US Court Rules E-Books are Not Necessarily “Books”
By: Christine McInerney
 
In a recent copyright decision, the United States Court of Appeals, Second Circuit, affirmed the prior holding of the federal district court of New York that a publisher who has the exclusive right to publish a novel on paper does not necessarily have the exclusive right to publish the exact same novel in an electronic form as an “e-book.”  Random House, Inc. v. Rosetta Books, LLC,                 F.3d                 , 2002 WL 373276 (2d Cir. 2002).

In Random House, Inc. v. Rosetta Books LLC, 150 F. Supp. 2d 613 (S.D.N.Y. 2001) (“Random House”), Random House sought to enjoin Rosetta Books LLC and its Chief Executive Officer from selling electronic versions or e-books of eight specific works on the ground that the authors (Kurt Vonnegut, William Styron and Robert B. Parker) had previously granted Random House the exclusive right to publish these works in book form.  Nevertheless, the  authors of the works had entered into agreements with ebook publishers for the right to publish the authors’ work in electronic form.

The grant language used in the contracts with Random House  was quite broad.  For example, the rights conveyed in the contested contract with Vonnegut included:

The “[e]xclusive right to publish and to license the Work for publication, after book publication … in anthologies, selections, digests, abridgements, magazine condensations, serialization, newspaper syndication, picture book versions, microfilming, Xerox and other forms of copying either now in use or hereafter developed.”

The Styron and Parker Agreements had similar broad language clearly designed to encompass forms of publishing arising in the future.  Nevertheless, when Random House brought a proceeding to enjoin the ebook publishers and authors from publishing the works in electronic form, the federal district court rejected the publisher’s argument.  In affirming the decision, the Second Circuit held that the district court did not abuse its discretion in concluding that Random House did not sufficiently prove its entitlement to an injunction.  The Second Circuit expressly noted that New York law had adopted a more restrictive view of the kinds of “new uses” to which an exclusive license may apply when the parties do not expressly include coverage of such future forms.

The Random House case is in line with other recent cases favoring the rights of authors over those of publishers.  Random House and other recent cases present a formidable hurdle for publishers whose contracts do not specifically identify “electronic form” and other specific language among their publishing rights.

Two other recent cases reflect a trend favoring authors.  In The New York Times Co., Inc. v. Tasini, 533 U.S. 483, 121 S. Ct. 2381, 150 L. Ed.2d 500  (2001), the Supreme Court held the The New York Times and other newspapers do not have the right to sell the contents of their previously published editions to electronic databases such as LEXIS/NEXIS.  Publishers of periodicals such as the New York Times entered into agreements with owners of electronic databases to republish past editions.  The publishers did not obtain any specific transfer of rights from the original authors and instead relied on broad language in their agreements with the authors permitting reproduction of the works as a collective work.  The publishers argued that the conversion of the work into a digital format and reproduction of the  work on an electronic database was permitted as a revision of the collective work pursuant to Section 201(c) of U.S. Copyright Law, Title 17 of the United States Code (“§ 201(c)”).  The federal district court had previously granted summary judgment in favor of the publishers holding that the databases merely reproduced and distributed the works as part of a revision of the collective work pursuant to §201(a).

The Second Circuit reversed the federal district court, and ultimately the US Supreme Court affirmed the Second Circuit’s decision.  The US Supreme Court held that the right to re-publish the authors’ works was not within the publisher’s licenses with the authors.  The Supreme Court found that the articles appearing in electronic databases were not merely “reproductions of the works as a collective work”, but something different.  The databases reproduce and distribute the articles standing alone, and not in context.  Therefore, publishing the articles in the database is no longer part of the collective work, or any revision thereof.  In particular, the court noted that in the original collective work, the selection, coordination and arrangement of the work is part of the collective work.  All of that is lost in the electronic database where the electronic “search” identifies and displays only a particular author’s work, not the entire newspaper edition.  The court’s focus was on the works as presented to and perceived by the user of the databases.  When the user conducts a search, each article appears as a separate item within the search results, without graphics, formatting or other articles with which the work was originally published.  The Supreme Court specifically rejected the argument that transfer of the articles to the databases was a mere transfer of work between media.  Accordingly, the Supreme Court ruled in favor of the authors.

In the Greenberg v. National Geographic Soc., 244 F.3d 1267 (11th Cir. 2001), cert. denied, National Geographic Society v. Greenberg, 122 S. Ct. 347, 151 L. Ed.2d 262, 70 USLW 3092 (2001), the court also held that National Geographic could not republish photographs from its magazines as a collection in CD-Rom sets.  The CD-Rom sets had three components: (i) the moving covers sequence; (ii) the digitally reproduced magazines; and (iii) a storage and retrieval computer program.

Plaintiff Greenberg owned the rights in the individual photographs but gave National Geographic a license to publish the photographs in its magazine.  National Geographic argued that the CD Rom sets were mere “revisions” of the prior collective works.  However, the CD-rom set contained more than just a digital version of the magazines.  Instead, it contained the introductory sequence, containing one of plaintiff Greenberg’s photographs, which did not mirror any particular edition of the magazine.  Instead, it  displayed certain of the magazine covers containing the photographers’ pictures in a format very different from the original editions of the magazines.  Moreover, the CD-Rom’s storage and retrieval system, which separates the photographs from the text, were a significant departure from the earlier publication of the work.  National Geographic contended that it was permitted to reproduce the works under §201(c).  The court declined to rule on whether the digital images of the magazines alone might be within the terms of §201(c).  It found however that the other two portions of the set, the introductory sequence and the computer storage and retrieval program, clearly did not come within the terms of §201(c).  Again, the court ruled that the case was factually and legally different from a mere media transformation.  The court therefore found the CD Rom set was a new and different collective work, and not within the terms of National Geographic’s license.

The district court’s decision in Random House provides that publishers cannot enjoin authors from selling the right to publish their work in an electronic format, even though the publishers have the exclusive right to publish the same work in “book” format.  Indeed, as reflected above, the contracts contained broad language reflecting that Random House had the rights to publish the works in any form now in use or hereinafter developed.

The district court in Random House found that the phrase “book form” is a limitation of the publishers’ rights.  The court interpreted the language referring to forms of copying, “now in use or hereinafter developed” to refer only to new forms of photocopying.  In e-books, although the text of the work is identical, ebooks involve a digitized text in a format readable by computer software.  Readers are able to search the text, highlight and annotate selections, change font size and style, etc.  Users can type electronic notes which are stored with the related text.  The notes can be automatically indexed, sorted and filed.  The users can obtain definitions of words used in the text.  There are often other unique features as well.  The court noted that interpreting the language to include all new forms of publishing would make the authors’ reservations of rights language superfluous.

In the contracts at issue in Random House, certain rights had been reserved by the authors, reflecting they did not intend to grant to the publisher the broadest possible rights to the work.  The Court rejected Random House’s claims that “book form” meant to reproduce the complete text as a “reading experience.”  Court noted that the “grant of rights follows the grant language alone.”  Therefore the right to print, publish and sell in book form was recognized by the court to be a limited grant.

Earlier cases involving a transition to new forms of media were far less favorable for copyright owners.  In Bartsch v. Metro-Goldwyn-Mayer, Inc., 391 F.2d 150 (2d Cir.), cert. denied, 393 U.S. 826, 89 S. Ct. 86, 21 L. Ed.2d 96 (1968), the court held that the grant by a copyright holder of the rights to license and exhibit a musical play to a motion picture company included the right to televise the motion picture version.  The Bartsch Court found that the broad grant language granting the right “to copyright, vend, licensee and exhibit such motion picture photoplays” permitted the licensee to exhibit the motion picture by telecast without further grant.

More recently, the court in Boosey & Hawkes Music Publishers, Ltd. v. The Walt Disney Company, 145 F.3d 481 (2d Cir. 1998), held that a traditional music licensing agreement concerning rights regarding use of copyrighted material in motion pictures permitted distribution of the motion picture in a videotape format.  The license permitted the licensee to use the musical work in a “motion picture” and did not authorize distribution in a video format.  Moreover, the agreement had no provision providing for use in “future technologies.”  The authors specifically reserved all rights in the work not granted in the agreement.  The Boosey court noted that the burden of excluding the right to a new use rests on the grantor.  Relying on Bartsch, the Boosey court found that the grant of motion picture reproduction rights included the video format, absent on indication in the agreement to the contrary.[1]

By contrast, the guiding principle of Random House and the other recent cases appears to be the recognition that copyrights are based on “defined rights”.  If rights are not expressly and unambiguously transferred pursuant to the license, they are retained by the author of the work.
Tasini, National Geographic, and now Random House all address means of reproducing the work involving more than just a mere change of medium.  In these cases, the new medium gave people the ability to do more than just read or observe the work.  The various interactive functions of the new medium add attributes to the work such that it cannot be considered merely a copy or reproduction of the original work.

The battle exemplified by Random House is not over.  As the Second Circuit Random House decision notes, determining whether the licenses here extend to e-books depends on fact finding with regard to a number of issues, including the ongoing evolution of the technological processes and uses of e-books, and the reasonable expectations of contracting parties.  The decisions resolving the injunctive motion are only preliminary and a final resolution of this issue awaits a full evidentiary record, and a final decision by judge or jury.  The industry obviously needs to follow the Random House case to see if the principles set forth by the district court in Random House will hold.  In any case, these cases reflect that a pattern that has been established, and the industry must take note.

In the future, publishers will attempt to expand their contracts to expressly include various types of electronic forms.  Similarly, astute authors will realize they have more “rights” with which to bargain.  Copyright owners should be alert to overly broad language, which seeks to reach out to include other means of publishing not yet foreseen.

As technology advances, there no doubt will be similar litigations as each new form of medium arises.