Bell v. Moawad Group: Answer

Is it fair use? Answer: ¯\_(ツ)_/¯ (but I’ll accept “yes”)

If you got here without reading the problem, you can find the problem here. The court’s opinion may be found here.

It was kind of a trick question, but I’ll give you credit if you said “yes.” The issue of fair use came before the court on defendants’ motion for summary judgment. A summary judgment by a defendant is appropriate when there aren’t any “genuine disputes of material fact,” and based on those undisputed facts, the court decides that there’s no reasonable way a jury could find for the plaintiff, so why not save everyone the trouble of a trial? The result is the dismissal of the claim being challenged. A material fact is under a genuine dispute unless, based on the evidence, a reasonable jury couldn’t find the fact in the other side’s favor.

Summary judgment is supposed to be reserved for times when the facts are pretty clear-cut. But it’s also fairly common for summary judgment to be granted in fair use cases. At first, this might seem strange. Look at all those factors: they all require a lot of factual development, and reasonable minds could differ about the meaning of those facts. Classic jury question.

So, what happened here is that the court ruled there were too many disputed facts for it to decide whether defendants’ use of the passage was fair or not. I’ll explain in more detail below, but the court wasn’t sure whether the defendants’ use was commercial or not. Commercial use is not only a sub-factor (of the first fair-use factor) that weighs against fair use, but it also creates a presumption that the fourth factor (effect on market) also weighs against fair use. Since the court also found that the fourth factor was a push if no presumption was applied, the question of commercial use would, by itself, be enough to determine the entire issue of fair use. (I’ll argue below that I don’t think fair use was all so close a question that commercial use could have made a difference, presumption or not.)

Could the Court Even Punt Fair Use to a Jury?

But it’s only a “classic jury question” if it’s a jury question to begin with. For complex historical reasons, some legal issues are for the judge alone. And for a long time, there was a suspicion that fair use was one of those issues, though there were plenty of countervailing cases where it wasn’t. Recently, though, in the second Oracle v. Google appeal, the Federal Circuit decided it would answer the question definitively: no it wasn’t a jury question. I blogged extensively about this not too long ago.

So, if fair use is a question of law for the judge, not a jury, was the court wrong to duck the fair use question? Not necessarily. First of all, it’s possible the court was just refusing to follow Oracle v. Google, since the Federal Circuit’s decisions are binding on this particular court.¹If the case had been about about patents, then it would have been binding, because patent cases are appealed to the Federal Circuit. But this is a copyright case, so any appeal would go to the Ninth Circuit. Why was the Federal Circuit even making copyright rulings in Oracle v. Google in the first place? Ugh, it’s so complicated! But it was because the case was mixed up with some patent claims that had long since crashed and burned, and the copyright rump of the case was still supposed to be appealed to the Federal Circuit. More important, even under Oracle v. Google, a court can still ask a jury—called an “advisory jury”—to help it make factual determinations for questions of law. In theory, the court was entitled to punt the issue until trial, when it could ask an advisory jury its opinion about the commercial use question. To be clear, the judge isn’t obligated to impanel an advisory jury for these issues; he just has the option. Ultimately, the decision was the judge’s to make, regardless of whether he consulted with an advisory jury or not.

No Advisory Jury Required

Advisory juries are well and good, but one isn’t necessary in this case because, no matter how the advisory jury came out on the issue of commercial use, the use wasn’t fair.
Here’s how the court arrived at its ruling that defendants’ use of the passage might be a fair use, depending on whether the use was commercial:

• Factor 1A: Transformative Use. The court (correctly) found that the use wasn’t transformative. The defendants didn’t alter the passage, comment on it, or really even change the context.
• Factor 1B: Commercial Use. The court couldn’t decide whether the use was commercial. On the one hand, defendants don’t directly sell anything through its social media accounts. On the other hand, why else does a commercial enterprise have social media accounts but to help sell its services? Even when, say, Wendy’s Twitter account is just snarking, it’s also increasing goodwill in the Wendy’s brand. Similarly, Defendants shared the passage—which directly related to their services—to increase goodwill: they’re here to inspire you, so why not book them?
• Factor 1C: Bad Faith. The court didn’t consider this sub-factor, even though it’s recognized by the Ninth Circuit. Not that it would have made a difference. Under the undisputed facts, the defendants were unaware that plaintiff owned the copyright in the passage, so there could be no bad faith. And “good faith” is irrelevant for fair use.
• Factor 2A: Expressiveness. The court found this sub-factor to be a push. One the one hand, the passage is non-fiction. On the other hand, it’s not very factual. I think the court gets this wrong. That the passage is non-fiction is a red herring. Non-fiction isn’t automatically less expressive than fiction, just because it’s non-fiction. What matters is how factual²Or otherwise composed of non-protectable elements. the underlying work is. Here, it’s not factual at all. The ideas (which are non-protectable) might be trite, and they might or might not have a basis in science, but their expression is actually pretty interesting. Lots of fiction has trite ideas, hackneyed ideas, and so forth, after all.
• Factor 2B: Non-publication. The court really screws this one up. The court found that, because the passage can be found everywhere on the internet, the passage wasn’t just published but super published. And the court found this factor weighed in favor of fair use, although only “slightly.”
• Factor 3: Amount and Substantiality of the Use. The court found this factor weighed against fair use, though “not heavily.” The passage comes from a longer work, and not the entire book was used (obviously). But the passage was by far the best known and loved portion of the book, so it went to the “heart” of the book.
• Factor 4: Effect on the Market. The court found this factor to be indeterminate and would depend on whether the use was commercial or not. The plaintiff is unsurprisingly unable to prove any actual market harm, because such harm is almost always impossible to prove.

It’s true that, if the use were commercial, not only would the first factor weigh even more strongly against fair use, but factor four would also weigh against fair use. Now, I’m pretty convinced the use was at least slightly commercial, but let’s say it was a push, and let’s say we don’t apply the presumption to the fourth factor. I still think there’s no fair use.

Let’s go back to the first factor. The court throws up its hands about it because it can’t decide about commercial use. But even if the use were non-commercial, it wouldn’t be that non-commercial. The court itself recognizes that it’s at least a close question. Yet, the court is quite certain (correctly) that the use isn’t transformative at all—not even a little bit. So even if we assume some non-commercial use, the first factor still weighs against fair use. And that’s the best case for the defendants.

Now, let’s look at the second factor. The court found it weighed “slightly” in favor of fair use, on the strength of the super-published nature of the passage. But this is a mistake of law. Although unpublished works cause the second factor to weigh against fair use, the opposite isn’t true. Historically, unpublished works were more protected than published works. The idea is that copying draft manuscripts isn’t just infringing, but it’s almost like theft: how did you get your hands on the author’s manuscript? But the 1976 Copyright Act got rid of the distinction, so courts decided the distinction would live on in the second fair-use factor (since it goes to the “nature of the copyrighted work”). But it makes no sense to punish works for being published. We want works to be published! Consider: nearly every work that is infringed is published. By this court’s logic, nearly every work that’s infringed starts the fair-use analysis in a hole.

It was also a mistake to find that the passage wasn’t very expressive, but let’s say that sub-factor is a push. That still means that three factors—including a vey important one—weigh against fair use. How harmless to the market would the use have to be to overcome those three factors?

Market Harm ≠ Actual Damages

I would also like to suggest that the court’s analysis of the fourth factor is incorrect. What the court appears to be asking for proof of actual damages, not market harm: “But Plaintiff submits no evidence to support these assertions [that the market for passage-based goods have been hurt]. Plaintiff has identified no specific business he lost as a result of Defendants’ posts….” But actual damage is not an element of copyright infringement. Yet, here the court not only treats the fourth factor as requiring such proof, but it also permits this factor to overwhelm all the other factors. This just sneaks proof of actual damages as an element of copyright infringement through the back door.

Once again, what’s really going on here is that courts just don’t like penny-ante copyright lawsuits. Defendants had already taken down the offending social media posts (and were prompt about it). No actual damages could possibly be proved. Statutory damages are available, but surely they will be on the low end, like around $1000. Attorney’s fees will be much higher, but this case doesn’t seem like a good candidate for awarding attorney’s fees.

This lack of any real stakes finds a natural home in the fourth factor. If you can’t prove you were harmed (which is often the case in copyright suits), then the market for your goods wasn’t harmed and couldn’t have potentially been harmed. But that can’t be right. Not only is actual harm not an element of copyright infringement, but Congress explicitly provided a remedy for those who can’t prove actual damages: statutory damages.

It’s not as though actual damage has nothing to do with the fourth fair-use factor. Proof of actual harm should be powerful evidence against fair use. But lack of such proof can’t be equally powerful evidence in favor of fair use. So, what are we to do in the typical case where actual damages can’t be proven? We can’t just call it a push and move on, or else the fourth factor could never be in favor of fair use, either.

A simple approach might go like this. If the underlying work is published but isn’t being marketed or shopped (or there aren’t concrete plans to market it in the near future), then the fourth factor weighs in favor of fair use. If there is proof of market harm, then the fourth factor weighs against fair use. Anything in between will depend on how vigorously the the underlying work is being marketed, or shopped, or how concrete the marketing plans are. One advantage with this approach is that it relies on evidence within the parties’ control.³I’d also get rid of the presumption of market harm, when the use is non-transformative and commercial. Those are separate factors. The presumption doubles their power, when the fourth factor should really be analyzed independently. Perhaps the factors will typically move together, but that should be the result of independent analyses, not of some presumption.

In this case, I’d say the fourth factor weighs somewhat against fair use because Dr. Bell really does market the exact passage at issue. He shouldn’t have to prove actual harm.

Would Mr. Moawad Be Personally Liable? Yes.

The court also ruled that Mr. Moawad would be personally liable if his company is liable. This isn’t a very close question. As usually happens, Mr. Moawad tries to look at this issue from the wrong end. He assumes that, as an officer of a corporation, any acts of infringement performed on behalf of company can’t be held against him because the company kind of shields him from liability. He further assumes that this shield—er, veil—must be affirmatively pierced. Alas, this logic only applies to contract actions, where the issue is the identity of the actual party to the contract, the owner or the company. Parties to contracts are entitled to know whom they’re contracting with and, more to the point, whom they can go after if the contract is breached.

With torts, like copyright infringement, the logic goes the other way. First, you identify who did the bad act, then you see if the bad actor’s employer is liable. Here, Mr. Moawad would be liable whether or not he had a company. He’s the one who found the passage and who directed an employee to post it on social media.
Courts often bollix this up. This court, I think, gets the analysis exactly right.

There is something unfair about this, though. One way to avoid personal liability is simply to have the company indemnify the officer for the officer’s actions. Since an owner can make her company do what she wants, this is trivial. It’s also normal practice for large businesses, since their officers are often put in harm’s way. But the indemnification is only as good as the company’s assets. Small companies won’t be able to cover any large judgments. But officers of large companies have no such worries. E&O⁴“Errors and omissions.” insurance helps, but it usually excludes copyright, patent and trademark infringement.⁵I wonder why?

Thanks for reading!

Rick Sanders

Rick is currently General Counsel for Software Freedom Conservancy. Previously, he has been practicing law as an intellectual-property litigator since 2000.