provider “must disable access in a meaningful way,” but absolute disablement may impractical and therefore unnecessary.

With respect to the thumbnail images of the magazines, the court found that eBay did engage in volitional conduct when it reposted the thumbnail images (after removing them in response to Rosen’s DMCA takedown notice) once it determined that the images were a fair use. Fortunately, the court agreed with eBay that the thumbnail images were a fair use.

The linchpin of the court’s fair use analysis was that eBay’s use was transformative, i.e., eBay used the images for a different purpose than Rosen. (The purpose and character of a use is the first statutory fair use factor.) eBay did not seek to profit from Rosen’s copyright by avoiding the need to pay for authorized copies. Rather, “eBay’s use of the images is to provide information to legitimate purchasers under the first sale doctrine, not for the artistic purpose of Rosen’s original images.” In reaching its conclusion, the court relied on the Ninth Circuit’s search engine cases, Kelly v. Arriba Soft and Perfect 10 v. Amazon.com, where the thumbnail images were treated as a fair use because they were used for information location, rather than aesthetic, purposes. Likewise, the court relied on the Ninth Circuit’s decision in Sony Computer Entn’t v. Bleem, where a screenshot of a video game used for advertising purposes was considered a fair use. The court summarized its holding on eBay’s transformative purpose as follows:

Rosen’s original photographs were created for the aesthetic and artistic purpose. The Magazine Photographs in question were created for the purpose of providing information as to the condition and content of the magazines in which Rosen’s photographs appeared.

Throughout its fair use analysis, the court stressed that the thumbnails were made to effectuate the users’ first sale rights. (The first doctrine was part of yesterday’s Copyright Week theme.) As noted above, in its discussion of whether the use was transformative, the court observed that eBay used the images to “provide information to legitimate purchasers under the fair first sale doctrine.” In the context of the amount if the work used (the third fair use factor), Rosen argued that the images were not necessary in the listings because a description of the magazines and their condition would have sufficed. The court firmly rejected this argument, stating that “an online marketplace for copyrighted visual works being sold legitimately under the first sale doctrine would struggle immensely were the seller or broker not able to display the image itself.”

When the court looked holistically at the purpose of copyright and the use of the thumbnails, the court noted that “the images are used for a fundamentally different purpose and promote the development of a secondary market,” which is one of the main functions of the first sale doctrine.

Additionally, the court dismissed Rosen’s dangerous argument that the first sale doctrine circumscribed the availability of fair use to the owners of copies. Rosen asserted that Congress had spoken definitively on the rights of the first sale owner, i.e., that she could physically transfer a copy under Section 109(a) or display the copy under Section 109(c). In essence, Rosen argued that the first sale doctrine acted as a limitation, and that a fair use finding would eradicate this limitation. This argument resembles an argument made by the Authors Guild in its litigation with the HathiTrust Digital Library, were it asserted that the specific library exceptions in Section 108 restricted the availability of fair use under Section 107. The Second Circuit rejected that argument in HathiTrust, and the district court rejected this argument here.

In particular, the court found that “the fair use doctrine applies to all forms of use of copyrighted works. There is nothing in the Copyright Act that limits its application to only certain types of direct infringement.” The court added that it “finds no support for the proposition that fair use does not apply Where Congress has provided more detail in its legislation.”

Further, the court rejected Rosen’s suggestion that a fair use finding here would allow owners of copies to make copies and publicly display them in any manner they desired. The court emphasized that it only was holding that “copies made of a magazine containing depictions of a copyrighted work, for the purpose of selling that magazine under the first sale doctrine, do not violate the Copyright Act under the fair use doctrine….” The court added that Rosen’s interpretation “would drastically limit the ability of any person to resell any visual copyrighted work except to those in the physical presence of the work.”

The court made one more important fair use finding. Rosen had argued that eBay had infringed by distributing the thumbnail images to its content delivery network (CDN) providers such as Akami. The court found that this distribution “is an inevitable and necessary part of using the internet, and ultimately a trivial activity that falls within the protection of the fair use doctrine.” The court explained that service providers across the internet use CDNs to ensure adequate and efficient service: “rather than keeping everything in one place, an outsourced network of multiple servers is used to ensure smooth operation of the internet general and a service provider’s services in particular.” The court noted that passing of content through multiple parties “is a crucial part of maintaining not only internet commerce, but the efficient operation of the internet generally.” Because the copying is wholly incidental, it is similar to the server cache copies permitted as a fair use by the Ninth Circuit in Amazon.com.

In sum, this decision is in line with previous rulings regarding the DMCA’s safe harbors and the application of fair use to digital technologies. The courts will not impose infringement liability for harmless trivial or incidental copies necessary for the operation of the Internet.

Intellectual Property

The Internet enables the free exchange of ideas and content that, in turn, promote creativity, commerce, and innovation. However, a balanced approach to copyright, trademarks, and patents is critical to this creative and entrepreneurial spirit the Internet has fostered. Consequently, it is our belief that the intellectual property system should encourage innovation, while not impeding new business models and open-source developments.