Chapter 4
Limitations on Copyrights: The Chili Pepper of Copyright
If all the copyright law did was grant rights to authors, our task would be simple, because any copying would require advance permission and a user would always have to seek approval to use even small portions of a work. However, while the granting of rights is broad and quite inclusive, there exists a series of statutory limitations to those grants. Within the parameters of these limitations lies much play and much confusion. In all, the limitations represent the chili pepper of copyright law, which creates the spicy intellectual mix.
Fair Use
The most important limitation in copyright law is fair use. Fair use is a defensive claim that can negate a charge of infringement. It provides that, in the course of activities such as “criticism, comment, news reporting, teaching, scholarship or research,” one can use a copyrighted work without the consent of the owner. To determine whether the use is indeed fair, four factors are considered:
- The purpose and character of the use, including whether the use is for commercial or noncommercial purposes.
- The nature of the copyrighted work.
- The amount and substantiality of the portion used in relation to the work as a whole.
- The effect of the use on the potential market for or value of the original.
While these criteria are deceptively simple, they have been the subject of more litigation than any other limitation in the copyright law.
Fair use has no bright-line test. Because analysis of the legal criteria varies with the facts of each case, one cannot know with certainty in advance whether the fair use assertion will be sustained. This poses a real dilemma for a potential user who does not want to be labeled an infringer and subject to the penalties the statute imposes for violation of someone's copyright. However, since fair use is a defense to a claim of infringement, the user must exploit another's copyright, then justify the activity after the fact, as allowed under law. This uncertainty can be both an advantage and a curse.
Due to a special provision of copyright law that allows the prevailing party in an infringement lawsuit to seek payment of legal fees, if a copyright owner challenges a user and loses the claim of infringement to the defense of fair use, the owner could be forced to pay the fair user's legal fees. However, the user who fails to defend his or her exploitation could likewise be burdened with the legal costs of both sides to the litigation in addition to financial penalties. Therefore, all parties must exercise reasonable caution when a fair use claim is involved.
As a handy reference for understanding the limitation, think of a baseball park, which we call “The Field of Fair Use Dreams” (Figure 4-1).
Figure 4-1 The Field of Fair Use Dreams
The Field of Fair Use Dreams
The statutory exemption defines the parameters, or the ballpark, in which fair use is played. News reporting, comment, criticism, research, scholarship, and teaching are in the field of play. For those in the news media and education, for example, most of the core activities come within these terms; therefore, these activities are favorable for a fair use analysis.
But being in the ballpark does not mean that using another's work is fair. To make that judgment, one must consider four criteria, which are like the bases of the infield diamond. You cannot claim fair use unless you successfully touch all the bases. So let's zone in on these four criteria.
First Base: Commercial or Noncommercial Use
This factor assesses the economic motivation involved in the exploitation. For some time, it was thought that any commercial use would doom the likelihood of winning a fair use argument. However, under more modern interpretations, while a noncommercial use is favored, a commercial use is not fatal to a fair use claim. Nevertheless, to the extent that the use is not directly tied to a commercial activity, the user has a better chance of prevailing. By definition, public (noncommercial) television stations and nonprofit educational institutions have an easier time establishing fair use than their commercial counterparts. Similarly, if the use is part of a product sold to the public directly for a fee, the use is less likely to prevail. It does not matter that the user is a single individual as compared with a multinational corporation. What matters for this factor is whether the user can claim to be noncommercial. In baseball terms, this factor also affects the speed with which one circles the bases, so that the swifter noncommercial runner may make it home while the slower commercial runners may be cut down.
Second Base: The Nature of the Work
This factor looks at the copyrighted work being used. The more factual the original work, the thinner is the line of protection. Biographies, historical writings, and photographs can be distinguished from works of fiction and abstract art. Further, expensive works like movies, which have great potential for commercial exploitation and may be available if the user pays a fee, are less likely to be subject to a fair use defense. For these reasons, one needs to understand the economic marketplace for copyrighted works. For example, movies and complicated software programs are among the most expensive copyrighted works to produce. The average box office feature costs close to $50 million to produce and distribute. Many software programs and video games are years in the making, involve teams of engineers, and contain thousands of lines of coded information. Understandably, copyright owners try to recoup every dollar, and the law discourages taking from those works. Conversely, works that are cheap to produce, have exhausted their market, and have limited value are fairer game. In between lies the vast bulk of current copyrighted works for which claims of fair use hinge on an analysis of the final two factors.
Third Base: Substantiality of the Taking
How much can you safely take from another's copyrighted work? The best advice is this: Borrow only what you must to create your own new work. In some instances, however, taking the whole work is hard to avoid. A photograph, a short poem, a one-page news article—these are all tempting targets. In the copyright analysis, substantiality is measured in relation to the entirety of the original work. The mathematics can be crucial: Judges will count words, minutes, inches, and then form their own opinions about the fairness of the taking.
A rule of thumb is to take no more than 5% of the original work. The chances of winning against an irate copyright owner are greatly improved when the borrowed piece constitutes less than 5%. While, in a few cases courts have ruled that 25–50% may be fair use (and even 100%, in the case of a photo), the danger zone is clearly marked in red when you take more than 25%. Taking 5–25% of the original leaves you in a yellow zone, where other factors come into play.
Still, even the 5% test has its limitations. In the case of film, taking a short clip (less than 1 minute of a 2-hour movie) might be questionable, but in the case of music, using several bars could constitute fair use. When the 1976 Act was adopted, Congress helped educators by setting forth some guidelines for in-class use. Included in the recommendations was taking no more than 250 words of a poem or 1,000 words of prose. But be advised: Guidelines are not a guarantor of the fair use conclusion.
In one of the most significant fair use rulings, Harper & Row, Publishers, Inc. v. Nation Enterprises (Nation), the U.S. Supreme Court held that the use of just 300 words out of a 200,000-word book constituted unfair use. The book (the memoirs of former President Gerald Ford) featured a first-person narrative by the man who pardoned President Richard Nixon. Indeed, President Ford and his publisher had a magazine serialization deal with Time, which promised a preview of the work a few days before formal release. Relying upon a purloined copy, Nation magazine published the part of the book that contained Gerald Ford's own description of that pardon. So, even though the percentage (0.0015%) was about as low as you can go, the use was considered to be the heart of the book.
Moreover, not only did Nation take a crucial part of the book, it beat Time magazine to publication. Since one of the bedrock copyright principles is that an author has the right to determine the time and manner for first sale of a work, Nation's audacity in scooping the author left the court very reluctant to find fair use.
As a result of the Nation decision and the case previously discussed involving J. D. Salinger's letters, it had been thought that a winning fair use claim could never be made if the work in question was unpublished. After all, if the owner is entitled to choose the forum for first sale and if an unpublished work means that the creator has not yet decided how or what should be done with the creation, why should anyone—even a distinguished researcher—be allowed to trump the author's plans? However, in 1992, Congress amended the fair use provision to explain that fair use could apply even to unpublished works. Nevertheless, it remains very difficult to prevail in a fair use claim if the original is unpublished, even where only tidbits of the original work are taken. Now, assuming that you have made it as far as third base, the hardest part is still to come.
Home Plate: The Economics of the Taking
Copyright interests are economic rights in works. Perhaps the most important question in assessing fair use is this: What is the impact of the use on the market for and value of the original? If the answer is that the economic interests of the copyright owner are not damaged, you may round the bases and get home safely.
There are two ways to test economic impact:
- Has the value of the original work been diminished?
- Has the owner been deprived of just economic rewards?
We must bear in mind that most uses have some economic impact. Surprisingly, it is often argued in copyright infringement cases that the user has actually benefited the copyright owner by making the work more popular, giving it broader exposure, or opening new markets that the owner did not tap but are now ready for exploitation. That argument, although it sounds convincing, has been stated by those who never made it to home plate. The reason is that it is not for the infringer to control the way the copyright owner exploits his or her work. The law gives that right exclusively to the copyright owner. Moreover, how can anyone know for sure that the benefit derived from the infringement was greater than the benefit the author could have achieved if left to his or her own devices? A judge reviewing such an assertion will always side with the copyright owner.
There is an obvious relationship between the first-base test (whether the use is commercial or noncommercial) and the economic factor. It is easier for those claiming noncommercial status to argue that they have not profited by the taking. However, to the extent the user generates any funds from the use (for example, even a public broadcasting station may raise donations) or the owner can argue it has lost revenue (for example, a nonprofit foundation uses software without paying the license fee), the taking can have economic impact. Even the failure of the copyright owner to exploit a market is not sufficient support for a fair use defense. Just as the law allows the copyright owner to market the work, it allows the owner to withhold the work from a market until he or she is ready. The copyright owner is free to decide that such a time never comes. Remember, unpublished works are still protected by copyright law; J. D. Salinger can insist that his private letters never be placed into someone else's book.
The economics of the taking are also closely tied to the issue of substantiality. The less taken, the stronger is the claim that the user's work as a whole is what is attracting the market, not the portion of it borrowed from the original author. If only a snippet of a film or book is copied and the snippet constitutes only a tiny part of a new work, then it is hard for the original owner to assert either that the infringing work relies for content on the original or that its own marketplace has been severely damaged.
Well, there you have it. A round-tripper. Touch every base successfully and you can score, using someone else's work without permission or fee. However, if you fail to touch each base or overrun any one of them, the claim of fair use will fail. When we discuss damages and remedies in the next chapter, you will appreciate how costly a mistake that can be.
Educational Exemptions
Libraries, archives, educators, and public broadcasters are given modest leeway to conduct their public purposes while making use of copyrighted works of others. Some of these limitations (Figure 4-2) were the product of intense negotiations between copyright interests and these public-spirited institutions. Nevertheless, the narrowness of their scope suggests an important caution: Given that copyright proprietors fight hard to limit the exceptions for educational institutions, the private exploitation of copyrighted works are targeted even more.
Figure 4-2 Limitations on Exclusive Copyright Rights of Owners
Library Photocopying and Lending
Borne out of the advent of 20th century photocopy technology and in the wake of a unique split in the Supreme Court in Williams & Wilkins Co. v. United States (a decision that ended in a four-four tie with one justice having withdrawn from the case), Section 108 of the Copyright Act attempts to explain how one can use the copier in a library without paying dearly for the privilege. The provision is divided into three parts: copying for preservation; copying for scholarship, research, and private use; and loaning copies of works.
The first principle is that libraries can duplicate works in danger of being lost due to age or condition, but only if the copies made are for preservation, not for resale. The second precept is that the copies can be made available to the public, provided that they are done on a single-copy basis and the library has no knowledge that the duplicated works will be resold. The libraries are instructed to post copyright notices near photocopy machines, advising the public about the limits of the law. Finally, libraries are free to publicly lend (distribute) to others copies of works they own. This is a corollary of the first sale doctrine, the same doctrine that got Nation into trouble when it scooped the story of Gerald Ford's memoirs.
The point here is that copyright law recognizes a distinction between copies and copyrights. One can buy and own a copy of a book, a video, or a record. Again, remember the lesson of Salinger and Random House. That physical copy can be resold or given to anyone else. If it becomes rare or if it increases in value, the possessor of the copy can keep the appreciation. Owning a copy, however, does not translate into owning copyrights. The six statutory copyrights belong only to the author. In short, the library limitation makes it clear that, while individually owned copies of works can be circulated without violating the exclusive distribution rights of the copyright owner, no such right entitles the holder of the copy to make widespread use of that copy.
With the digital debate of the DMCA, the library community pressed the point that it was time to update the exemption so that digital works could be covered. The 1976 Act allowed libraries to make copies, but only facsimiles. However, within the compromises of 1998 were some gifts to libraries, including the right to make digital as well as facsimile and analog copies, the right to make three copies of endangered or damaged works (one for use, one for copying purposes, and one to store away protectively), and the right to make digital versions available within the confines of the library.
Public Broadcasting
Under copyright law prior to 1978, certain nonprofit uses of copyrighted works were exempt from liability. As nonprofit activities expanded dramatically in scope in the 1950s and 1960s, pressure mounted to modify the free ride for nonprofits. However, the copyright compromise of 1976 left intact certain limitations on owners' rights.
One of the industries that benefited from special treatment is public broadcasting. In a provision that tries to strike a balance, Section 118 of the Copyright Act allows public broadcasters (as defined by the Communications Act) and copyright owners of published nondramatic musical and published pictorial, graphic, and sculptural works to negotiate a voluntary license allowing the radio and television outlets to perform, display, and produce works incorporating the copyrighted material. However, if voluntary licenses are not agreed on, then the copyright law provides that a government entity (originally the Copyright Royalty Tribunal and now the Librarian of Congress) can set royalty rates.
Thanks to the successful lobbying efforts of movie interests, the public broadcasting exception does not cover the use of movies or nondramatic musical works. It also does not authorize the production of a program drawn to any substantial extent from a published compilation of pictorial, graphic, or sculptural works. If they are unlicensed by the copyright owner, they fall in the province of fair use because, without a license or permission, the use must be defended, and there are no other explicit exceptions that would apply. In practice, voluntary licenses rarely materialized, so every year the Library of Congress reviews the government-mandated rates and makes adjustments. Payments from the stations go to the owners.
Performance and Display Exemptions
One of the most hotly debated issues in copyright law is the appropriate limitation on the performance right. The heat generated by this issue is due in part to the strength and cohesion of performing rights licensing societies. ASCAP, BMI, and SESAC represent the vast majority of people who write popular songs and lyrics. They are tenacious in their efforts to sign up licensees, and under special legal rules, they are allowed to offer licenses not only for individual works but also for all the works in their repertoire, the so-called blanket license.
Although, prior to 1978, nonprofit entities, including educational institutions and public broadcasters, were free to perform copyrighted works, the 1976 Act struck a new balance in Section 110. The limitations set forth in this provision allow the performance of all kinds of works in classroom settings. Face-to-face teaching by nonprofit educational institutions and government bodies has a broad exemption that permits the performance and display of works without requiring permission. The primary qualification relates to the performance of motion pictures in classrooms. The law requires that the movie be “lawfully acquired”; that is, no bootlegged tapes or DVDs can be used. This requirement is one of many markers throughout the copyright law that evidence the quiet and effective work of the Motion Picture Association of America (MPAA). MPAA has been engaged in copyright debate for decades, and the respect the act repeatedly shows to the economics and value of movies is testament to MPAA's effective lobbying activities.
When works are transmitted from a classroom setting to another locale, however, more constraints emerge; most significantly, audiovisual works (movies and videos) fall out of the exemption that allows their performance in classrooms. This means that distance education, particularly digital distance education, must rely on fair use to justify exploitation of third-party material not individually cleared. Further, the transmission must be made primarily for reception not just anywhere but in keeping with an educational motive in places devoted to instruction.
The transmission of teaching outside of a classroom, an updated version of the Sunrise Semester television show of the 1950s, is at the heart of a larger legal issue of distance learning. The more that classroom transmissions have the look and feel of television programming, the more copyright owners require that any use of their works be cleared at the source and resist the claim that they are subject to unlicensed exemptions. The debate is coming into clearer focus and will be hotly contested in the next few years. See Chapter 31 for the discussion of the digital distance education debate.
Another performance exemption that has been the subject of U.S. Supreme Court opinion and legislative reform is the playing radio and television signals in commercial establishments. Since anyone can play a radio station in his or her own home, we might wonder whether there should be any limit if someone wants to keep the radio on for background music on the job. Since the performing rights societies have licenses to cover background music, their answer has always been, “Get a license.” However, Section 110(5) of the Copyright Act allows small store, restaurant, and bar owners to keep the radio or television on, as long as the equipment used is similar to that found in a home, no charge is made to hear the transmission, and the broadcast is not tampered with.
To explain the exemption, the statute clarifies what is meant by “equipment similar to that used in one's home.” At base, for radio programs, no more than six speakers total (four hooked together in one room or space); for television, no more than four sets and one per room. The physical area of the store must be less than 2,000 square feet (3,750 feet in the case of bars and restaurants). So, the owner of a downtown department store cannot play a radio station's music throughout the building and claim an exemption. If the department store wants to play that station, it must get a license from ASCAP, BMI, and SESAC.
Beyond these performance exemptions, the Copyright Act details a host of other instances where publicly performed music is exempt from copyright liability, principally in the context of religious services, government meetings, state agricultural fairs, nonprofit veteran and fraternal organization functions, music stores, and transmissions to the blind. These limitations are detailed, and when issues arise, the precise language of the statute should be consulted to confirm that the exemption applies.
A word of caution should be added here: Radio stations have been known to get drawn into the middle of performance exemption disputes. A local merchant who advertises on a station may ask for permission to carry the station's programming free of charge. It is always tempting to keep the advertiser happy; however, the radio station's license with ASCAP, BMI, and SESAC does not allow the station to grant the rebroadcast right without regard to the copyright interests of the folks who wrote the music. A station may authorize anyone to perform works the station owns, but it cannot encourage retransmission of licensed material without clear authorization. When these questions arise, the station should exercise care in making sure that it has the right to do what is asked of it or else just say no.
A similar problem arises when a station's programming is used by businesses for telephones put on hold. Even though it seems innocuous, a radio station has no authority to grant a local business the right to play the station when the business phone is on hold. The performing rights societies have licenses specially drafted to cover this situation. If a station is asked for permission and grants it despite the absence of a clear right to do so, it may be liable to the copyright societies for contributing to the infringement of the performance right. Therefore, any such request should be carefully considered, and consents should be clearly limited to programming owned by the station. At the same time, the station should refer the enterprise to the performing rights societies for music clearances.
Cable and Satellite Compulsory Licenses
Compulsory licensing is a creature of the copyright laws. It is a government-mandated loan of copyrighted material in exchange for a fee set by the government—not an arrangement governed by supply and demand, but an economic bargain nevertheless. The theory of compulsory licensing is that the true marketplace is so unwieldy and technology so pervasive that public policy must reconcile these competing interests to allow consumers access to the copyrighted works.
When copyright law came face to face with content-eating technology such as cable television and satellite-delivered programs to home dish receivers, complicated compromises were devised. The compulsory licenses for the cable and satellite industries qualify as winners of the Blue Ribbon of complex federal law. We discuss these rules in depth in the next chapter. For now, it should be understood that, at the core of these rules lies the principle that copyright law should not stop the technology. Indeed, Congress found a way to require the cable and satellite resale carrier industries to pay fees for the privilege of delivering programming to paying subscribers without having to navigate the maze of negotiated clearances.
Compulsory Music License
The granddaddy of compulsory licensing traces back to the 1909 Copyright Act. The license for making and distributing sound recordings has a simple premise: Once a composer has published a musical work, others should be allowed to record their interpretation of it for play on mechanical devices by paying a fixed fee. Therefore, after Liza Minelli introduced “New York, New York,” Frank Sinatra was able to make his own version of it. To qualify, Sinatra and his recording company could have negotiated a mechanical license, but failing agreement, they could take the compulsory route by filing a notice of intention to obtain a compulsory license with the copyright owner of the musical work. Then, they would have to pay a royalty for every record, tape, or CD distributed to the public, based on a certain number of pennies per recording or a smaller number of cents per minute of playing time, paid directly to the copyright owner on a monthly basis. The rates change periodically, so it is necessary to check the current numbers. A key restriction is that the use must be for a recording that will be sold to the public for private use; the compulsory fee does not permit the public performance of someone else's music. Either the performer or the venue must obtain a performance license when rendering a work to the public.
Sound Recordings
Just as the compulsory license for making and distributing records does not sanction public performances, it also does not allow someone to duplicate the original sound recording and sell copies to the public. In the 1960s and early 1970s, the arrival of the tape recorder on the mass market spurred a booming (albeit underground) business in selling bootleg tapes. The tapes, copies from purchased originals, were sold on the street for half or less the price in the retail stores. Some clever bootleggers even registered with the copyright owner under the mechanical license of the 1909 Act and used a gap in copyright law that did not provide express protection for sound recordings. The underlying works (music and lyrics) were protected, but the actual LP or tape was not.
Despite the absence of legal protection under copyright, the U.S. Supreme Court in Goldstein v. California found that the duplication violated local laws of misappropriation. In other words, it was theft. The bootleggers were stymied. The practice drew such attention that Congress amended the Copyright Act, effective February 15, 1972, to make sound recordings separately protectable. The owners of sound recordings, however, were not granted the five copyrights of other owners. The law allowed owners of sound recordings only the right to control copies, preparation of derivative works, and public distribution.
The failure to acquire public performance rights in sound recordings has remained a contentious issue between the record manufacturers and broadcasters. Major record labels have pressed Congress for changes in copyright law to require that, when a sound recording is played in public, the composer and lyricist are entitled to royalties and, in addition, the owner of the record itself deserves some revenue.
The broadcast industry has opposed the payment of new license fees to perform music. The stations argue that the record labels receive bounty enough from the commercial sales that follow airplay. From the point of the record labels, those sales are welcome; but why not get extra compensation from a blanket license fee like the composers and lyricists?
The battle lines have been drawn even more clearly with the advent of digital sound recordings. The copyright interests in the music industry pressed very hard for a copyright interest in the public performance of digital sound recordings. They argue that, due to the superior ability of digital technology to copy music off the air, once digital sound gains a dominant market share, home taping will replace buying CDs. While home taping with older technology is enshrined, the digital domain has offered a new opportunity to revise the rules; and in 1998, Congress instituted a new digital recording compulsory license for webcasting.
The change was inevitable. In 1992, Congress passed what could be called the precursor legislation. It amended the Copyright Act to establish a royalty system covering the sale of digital audio recording devices. As a result, DATs and other digital devices are subject to tax at the source, a flat royalty of $1 or 2% of the transfer price, for every machine initially distributed in the United States. The money collected is divided between two funds (two thirds to the Sound Recordings Fund and one third to the Musical Works Fund) then distributed from the funds to those whose works are included in digital recordings. Of the money in the Sound Recordings Fund, 4% is reserved for nonfeatured musicians and vocalists and the remaining 96% is divided between featured musicians (60%) and the sound recording companies (40%). Money in the Musical Works Fund is split between music publishers and writers.
The digital sound recording compulsory license covers the use of musical CDs and sounds from digital media in Web pages. Whether the use is original to the website or a streamed version of a radio or television broadcast, the license can be obtained if a privately negotiated deal is unworkable. A hotly contested Copyright Office arbitration proceeding over rates marked the introduction of the license to the public in fall 2001. We discuss this license in Chapter 32.
Ephemeral Recordings
One of the more intriguing copyright concepts is the ephemeral recording limitation. Ephemeral means short lived or transitory. To the extent that a copy of a work is made, even if it is not retained, an author's copyright right is implicated. Therefore, when radio stations want to perform “10 hits in a row” without worrying about setting up each piece individually, they need to make a composite recording. The ephemeral recording exemption permits the station, provided it holds a performance license from ASCAP, BMI, or SESAC, to prepare the prerecorded tape or CD of songs it wants, making for a smooth, easy-to-follow program, without running afoul of the copying right.
The rule, however, applies only to “transmitting organizations,” ones entitled to broadcast music to the public under a performing rights license. Without that safety net, there is no ephemeral exemption. Furthermore, the ephemeral recordings prepared for the transmitting organization must be (1) retained and used solely by the transmitting organization that made it, (2) used solely for its own local transmissions or archival purposes, and (3) destroyed 6 months after the public use or archived. The rule has occasionally been stretched to the limit by music format distributors who tape songs to license precisely organized formats, such as beautiful music, oldies, "middle of the road," and rock. Since so many aspects of the music business have been subdivided and licensed for copyright purposes, these distributors have escaped the scrutiny of the licensing sources. Nevertheless, this practice fits the mold of a use that requires clearance even though the habit of the industry is to ignore it.
The ephemeral recording limitation also comes into play in distance education. When an educational institution has a closed circuit performance of a classroom lecture that incorporates third-party copyrighted materials, the school is permitted to record up to 30 copies and reuse them for 6 months. The actual recording can be retained for archival purposes for as long as 7 years.
Recordings for the Blind and Visually Impaired
To accommodate the handicapped, Congress amended the copyright law to enable qualified nonprofit organizations whose primary mission is to educate and train the blind and other persons with disabilities to make copies of previously published nondramatic literary works. The copies can only be made into special formats—Braille, audio, or digital text to be used exclusively by the disabled person.
Computer Programs
A core principle of copyright law is that a work is covered if it is fixed in a medium of expression. Ever since piano rolls, interpretations have held that fixation does not have to be read only by humans. Machine-readable works can be copyrighted. So, when computer programs arrived on the scene, there was no doubt that they joined other copyrighted expression. This is especially fair because they are among the more complex and expensive works to create. As a result, all copyright rights flow to the owners of software programs, just like they flow to the owners of books and films.
At the same time, the nature of software has some unique elements that affect the way software is publicly distributed and also require accommodations within the Copyright Act. Most fundamentally, even though users receive a physical copy of software (in the form of a diskette, CD-ROM, or download directly onto a hard drive), unlike their print counterparts (books and magazines), the copy of software is usually distributed to the public by means of a license agreement, not by sale. This is a crucial distinction that permeates the whole context of digital content. If a user acquires access to a work by license, then the terms of the license may set conditions that restrict the ways in which the digital content may be used. Software upgrades (e.g., Version 1.0 replaced by 2.0; Windows 95, 98, 2000, and XP) constitute derivative works that not only extend copyright terms of protection, but also render earlier versions obsolete, even useless.
Nevertheless, copyright law has long had some things to say about the use of software. Most important, when a computer opens software, much of its content is automatically copied onto a user's hard drive. Also, most people who buy software like to have a backup copy of the original. Because the software is often expensive to purchase and its content can be compromised during usage, backing up copies of software is a standard practice. The Copyright Act, section 117(a), expressly provides that making these copies, automatically by a machine or as an archival backup, is not an infringement. The owner of the copy must keep these backups under tight control, but if he or she does, then no infringement occurs. The only time an owner can transfer the exact copy is in the context of disposing of the original software. Then, these exact backups should be passed on and not retained. Owners of copies are also permitted to allow the making of a copy for purposes of computer maintenance or repair. Often, the individual or an outside contractor has to copy the software used on the machine to troubleshoot problems in performance. Section 117 of the Copyright Act expressly allows that activity.
However, just because one has finished using software, one is not free to dispose of it any way one pleases. If software was obtained subject to a license (either within the boxed packaging, a so-called shrink-wrapped license, or online, a so-called click license), then the terms of that license rule.
Because software unprotected by technological measures that prevent copying is easy to reproduce, a fair question arises: Can that backup copy be given to someone else? The question is most often answered by the license, rather than copyright law. The law essentially gives the software creator the right to control copying. By the license, the copyright owner can impose (and usually does) conditions prohibiting the transfer of a copy to anyone else.