Using Fee Shifting to Promote Fair Use and Fair Licensing
34 Pages Posted: 10 Oct 2012 Last revised: 7 Mar 2019
Date Written: October 9, 2012
The fair use doctrine seeks to facilitate socially optimal uses of copyrighted material. As a practical matter, however, cumulative creators, such as documentary filmmakers and many contemporary musicians, are often reluctant to rely on the fair use doctrine because of its inherent uncertainty, the potentially harsh remedies for copyright infringement, and the practical inability to obtain effective pre-clearance rights. Moreover, copyright owners have no obligation under existing law to respond to a cumulative creator’s inquiry. Thus, a familiar refrain in professional creative communities is “if in doubt, leave it out.”
In this Article we propose a novel mechanism that would afford a limited, cost-effective process for pre-clearing works, promote fair negotiation over cumulative uses of copyrighted works, and reduce the exposure of cumulative creators from the inherent risks of relying on copyright’s de minimis and/or fair use doctrine. Under this mechanism, a cumulative creator has authority to make a formal offer of settlement to use copyrighted material for a project. If the copyright owner does not respond to the offer, the cumulative creator would be permitted to use the work provisionally by paying the settlement amount into escrow. If the copyright owner rejects the proposed license fee and sues for infringement, the copyright owner will bear the cumulative creator’s litigation costs (1) if the court determines that the use of the material qualifies as fair use or (2) if the court determines that the fair use doctrine did not excuse the use but where the cumulative creator’s offer of settlement (the proposed license fee) exceeded the amount of damages that the court determines to be appropriate. In the former case, the escrow amount is returned to the cumulative creator. In the latter case, the copyright owner receives the infringement award from the escrow account and the remainder returns to the cumulative creator.
Our fair use fee-shifting proposal encourages copyright owners to take settlement offers seriously and negotiate around the fair use doctrine’s inherent uncertainties. In so doing, this mechanism protects the reliance costs of cumulative creators, reduces transaction costs, and discourages hold-out behavior. Overall, our mechanism should enrich cultural production by increasing the use of copyrighted content in follow-on works while fostering markets for cumulative creativity and providing fair compensation to copyright owners of underlying works.
Keywords: copyright, fair use, mechanism design, fee shifting
JEL Classification: K39, K41, L82, Z10
Suggested Citation: Suggested Citation