Unlock the Box Meets Lochner

I’m told that August is a slow month in D.C., but there is nevertheless policy drama in the air for the telecommunications and copyright nerds among us. I blogged last week about the battle currently being waged over the FCC’s effort to introduce competition into the market for cable set-top boxes—a market currently controlled by cable companies to the tune of about $20B a year. The concise version of the cable box story is that the FCC has proposed rules for cable companies and other MVPDs (Multichannel Video Programming Distributors) that would allow third-party device manufacturers and app developers access on prescribed terms to cable programming streams, so that cable subscribers can view content on devices or apps of their choice. The proposed rules have the backing of the Obama White House, which has publicly agreed with the FCC that competition in this market is good, pro-consumer telecommunications policy.

Enter the United States Copyright Office, which weighed in on the matter yesterday with an 18-page letter to lawmakers elaborating its view that the rights of copyright holders will be trammeled if the FCC is permitted to go forward with its plan. The Office’s view is essentially that the Copyright Act gives right holders not only the limited range of rights enumerated in Section 106 (i.e., reproduction, preparation of derivative works, distribution, public display, and public performance), but also a much broader and more amorphous right to “manage the commercial exploitation” of copyrighted works in whatever ways they see fit and can accomplish in the marketplace, without any regulatory interference from the government.

The Office’s absolutist logic concerning freedom of contract in the copyright licensing domain is reminiscent of the Supreme Court’s now-infamous reasoning in Lochner v. New York, a 1905 case that invalidated a state law limiting maximum working hours for bakers on the ground that it violated employer-employee freedom of contract. The Court in Lochner deprived the government of the ability to provide basic protections for workers in a labor environment that subjected them to unhealthful and unsafe conditions. As Julie Cohen describes it, “‘Lochner’ has become an epithet used to characterize an outmoded, over-narrow way of thinking about state and federal economic regulation; it goes without saying that hardly anybody takes the doctrine it represents seriously.” Hardly anybody, that is, but the Copyright Office, which said the following in its letter:

As a threshold matter, it seems critical that any [FCC] proposal respect the authority of creators to manage the exploitation of their copyrighted works through private licensing arrangements, because regulatory actions that undermine such arrangements would be inconsistent with the rights granted under the Copyright Act, and to some degree, as discussed below, the authority of Congress to decide whether and when limitations on these rights should apply.

Contrary to the Office’s assertion, there is no general “right to manage the exploitation of a copyrighted work” under federal copyright law. Rather, the five rights specifically enumerated in Section 106, and those five rights alone, define the extent of the copyright entitlement. It is true that right holders are generally free to strike bargains in the commercial marketplace that give them broader control over the disposition of their protected works than the Copyright Act affords. Those deals, however, are private law (i.e., contractual) bargains that are legitimately subject to regulatory limits. Following the Supreme Court’s repudiation of Lochner in the 1930s, the government’s authority to limit freedom of contract in the public’s interest is well-established. Regulatory limits on private bargains may come in the form of antitrust laws or telecommunications laws or, as here, telecommunications regulations that further antitrust ends.

One of the more troubling aspects of the Copyright Office’s letter is the length to which it goes to assert that right holders must be free in their licensing agreements with MVPDs to bargain away the public’s fair use rights by, for example, prohibiting cable customers from using digital recording technologies (like the DVR) to time-shift linear programming. Here’s how the Office put it:

Thus, in this marketplace, as a condition of granting access to their works, copyright owners may choose to exclude certain uses of content by an MVPD by contract, regardless of whether such activities could potentially qualify as fair uses under copyright. The ability to delineate and assign value to permissible uses-and to exclude others-through the licensing process flows from the copyright owner's more general right to withhold access to the content altogether if licensing terms cannot be agreed.

MVPDs and right holders should be able to abrogate consumer fair use rights, the Office argues, "to eliminate uncertainty over fair use questions.” Of course, the right of consumers to time-shift video programming for personal use has been enshrined in law since Sony v. Universal in 1984. There’s no uncertainty about that particular fair use question—none at all. Moreover, it’s one thing for cable companies to bargain away their own judicially confirmed rights; it’s quite another for cable companies to bargain away consumers’ rights. Yet the Copyright Office, waving the flag of unbridled freedom of contract, is all for having cable companies abrogate the public’s clearly established fair use rights.

When I wrote about this issue last week, I worried that the Copyright Office would offer an opinion in the FCC proceeding that would disregard Sony’s crucial limiting principle and overstate the scope of the copyright monopoly to the detriment of the public. Yesterday, I’m sorry to say, that prediction became a reality.

Add new comment