United States: Summer 2015 Federal Copyright And Trade Secret Legislation Update

Last Updated: July 13 2015
Article by Armand J. Zottola and Christopher J. Kim

Since the Summer/Fall 2014 Update, Congress is no longer in its 113th session, and most of the bills previously referenced are no longer active. However, the 114th session has begun its term with several proposed amendments to copyright law. Generally, the numerous copyright bills attempt to amend the first sale doctrine, revise DMCA rulemaking procedures, and modify royalties owed to authors of certain sound recordings and visual arts.

Copyright

The 114th session of Congress is currently examining multiple areas of copyright law. Some of the new bills focus on the 1998 Digital Millennium Copyright Act's (DMCA) anti-circumvention measures. Section 1201 of Title 17 of the United States code stipulates that no person is authorized to circumvent technological measures that control access to a copyrighted work. However, under the DMCA, the Library of Congress (LOC) may authorize exceptions to Section 1201. Specifically, the Librarian of Congress, as part of his role as the head of the LOC, authorizes certain classes of copyrighted works to be exempt from the DMCA rule against circumventing access protections. In the previous congressional session, President Obama signed the Unlocking Consumer Choice and Wireless Competition Act (S. 517) (Unlocking Act). The Act repealed a LOC rule that classified "unlocking" technical access controls on cellular phones as copyright infringement under the DMCA. In other words, the Act allows consumers to reprogram their mobile devices in order to change wireless service providers. However, its benefits may be rather modest and short-lived, because it is set to expire this year (at which point the LOC will consider whether unlocking a cellular phone constitutes copyright infringement). Congress has taken notice, and in March 24, 2015, the House introduced the Unlocking Technology Act of 2015 (H.R. 1587), which would amend section 1201 to allow circumvention of a technological measure that controls access to copyrighted work, unless the circumvention is done with the purpose of infringing of such work. The Act would allow the "unlocking" of mobile devices without the consent of the initial carrier network before switching to a new carrier. Unlike the expiring Act, this amendment would be beneficial to consumers in the long term, as it may permanently allow for the unlocking of cellular phones.

Addressing the same matter, a bill introduced on April 16, 2015 by both the Senate and the House, the Breaking Down Barriers to Innovation Act of 2015 (S. 990/H.R. 1883), revises the procedures that the LOC uses to determine which non-infringing uses are exempted from the DMCA's circumvention prohibitions. Specifically, the bill requires the Librarian of Congress to consider the impact of the prohibition in light of any decrease in the availability for use of copyrighted works, any fair uses applied to the copyrighted works, and access to information not subject to copyright protection.

Another copyright bill introduced by the House on February 11, 2015 is the You Own Devices Act (H.R. 862) (YODA). It is intended to amend and expand the first sale doctrine codified in section 109 of the Copyright Act by applying it to "any computer program that enables a machine or other product to operate." Typically, software is licensed and not sold. This approach allows the copyright holder (licensor) to limit the resale of the software by the original purchaser and impose substantial use restrictions. As more devices like cars, coffee makers, and even refrigerators come with pre-installed onboard software, restrictive software licenses could be interpreted to disallow the transfer of the device. The amendment intends to run against these end-user license agreements and allow the transfer of the device and its legitimate copy of the software. Importantly, the right to transfer the device would be absolute, and could not be waived by any agreement.

In an attempt to enhance information-sharing efforts between the U.S. Customs and Border Patrol (CBP) and copyright/trademark owners, the House introduced the Foreign Counterfeit Merchandise Prevention Act (H.R. 236) on January 9, 2015. The Act amends the federal criminal code to allow an officer or employee of CBP to provide a copyright or trademark owner with information appearing on detained merchandise for the purposes of determining whether the merchandise infringes on the copyright owner's rights (or circumvents copyright protection). After determining that the seized merchandise infringes on a copyright owner's exclusive rights, the CBP may provide information regarding the date of importation, the port of entry, a description of the merchandise, and a photographic image of the merchandise to the injured party.

On March 4, 2015, the Senate and House reintroduced the Songwriter Equity Act of 2015 (S. 662/H.R. 1283) (SEA), which was not enacted during the last session. The Act aims to amend sections 114 and 115 of the Copyright Act and allow the Copyright Royalty Judges (CRJs), who set royalty rates under compulsory licenses, to consider all relevant evidence when establishing rates applicable to digital transmissions. Most importantly, CRJs would be allowed to consider evidence related to streaming services like Pandora and Spotify. Moreover, the Act would require the CRJs to consider the rates that would have been negotiated in the marketplace between a willing seller and a willing buyer for the distribution and reproduction of musical works.

In an attempt to harmonize and modernize the current music licensing system, the House introduced the Fair Play Fair Pay Act of 2015 (H.R. 1733) on April 13, 2015. The Act would create a terrestrial performance right for sound recordings and require that AM/FM radio broadcasters pay the owner of a copyrighted sound recording for its performance. Currently, sound recording copyright owners have a performance right for digital transmissions only, so this would be the first time nondigital broadcasters could pay for play. In theory, this would level the playing field between digital streaming services and traditional broadcasters. Like the SEA, this Act would further require the CRJs to establish royalty rates that most openly represent the voluntary licensing marketplace. However, to balance potential backlash from traditional broadcasters, the Act would set a royalty cap of $500 per year for a station with less than $1 million in annual revenue.

Congress has reintroduced the American Royalties Too Act of 2015 (ARTA), designed to ensure that artists receive a resale royalty for sales of certain visual works (e.g., paintings, drawings, or prints). The bill would basically allow the author of a work to collect a royalty if the work is sold for more than $5,000 at auction by someone besides the author. ARTA would further amend the Copyright Act to establish a resale royalty rate equal to the lesser of (1) 5% of the purchase price or (2) $35,000 for any work of visual art sold by a major auction house (i.e., one that has sold at least $1,000,000 worth of works during the previous year) or in an online auction. Predictably, major auction houses and online sales platforms have voiced strong opposition to the ARTA, which has been introduced in substantially similar forms in both the House of Representatives (H.R. 1881) and the Senate (S. 977).

During the last term, the Respecting Senior Performers as Essential Cultural Treasures Act (RESPECT Act) was introduced by Congress to address the royalties owed to certain artists for digital transmissions of their songs through services such as Pandora, Spotify, and Sirius. The Act would have required such services to pay previously inapplicable royalties for transmissions of songs recorded before February 15, 1972. However, the change of Congress has rendered this bill inactive.

The following copyright-related bills were also referenced in the previous article, but are currently inactive:

  • Free Market Royalty Act
  • Next Generation Television Marketplace Act
  • Television Consumer Freedom Act

Trade Secrets

Although Congress has kept its momentum regarding copyright legislation, the same cannot be said about trade secret bills. Unlike last term, no new federal trade secret legislation has been introduced in the 114th session at this time.

As noted in the Summer/Fall 2014 Update, the Defend Trade Secrets Act of 2014 (DTSA) and the Trade Secrets Protection Act of 2014 (TSPA) were introduced last term to broaden and strengthen trade secret protection in the United States. However, both bills are no longer active, because of the change of Congress. Similarly, the Deter Cyber Theft Act of 2014, which aimed to deter trade secret theft resulting from cyberattacks, is no longer active.

The following trade secret-related bills were also referenced in the previous article, but are currently inactive:

  • Future of American Innovation and Research Act
  • Private Right of Action Against Theft of Trade Secrets Act of 2013
  • Cyber Economic Espionage Accountability Act
  • Deter Cyber Theft Act

We would like to thank Summer Associate Renato Perez for his assistance with this publication.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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