Commercial Fan Works, Fair Use - Copyright Law And The Promotion Of Progress

III. COPYRIGHT LAW AND THE PROMOTION OF PROGRESS As the Constitution states, the ultimate goal of the Copyright Act is to “promote the Progress of the useful Arts and Sciences.” 173 However, as this Part demonstrates, defining how to best achieve this goal of “promoting Progress” is not a simple inquiry. Broadly speaking, most commentators agree that Progress should speak to a general societal goal of “the advancement and dissemination of culture and knowledge,” 174 or alternatively, the production of a socially optimal number of works. 175 While these definitions may differ in focus, they both indicate that the creation of works is essential to the promotion of Progress. This Part discusses competing theories of maximizing the creation of works to best promote Progress. One theory of ensuring that authors will create works is to vigorously protect authors’ incentives to create by protecting their economic interests. 176 Another competing theory is to ensure the accessibility of the building blocks of creation. 177 Copyright doctrine addresses both of these theories in turn. This Part first discusses how copyright’s provision of legal rights to authors protects the economic incentives of authors. Then, this Part examines how doctrinal tools such as the public domain, the idea/expression distinction, durational limits, and finally, the fair use doctrine, ensure that future creators will have access to the building blocks of creation. While these theories are in direct competition, this Part ultimately concludes that courts would best serve the interests of Progress by striking a balance between these approaches. A. Economic Incentives Because copyrightable works are intangible goods, it is necessary to provide legal rights to authors to preserve economic incentives to create. 178 Owners of tangible goods, like a piece of land, can easily control access to and distribution of their goods. 179 For example, controlling a tangible good such as real property is as simple as installing a fence. In contrast, intangible goods 173 U.S. CONST. art I, § 8, cl. 8. Gordon, Fair Use as Market Failure, supra note 14, at 1602. 175 Glynn S. Lunney, Jr., Copyright, Derivative Works, and the Economics of Complements, 12 VAND. J. ENT. & TECH. L. 779, 790–91 (2010) [hereinafter Lunney, Economics of Complements]. 176 See WILLIAM M. LANDES & RICHARD A. POSNER, THE ECONOMIC STRUCTURE OF INTELLECTUAL PROPERTY LAW (2003). 177 See Jessica Litman, The Public Domain, 39 EMORY L.J. 965 (1990). 178 Gordon, Fair Use as Market Failure, supra note 14, at 1602. 179 LANDES & POSNER, supra note 176, at 19. 174 that you cannot touch, feel, or see are more difficult to physically control. Intangible works of authorship like a song’s melody, the words of a poem, or lines that form an image, can certainly manifest in physical reproductions, but their true form is immaterial. Unlike natural resources, which eventually deplete to nonexistence, multiple consumers can “use” an intangible work of authorship without exhausting it.180 This quality of inexhaustibility makes intangible goods “nonrivalrous:” individuals can create unlimited reproductions without causing the value of the intangible good to depreciate. 181 Because intangible goods are difficult to physically control and are inexhaustible, it is difficult for authors to “(cheaply) exclude competitors” without legal remedies. 182 This inability makes free riding from competitors a significant threat to author incentives to create. 183 Intangible goods like copyrighted works have high initial costs. 184 Without the legal rights that the copyright system imposes, free riders could reproduce the author’s work without repercussion. 185 Without an obligation for such free riders to reimburse the author, these free riders could underprice the author. 186 Consumers will naturally purchase the lower-priced good, leaving authors unable to recapture Although economic incentives are not the sole their investment. 187 motivations for authors to create, an inability to fully recapture profits would likely result in decreased productivity, given an inability to fully recapture profits combined with an author’s opportunity costs. 188 Without a system of rights, the free market would essentially require authors to operate at a loss. 189 It is in the copyright system’s best interests to protect author incentives to ensure that authors will continue to create. 190 By granting exclusive rights in 180 Id. at 20. Gordon, Fair Use as Market Failure, supra note 14, at 1611. 182 Michael J. Madison et al., Constructing Commons in the Cultural Environment, 95 CORNELL L. REV. 657, 666 (2010). 183 Id. 184 Richard A. Posner, Intellectual Property: The Law and Economics Approach, 19 J. ECON. PERSP. 57, 58 (2005). For example, with a literary work which has not been commissioned, the cost of supplies as well as the opportunity cost of foregone time spent writing instead of earning money elsewhere are a high cost to the writer. At least with respect to financial incentives, it would be a better use of the writer’s time to get a job rather than spend money writing a novel she may be unable to sell in the future. 185 LANDES & POSNER, supra note 176, at 40. 186 Id. 187 Id. 188 Id. 189 Id. 190 According to Judge Posner, “[t]he traditional focus of economic analysis of 181 Section 106 to the author/copyright owner, copyright protects author incentives by giving authors a right and a remedy against free riders. 191 Although the existence of a legal right does not per se guarantee that free riding will be eradicated, rights will deter potential free riders. 192 As a result, “[a]uthors will be encouraged to produce and distribute new works because the copyright laws give authors the means of being paid for their efforts.” 193 Without such a guarantee to maintain economic control, authors may have little economic incentive to create. 194 Failing to provide potential authors with incentives to create would likely lower the number of works in the market, and ultimately stifle Progress. 195 B. Providing Access to Creative Materials Although protecting authors’ economic incentives is important to preserve individual incentives to create, protecting authors’ interests to the exclusion of all else would ultimately stifle Progress. 196 Professor Jessica Litman rejects “the charming notion that authors creates something from nothing” in favor of the position that “the process of adapting, transforming, and recombining what is already ‘out there’ . . . is the essence of authorship.” 197 Almost every copyrighted work uses elements from the public domain. 198 It would be difficult to write a story without employing scènes à faire, stock characters, and common themes in creative works. 199 By providing fodder for new material, the public domain is a vital source of inspiration. 200 Many authors in the English literary tradition have taken source material from biblical tales or Greco-Roman mythology. 201 For example, Milton’s renowned Paradise Lost retells sections of the Holy Bible, and Shakespeare’s Romeo and Juliet retells intellectual property has been on reconciling incentives for producing such property with concerns about restricting access to it by granting exclusive rights in intellectual goods.” Posner, supra note 184, at 57. 191 Glynn S. Lunney, Jr., Fair Use and Market Failure: Sony Revisited, 82 B.U. L. REV. 975, 987 (2002) [hereinafter Lunney, Fair Use and Market Failure]. 192 See Gordon, Fair Use as Market Failure, supra note 14, at 1611–12. 193 Id. at 1602. 194 Id. at 1610. 195 Id. 196 See Posner, supra note 184, at 65. 197 Litman, supra note 177, at 965, 967. 198 Wendy Gordon, Render Copyright Unto Caesar: On Taking Incentives Seriously, 71 U. CHI. L. REV. 75, 78 (2004) [hereinafter Gordon, Render Copyright Unto Caesar]. 199 NIMMER & NIMMER, supra note 69, at § 13.03[B][4]. 200 Wendy Gordon, Fair Use Markets: On Weighing Potential License Fees, 79 GEO.WASH. L. REV. 1814, 1815 (2011) [hereinafter Gordon, Fair Use Markets]. 201 LANDES & POSNER, supra note 176, at 66–67. the Greek myth Pyramus and Thisbe. 202 Aggressively protecting author incentives without considering how the public domain provides access to the building blocks of expression may ultimately hinder, rather than promote, Progress. 203 Accessibility to the public domain is essential to continuing new creative works. 204 Copyright doctrine has several mechanisms to ensure that the necessary building blocks for new creation are available to future creators. One such mechanism is the durational limits on copyright protection. 205 Although the Constitution provides “exclusive Right[s]” to authors and inventors, these rights are subject to the restriction of “limited Times.” 206 Under current copyright law, most works of authorship will remain under the aegis of copyright until seventy years after the author has died. 207 At that point, the work will pass into the public domain. The Copyright Act establishes these limitations in Section 302 through 305, which detail the rules governing By imposing limited durational protection for copyright duration. 208 intellectual property, the Founders ensured that intellectual property would pass from authorial control into the public domain. 209 In addition to imposing durational limits, copyright’s idea/expression distinction relegates ideas, facts, theories and other unprotected elements to the public domain. 210 This distinction leaves conceptual building blocks available to the public. 211 For example, scènes à faire and stock characters are unprotected ideas necessary for new creation. 212 If these ideas were protected, then “it would be difficult to write successful works of fiction without Where negotiating for dozens or hundreds of copyright licenses.” 213 overzealous protection would stifle Progress by locking up copyrighted material, preserving a robust public domain promotes Progress by permitting 202 Id. at 67. White v. Samsung Elecs. Am., Inc., 989 F.2d 1512, 1513 (9th Cir. 1993) (Kozinski, J., dissenting from denial of rehearing en banc). 204 Gordon, Fair Use Markets, supra note 200, at 1815. 205 17 U.S.C. §§ 302–305 (2006). 206 U.S. CONST. art. I, § 8, cl. 8. 207 17 U.S.C. § 302 (2006). 208 Id. §§ 302–305. 209 See Litman, supra note 177, at 975–76. 210 17 U.S.C. § 102(b) (2006). 211 Posner, supra note 184, at 60 (“Most creators of expressive works—whether novels, films, musical compositions, paintings or works of nonfiction, such as histories—borrow very heavily from earlier expressive works.”). 212 Suntrust Bank v. Houghton Mifflin Co., 268 F.3d 1257, 1266 (11th Cir. 2001). 213 Gaiman v. McFarlane, 360 F.3d 644, 660 (7th Cir. 2004). 203 public access to necessary creative building blocks. 214 In addition to these doctrinal mechanisms, the fair use doctrine operates as a back door to the public domain by permitting access to materials that are already “locked up” under copyright protection. 215 By finding uses that would otherwise constitute infringement, the fair use doctrine permits access when permitting such use would benefit society. 216 If courts find that certain uses are fair, these uses relegate copyrighted material to the public domain for that particular use, permitting the secondary user to create a new work. 217 Western literature has a rich tradition of borrowing from its predecessors. 218 As Professor Pierre Leval noted, “[t]here is no such thing as a wholly original thought or invention. Each advance stands on the building blocks fashioned by prior thinkers.” 219 Limiting access to these necessary building blocks comes with the threat of stifling Progress. 220 Professor Wendy Gordon expressed concern that modern copyright regulations may cause the tradition of building upon earlier stories to perish. 221 Citing to the literary tradition of building upon the past, Professor Gordon’s notes that “[a]ll artists create using much that they have not themselves created,” and argues that since “predecessors also built upon tradition, the claim that they can rightfully assert against the makers of later art should be limited.” 222 Ultimately, Gordon posits that “freedom from copyright is also likely to benefit authors in the long run, as evidenced by the long tradition among fine artists and composers of tolerating each other’s uses.” 223 Granting the author an absolute monopoly, and thus locking up materials that can potentially inspire newer works, ultimately provides roadblocks to Progress. 224 ***** Both protecting author incentives and providing access to creative materials are essential to the creation of new works and thus the promotion of 214 Lunney, Economics of Complements, supra note 175, at 781 (“Every book in literature, science and art, borrows, and must necessarily borrow, and use much which was well known and used before.”). 215 Litman, supra note 177, at 1005–06. 216 Pierre N. Leval, Toward a Fair Use Standard, 103 HARV. L. REV. 1105, 1106–10 (1990). 217 Id. 218 LANDES & POSNER, supra note 176, at 66–67. 219 Leval, supra note 216, at 1109. 220 Posner, supra note 184, at 65. 221 Gordon, Render Copyright Unto Caesar, supra note 198, at 78, 85. 222 Id. at 78. 223 Id. at 85. 224 Posner, supra note 184, at 65. Progress. 225 Satisfying both of these interests plays an important role in promoting Progress. 226 Granting authors monopolies over their work ensures them that they can recapture their investments. 227 However, as important as author incentives are, the copyright act should not grant authors absolute rights in their works, in order to permit access to creative building blocks. 228 Such access is essential to the promotion of Progress, as future creation is dependent on how later authors “receive images, tales, language, and structure from the past.” 229 Overprotecting copyright in order to protect author incentives may protect current authors at the expense of future creations. 230 At the same time, under-protecting copyright in order to provide an overly robust public domain may diminish both current and future authors’ incentives to create. 231 Although many, if not most, authors are not solely motivated by economic profit, an ultimate inability to recapture profits may make the opportunity costs of creating such works too high to realistically pursue. In order to establish the optimal level of copyright protection, courts should strike a balance between these two interests. As Professor Leval noted, “[t]he stimulation of creative thought and authorship for the benefit of society depends assuredly on the protection of the author’s monopoly. But it depends equally on the recognition that the monopoly must have limits.” 232 While author incentives are important, and copyright law should protect author’s interests, “[o]ver protecting intellectual property is as harmful as underprotecting it . . . [o]ver-protection stifles the very creative forces it’s supposed to nurture.” 233 Courts should not consider author incentives to the exclusion of the public interest, or vice versa. Instead, as Professor Wendy Gordon urges, courts should use a balancing test that takes into account both supply-side interests of incentives to create works of authorship and demand-side interests such as secondary users’ incentives to use works and create derivative works based upon them. 234 The next Part of this Note argues that the best way to achieve this balance with respect to fan works is to provide fair use exceptions for certain types of fan works. 225 Lunney, Fair Use and Market Failure, supra note 191, at 994–95. Lydia Pallas Loren, Redefining the Market Failure Approach to Fair Use in an Era of Copyright Permission Systems, 5 J. INTELL. PROP. L. 1, 57 (1997). 227 See supra Part III.B. 228 Gordon, Render Copyright Unto Caesar, supra note 198, at 77. 229 Id. 230 Id. 231 Id. 232 Leval, supra note 216, at 1136. 233 White v. Samsung Elecs. Am., Inc., 989 F.2d 1512, 1513 (9th Cir. 1993). 234 Gordon, Fair Use Markets, supra note 200, at 1835–36. 226 IV. BALANCING COMPETING “PROGRESS” INTERESTS BY TAILORING THE FAIR USE DOCTRINE In applying fair use analysis, courts should recall that “‘[t]he ultimate test of fair use . . . is whether the copyright law’s goal of promoting the Progress of Science and useful Arts would be better served by allowing the use than by preventing it.’” 235 This Part proposes that one way to best promote Progress is to balance the dually important interests of protecting authors’ economic incentives and providing access to creative materials by tailoring the fair use exception. Tailoring the fair use exception would adequately protect author incentives, because it would not affect the scope of rights for copyright owners of original works under Sections 102 and 103. 236 At the same time, it would free up otherwise ‘locked up’ materials protected under copyright where permitting specific uses would best serve the promotion of Progress. Fan merchandise likely constitutes a prima facie copyright infringement. 237 In addition, under current fair use doctrine, it is likely that fan merchandise would not be considered a fair use. 238 This Part posits that current fair use doctrine should be tailored such that courts consider uses (such as fan merchandise) fair when such uses are complementary to the copyrighted work or when such uses respond to market failure. Although this would require a change in current fair use doctrine, such an alteration is justified because it better serves copyright’s goal of Progress than does the current fair use scheme. A. Courts Should Consider Fan-Created Merchandise Fair Uses When They Serve as Economic Complements to the Canonical Works and Not Substitutes. The fourth fair use factor analysis does not explicitly include whether an allegedly infringing use is a complement or a substitute in its inquiry. 239 Complements do not replace demand for or compete with the original work— in some cases complements may even increase demand for the original. 240 One example of a complement in the context of copyrightable works would be 235 Bill Graham Archives v. Dorling Kindersley Ltd., 448 F.3d 605, 608 (2d Cir. 2006) (quoting Castle Rock Entm’t v. Carol Publ’g Grp., 150 F.3d 132, 141 (2d Cir.1998)). 236 Fair use is a defense, and would not affect the prima facie analysis to determine infringement. 237 See supra Part II.A. 238 See supra Part II.B. 239 The sole text of the fourth factor is “the effect of the use upon the potential market for or value of the copyrighted work.” 17 U.S.C. §107(4) (2010). 240 Lunney, Economics of Complements, supra note 175, at 782. “a movie based on [a] play” or book. 241 It is often the case that when books or plays are adapted into movies, the source work receives boosts in sales and consumer attention. 242 In contrast, substitutes often replace demand for and directly compete with the original. 243 The analogous example of a substitute in the context of copyrightable works would be “a play based upon another play [which] would likely compete with or substitute for the original work.” 244 This Part ultimately argues that where the use of an original work is a complement and not a substitute, courts should find that the use is fair. Determining whether a use is complementary or substitutionary may significantly affect the fourth fair use factor analysis. When determining the effect upon the market, courts have interpreted the relevant kind of harm as substitutionary, and not complementary. 245 As Professor Leval wrote, “[t]he fourth factor disfavors a finding of fair use only when the market is impaired because the quoted material serves the consumer as a substitute, or, in Story’s words, ‘supersede[s] the use of the original.’ Only to that extent are the purposes of copyright implicated.” 246 The Campbell Court echoed this focus on substitutionary, rather than complementary, effects in determining the fourth factor analysis on the basis of whether the parody “serve[d] as a market substitute for the original or potentially licensed derivatives.” 247 Substitutionary derivative works are works that directly compete with the potential derivative work market authorized by the canon copyright author.248 Returning to The Wind Done Gone, imagine if Margaret Mitchell had survived to publish a novel retelling Gone with the Wind from the perspective of a slave at Tara. The Wind Done Gone in this case is clearly a substitutionary derivative work, because it would have directly competed with Mitchell’s retelling and negatively impacted Gone with the Wind’s authorized derivative good market. While substitutes will directly compete with the original work, complementary derivative works may even increase demand for the original. 249 241 Id. Lisa Respers France, Movies Based on Books Increase Book Sales, MARQUEE BLOG (Aug. 12, 2010, 9:59 AM), http://marquee.blogs.cnn.com/2010/08/12/movies-based-onbooks-increase-book-sales/. 243 Lunney, Economics of Complements, supra note 175, at 782. 244 Id. 245 Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 598 (1994) (“[T]he Court acknowledges that it is legitimate for parody to suppress demand for the original by its critical effect. What it may not do is usurp demand by its substitutive effect.” (emphasis added)). 246 Leval, supra note 216, at 1125 (emphasis added). 247 Campbell, 510 U.S. at 587. 248 See Lunney, Economics of Complements, supra note 175, at 782. 249 Id. 242 Although substitutes may harm the economic incentives of the original author, complementary works may in fact further the interest of Progress by enhancing authors’ abilities to recapture profits. 250 Finding complementary uses fair serves the interest of Progress because permitting such uses would not negatively affect (but may in fact increase) author incentives. 251 Furthermore, expanding fair use doctrine to permit complementary works would increase accessibility to creative tools, and encourage the creation of more works. To otherwise suppress complementary uses only works to the detriment of the canon author, the fan author, and Progress in general, as the practice of sampling demonstrates. 252 Sampling is a musical practice where musicians take (i.e. ‘sample’) audio clips from other musical artists and use them in their own musical works. 253 The practice of sampling is complementary to the original work: ‘sampled’ audio files expose consumers of the secondary work to the original work. 254 Many of these secondary consumers may be interested in listening to or even purchasing the original work after hearing sampled audio clips. 255 Courts have taken two approaches to sampling: either that de minimis uses are permissible, 256 or that sampling without a license, no matter how trivial the taking, is per se infringement. 257 Regardless of the approach, both legal theories require artists to pay licensing fees for any significant use. However, even sampling has increased with the growing popularity of mashups and electronic dance music, rather than resulting in increased licensing fees, artists such as Danger Mouse and Girl Talk instead opt to skirt the law by using unlicensed samples and hope that an interest in creative collaboration will dissuade copyright owners from pursuing legal action. 258 Although this risky practice may work so long as 250 Id. at 783. Professor Lunney notes that complementary works do not trigger the same anti-free riding concerns that substitutionary works do: “[T]he production of complements will not reduce, as competing substitutes do, the profits or rents available to the original author from sales of her own copies or of access to her original work in its original form.” Id. 251 Id. 252 Id. at 808. 253 Id. 254 See id. 255 See Note, A New Spin on Music Sampling: A Case For Fair Pay, 105 Harv. L. Rev. 726, 738 (1992) (“[A] sample . . . may actually enhance [an original song] by renewing interest in a previous ‘hit.’”). 256 See Newton v. Diamond, 388 F.3d 1189, 1190 (9th Cir. 2003) (sampling musical compositions). 257 See Bridgeport Music, Inc. v. Dimension Films, 410 F.3d 792, 801 (6th Cir. 2005) (sampling sound recordings). 258 Jeffrey Omari, The Digital Sampling of Music Has Stretched the Meaning of the Fair artists encourage collaborative sampling, if artists begin to seek more legal enforcement, it will run the risk of stifling creative progress. 259 Similarly, if complementary uses are considered per se infringement, valued creation such as sampling could be stifled to the detriment of Progress. Given the divergent effects of substitutes and complements upon the market, courts should take into account the complement/substitute distinction when determining whether allegedly infringing uses are fair. However, the determination of whether a use is complementary or substitutionary is not so simple. Professor Frank Pasquale defines complementarity as a phenomenon that occurs “whenever one good enhances [the] demand for another good.” 260 But, this definition is problematic, as market demand is not always easy to measure or predict. Therefore, Professor Glynn Lunney’s proposal may be a better way to focus the complement/substitute distinction: Where the derivative use at issue is not a strong complement, giving the copyright owner a legal right to control that use would likely increase the copyright owner’s profits. If, on the other hand, the use at issue is a strong complement, then a legal right to control the use may or may not increase her revenue. 261 In contrast, prohibiting the creation of substitutionary works would grant copyright owners better control over direct competition and prevent secondary free riders from usurping market share. 262 Because a complement and the original are not in direct competition, a legal ability to prohibit complements will not directly benefit the original work author since it does not threaten the author’s market share. 263 According to Judge Posner, requiring permission to create complementary works “would impose a transaction cost with no offsetting benefit.” 264 Judge Posner ultimately argued that complementary Use Doctrine, L.A. LAWYER, 35, 41 (Sept. 2010) (“[I]t is clear that artists from around the globe seem willing to shun legal constraints and work together to pursue that [creative] advancement.”). 259 Miles Rayner, No Sale = No Defense: From Flosstradamus to Kanye West, Artists Are Learning the Hard Way That They Can Catch Heat for an Uncleared Sample Even if They Give Their Songs Away, CHI. READER (May 9, 2012), http://www.chicagoreader.com/ chicago/flosstradamus-kanye-total-recall-girls-copyright-uncleared-sampleslawsuit/Content?oid=6279842. 260 Frank Pasquale, Toward an Ecology of Intellectual Property: Lessons from Environmental Economics for Valuing Copyright’s Commons, 8 YALE J.L. & TECH. 78, 111 (2006). 261 Lunney, Economics of Complements, supra note 175, at 794. 262 See Posner, supra note 184, at 58–59. 263 Lunney, Economics of Complements, supra note 175, at 793. 264 Posner, supra note 184, at 64. works should be considered fair uses, and substitutionary works should not. 265 Because the economic impetus to grant copyright owners the ability to regulate complementary uses is less compelling, courts should find that a use’s complementary nature weighs in favor of finding fair use. The nature of fan merchandise indicates that it is a complement, and not a substitute. 266 Rather than competing with original works for the attention of consumers, “[f]an works, in part simply because they are not canonical, cannot substitute for the official versions; they can only whet the appetite for more.” 267 The strict dichotomy in fan communities between unauthorized fan works and official canon enables parallel interpretations of characters and events to coexist as alternate universes. 268 Fan works can safely explore paths the canon work ignores without supplanting the canon work itself because “such stories are not official, they retain their appeal because the characters return unscathed in the next episode or official form.” 269 Instead of usurping or directly competing with the original work’s author, fan authors are at liberty to develop their own versions of characters, settings, and events from the canon work. 270 Furthermore, fans have no creative or economic impetus to directly compete with canon works; without canon, fan authors would never create their fan works. 271 Fan works do not compete with derivative work markets that copyright owners have authorized; fan works have been complementary even where canon authors have developed derivative work markets. 272 Professor Tushnet noted, for example, instances where unauthorized fan fiction coexists with authorized derivative works in Star Trek fandom. 273 Despite the 265 Ty, Inc. v. Publ’ns Int’l Ltd., 292 F.3d 512, 517 (7th Cir. 2002). Tushnet, Legal Fictions, supra note 7, at 654. 267 Tushnet, Payment in Credit, supra note 6, at 144. 268 See id. at 143. 269 Tushnet, Legal Fictions, supra note 7, at 671. “The nature of most fan fiction, which explores plot and situation possibilities generally refused by copyright owners, is such that it is unlikely to interfere with officially authorized publications. Romances, interior monologues, humor, vignettes, poetry, songs and stories in which a main character dies would not support an official market . . . . [F]an fiction often imagines rather earthshaking changes for the characters—marriage and death, among others—that the ‘canon’ cannot accept without signaling the end of the show.” Id. at 670–71. 270 Id. 271 Tushnet, Payment in Credit, supra note 6, at 164 (“[F]an practices do not kill the author and replace him with the reader. Rather, the author is always in dialogue with the reader, never entirely in control of the interaction even though the author’s name is associated with the work at issue . . . .”). 272 See Tushnet, Legal Fictions, supra note 7, at 672. 273 Id. 266 prevalence of unauthorized Star Trek fan fiction online, the official Star Trek novelizations remain a commercial success. 274 Rather than usurping market share, fan works increase demand for the original works by keeping the “consumers excited about the official shows, receptive to other merchandise, and loyal to their beloved characters.” 275 Because fan works do not pose the same kind of threat that direct market substitutes do, courts should find that complementary uses are fair uses. Using a hypothetical, the next Part demonstrates how complementary works may increase demand and why permitting fair use of complements will best serve the interest of Progress. Test Case: Webcomic The following hypothetical will demonstrate how fan merchandise is a complement because it increases demand for the canon work. While permitting substitutes may harm author incentives, permitting such complementary works as fair uses best promotes the interest of copyright’s goal of Progress. Imagine that Dick Grayson, a comic book fan with great artistic talent, begins to draw comics featuring the popular DC Comics character Batman. 276 Although Grayson initially creates these drawings in his spare time out of boredom, after some time he gets the idea to post his artwork online. The collection of his artwork becomes popularized as a webcomic series called I am not Bruce Wayne: The Secret Life of Batman. Although Grayson generally draws whatever he feels like creating, a recurring theme in his work is the depiction of Batman performing mundane tasks, such as taking Ace the Batdog for long strolls along the beach, playing video games with Alfred and Robin on the giant consoles in the Batcave, or gardening in the shade of Wayne Manor. None of Grayson’s webcomics reproduce any copyrighted images belonging to DC Comics, but all of the webcomics are clearly derivative works of copyrighted DC Comics characters. For some time, Grayson posts the webcomics on an online site that anyone can access free of charge. However, as is often the case with webcomics, 277 the popularity of I am not Bruce Wayne 274 Id. Id. at 669. 276 The author of this Note created this hypothetical, but it was inspired by The Gutters webcomics. See Ryan Sohmer et al., THE GUTTERS, http://www.the-gutters.com (last visited Feb. 24, 2013). 277 See, e.g., Volume 1: Attack of the Bacon Robots!, PENNY ARCADE STORE, http://store.penny-arcade.com/products/pap070011 (last visited Jan. 30, 2013); Megatokyo Volume 1 TPB, DARK HORSE COMICS, http://www.darkhorse.com/Books/13-072/ Megatokyo-Volume-1-TPB (last visited Jan. 30, 2013); The Perry Bible Fellowship: The Trial Of Colonel Sweeto And Other Stories HC, DARK HORSE COMICS, http://www.darkhorse.com/Books/13-825/The-Perry-Bible-Fellowship-The-Trial-of275 skyrockets so much that a publisher approaches Grayson with a book deal to publish his webcomics in a glossy compendium. Although none of the images in the webcomics resemble copyrighted images of Batman, I am not Bruce Wayne may still infringe the derivative work right for Batman under a fair use analysis. In engaging a fair use analysis for I am not Bruce Wayne, the first three factors are relatively easy to determine. Under the first factor, the purpose and character of the use, a webcomic has a particularly transformative nature even if the work is commercial. 278 Much like The Wind Done Gone, I am not Bruce Wayne takes elements from copyrighted material but Grayson’s own original contributions to the webcomic are significant. 279 Aside from basic elements of Batman’s character, much of the resulting webcomic consists of Grayson’s contributions, such as his artistic interpretation of Batman, his choice of scene and setting, and his choice of Batman’s depicted actions. Grayson’s significant transformation of the work should result in a finding of fair use, notwithstanding the webcomic’s commercial nature, much like the results in Suntrust and Campbell. 280 Under the second statutory factor, the nature of the copyrighted work, the Batman character is at the core of copyright’s interests as a fictional character. 281 Characters that are sufficiently delineated are generally protected under copyright. 282 Batman is certainly a distinctive enough character to rise above the level of stock character; furthermore, courts have determined that the Batman character meets this standard and therefore warrants protection. 283 Thus, the second factor would weigh against a finding of fair use. Under the third factor, the amount and substantiality of the portion taken, I am not Bruce Wayne appropriates the entirety of the Batman character. Thus, the third factor would likely weigh against finding fair use. Under the fourth factor, the effect of the use upon the potential market, the substitute/complement distinction enters the analysis. A webcomic is unlikely to directly compete with Batman canon: if anything, a webcomic may increase demand for Batman canon, especially if the webcomic begins making Colonel-Sweeto-and-Other-Stories-HC (last visited Jan. 30, 2013); The Gutters Absolute http://dynamite.com/htmlfiles/ Complete Omnibus Vol 1, DYNAMITE, viewProduct.html?PRO=C1926838068 (last visited Jan. 30, 2013). 278 Tushnet, Legal Fictions, supra note 7, at 664–67. 279 Id. at 665–67; see Suntrust Bank v. Houghton Mifflin Co., 268 F.3d 1257, 1266–67 (11th Cir. 2001). 280 See Suntrust Bank, 268 F.3d at 1267–71. 281 Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 586 (1994). 282 See Walt Disney Prods. v. Air Pirates, 581 F.2d 751 757–58 (9th Cir. 1978). 283 DC Comics Inc. v. Reel Fantasy, Inc., 696 F.2d 24, 25–26 (2d Cir. 1982). references to Batman canon. For example, imagine that Grayson draws a special webcomic for Halloween. In the Halloween edition, Grayson draws Batman using a batarang to carve jack-o-lanterns. The webcomic depicts Batman in the middle of the painstaking process of carving a jack-o-lantern in the likeness of the villain Two-Face. Alongside his worktable, the reader can see a line of completed jack-o-lanterns carved in the likenesses of villains Catwoman, the Joker, the Riddler, and Solomon Grundy. The final panel shows Batman with a speech bubble that says, “Man. This is a going to be a long Halloween.” 284 Fans of Batman canon will recognize this quip as a reference to the graphic novel The Long Halloween. 285 However, those reading I am not Bruce Wayne who have not had the opportunity to read The Long Halloween might purchase it in order to better understand Grayson’s reference. As a result, Grayson’s fan-created webcomic ultimately boosts sales for The Long Halloween and thus serve as a complementary good to the canon work. Real-world situations resembling this webcomic hypothetical are not unusual; fan works are replete with references to canon works. 286 It is not inconceivable that as fan works call to attention canon works, such canon works experience boosts in sales. 287 Although the webcomic may be complementary to the original work, it may still serve as a substitute for other derivative works. For example, DC Comics may be interested developing webcomics featuring Batman. However, this alone should not preclude a finding of fair use for Grayson’s webcomic due to the nature of fan works. Parallel works, whether fan fiction, fan webcomics, or otherwise, can coexist with canon works without a substitutionary effect.288 The sanctity of the canon gives the original work a premium of authenticity that fan works cannot command and permits unlimited fan works to comment upon, expand, or re-imagine the DC Comics universe. 289 Ultimately, finding fan works to be complementary serves the general policy aim of copyright to promote Progress. First, the creation of fan works promotes Progress by generating creativity and new works. 290 Second, fan works may also promote Progress by augmenting author incentives to create— 284 See JEPH LOEB & TIM SALE, BATMAN: THE LONG HALLOWEEN (1998). In this graphic novel, Batman faces various villains, including Catwoman, the Joker, the Riddler, and Solomon Grundy. See id. 286 Jeffrey A. Brown, Comic Book Fandom and Cultural Capital, 30 J. POPULAR CULTURE 13, 28 (1997) 287 Tushnet, Payment in Credit, supra note 6, at 144; see Jeffrey A. Brown, Comic Book Fandom and Cultural Capital, 30 J. POPULAR CULTURE 13, 13, 28 (1997) (noting the importance of fandom in support of the comic book industry). 288 Tushnet, Payment in Credit, supra note 6, at 144. 289 See id. at 144–45. 290 Id. at 143. 285 both financial and non-financial. 291 The comic book industry, like other media fandoms, thrives upon a strong fan base. Fan works serve to further strengthen Fan communities depend on fans’ abilities to fan communities. 292 meaningfully engage with the works they feel a connection to, including the ability to create works of their own. 293 Often, the relationship between original works and fan works is symbiotic: the stronger the fan base, the greater the market for the canon work. 294 Furthermore, with fandom comes fame, which is a non-economic incentive for authors to create. 295 Particular fan works should be considered fair uses when they do not directly compete with original canon works and they may even boost the market power of the original works. B. Courts Should Find Fair Use When Fan-Created Merchandise Fills a Gap Left in the Market Due to Market Failure. In addition to finding fair use when fan works are complementary goods, courts should similarly find fair use when fan works respond to market failure. Oftentimes, fan works are goods that fans demand but copyright owners have failed to supply. This failure to supply can occur for any number of reasons: high transaction costs, preference to focus on more profitable goods, or too insignificant a demand for owners to feasibly create or license such goods themselves. 296 Professor Wendy Gordon, in her influential paper examining the result in Sony, proposes a test for applying fair use analysis in the context of market failure. 297 This three-part test weighs in favor of finding fair use when: “(1) market failure is present; (2) transfer of the use to the defendant is socially desirable; and (3) an award of fair use would not cause substantial injury to the incentives of the plaintiff copyright owner.” 298 Professor Gordon’s proposed test does not come without its critics. Professor Glynn Lunney criticized Gordon’s market failure test because it fails 291 See id. at 143–44. See id. at 138, 147. 293 See id.; Burns & Webber, supra note 5. 294 Tushnet, Payment in Credit, supra note 6, at 143–44. 295 Consider the popularity of the television, comic book, and movie creator Joss Whedon, who enjoys a wide following of fans. Jordan Zakarin, Exploring the Whedonverse: Inside the Cult Hero Fame of ‘Avengers’ Director Jose Whedon, HOLLYWOOD REP. (Apr. 24, 2012, 10:08 AM), http://www.hollywoodreporter.com/news/ joss-whedon-whedonverse-cult-hero-avengers-buffy-firefly-314554. 296 See Gordon, Fair Use as Market Failure, supra note 14, at 1614, 1648; Wendy Gordon, Market Failure and Intellectual Property: A Response to Professor Lunney, 82 B.U. L. REV. 1031 (2002) [hereinafter Gordon, Market Failure and Intellectual Property]. 297 Gordon, Fair Use as Market Failure, supra note 14, at 1614. 298 Id. 292 to take account the fact that market failure is a concept best reserved for private markets, rather than public goods. 299 As a result, applying the concept to copyright inappropriately fails to take into account the nature of copyrighted works as public goods. 300 In particular, Professor Lunney finds market failure unhelpful for determining when a use should be considered fair because the private rights created by copyright must necessarily lead to market failure due to the nature of copyrighted works as public goods. 301 Although Professor Lunney may be correct to note that market failure is better suited to private goods, market failure can still be a useful analytical tool. 302 Professor Gordon defended her theory by noting that no better analytical tool for this phenomena exists. 303 As Gordon noted in her response to Professor Lunney, “it is useful to begin with the model of the market—a model whose workings and virtues we know relatively well. In that endeavor, market failure remains the central organizing trope.” 304 Determining whether market failure exists, much like determining whether a particular use is a complement or substitute, is not necessarily an easy question. Professor Gordon argues that market failure occurs when “the possibility of consensual bargain has broken down in some way.” 305 This can occur when “the desired transfer of resource use is unlikely to take place spontaneously” or when “market flaws impair the market’s ordinary ability to serve as a measure of how resources should be allocated.” 306 Other contributing factors may be high transaction costs, information asymmetry, and negative externalities. 307 In some cases, market failure may be the reason why fan works have emerged. Fans likely have difficulty bargaining with canon copyright owners for a number of reasons. 308 Administratively, it would be difficult for copyright owners to review licensing requests from the thousands of fans who wish to create derivative works, regardless of the form. Furthermore, if current fan activity and merchandising is any indication, fans demand a wide variety of works. 309 Between fan fiction, webcomics, standalone artwork, costumes, accessories, and more, it may be difficult or near impossible for copyright owners to meet consumer demands themselves. 299 300 301 302 303 304 305 306 307 308 309 Lunney, Fair Use and Market Failure, supra note 191, at 987. Id. at 993. Id. at 996. See Gordon, Market Failure and Intellectual Property, supra note 296, passim. Id. at 1039. Id. Gordon, Fair Use as Market Failure, supra note 14, at 1615. Id. Lunney, Fair Use and Market Failure, supra note 191, at 986. Tushnet, Payment in Credit, supra note 6, at 149. Id. at 140. When fans’ demands become increasingly idiosyncratic, such as the desire for customizable merchandise, fans may be more justified in responding to market failure by creating their own goods. For such fans, official and licensed merchandise may be unfit for their consumption. Essentially, a demand would exist that the copyright owner could not fulfill. In such cases, the market would be more efficient if fan consumers can turn to unauthorized fan merchandisers, who may be better equipped at responding to the market. Permitting such transactions to occur is not only socially desirable, but also in the best interests of Progress. Professor Gordon, in applying the second factor of her market failure analysis, narrowed the inquiry to the question of whether “the use is more valuable in the defendant’s hands or in the hands of the copyright owner.” 310 In the particular case of fan merchandise, courts should weigh in favor of fair use when the infringing merchandise is merchandise the copyright owner would not have developed. This approach echoes the Campbell court’s restriction of the fourth fair use factor to instances where the use would compete with “those [uses] that creators of original works would in general develop.” 311 Permitting use that creators did not choose to develop would be socially desirable for two reasons: first, it increases consumer utility by providing a good they would not have been able to obtain otherwise because consensual bargaining has broken down, 312 and second, it creates a more efficient marketplace. In other words, the use would be more beneficial in the defendant’s hands than it would be in the plaintiff’s. 313 Ultimately, this only furthers the interest of Progress because an efficient marketplace can only serve to “whet [consumer] appetite for more [canon work].” 314 In addition to the presence of market failure and the social desirability of defendant use, permitting fan works would not “leave the plaintiff copyright owner facing substantial injury to his incentives.” 315 In many instances, market failure occurs with fan works because copyright owners cannot or do not want to participate in the market. While an unwillingness to participate in a derivative market may not harm author incentives, permitting others to engage in a market that copyright owners do not wish to develop may serve to boost author incentives. 316 When fan bases increase, frequently so does market share. 317 If copyright owners are unwilling or unable to capitalize on 310 311 312 313 314 315 316 317 Gordon, Fair Use as Market Failure, supra note 14, at 1615. Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 592 (1993). See id. See id. Tushnet, Payment in Credit, supra note 6, at 144. Gordon, Fair Use as Market Failure, supra note 14, at 1619. Tushnet, Payment in Credit, supra note 6, at 143. Id. this growth, then fans should be able to, so long as it does not injure the author incentives. When fan derivative works may boost authors’ abilities to recapture profits in the market, it seems unlikely that this will significantly injure author incentives. 318 Ultimately, while the approach may have its imperfections, Gordon’s theory of market failure may provide a useful tool for determining when courts should allow fair use. Ultimately, Gordon’s theory of market failure serves to expand the fair use doctrine. 319 This benefits the purpose of Progress, by increasing, rather than harming author incentives. When market failure occurs, fan response to the failure by filling the gap in the market only boosts both the economic and non-economic incentives authors have to create new works. Therefore, in instances when fan works arise in response to a failure in the market, courts should weigh in favor of fair use. Test Case: Costume Company The following hypothetical demonstrates how fan works respond to market failure, how the product of their response is socially desirable, and how this use does not harm author incentives. Ultimately, this Part explains why such works should constitute fair uses, and by doing so demonstrate Gordon’s theory of market failure in practice. Imagine that during her spare time, a theatrical costume designer named Tina Drake enjoys making and selling adult-sized costumes based upon the characters from Batman. For a recent comic convention, she created and modeled a particularly impressive Harley Quinn costume. Persuaded from the attention from other fans about her costume, Drake creates an online website called Batcostumes. Through the website, Drake takes custom order costume requests and sells customized costumes online. Much of Drake’s clientele consists of individuals who want their costumes to fit like a glove, so they send specific measurements to Drake in order for her to create perfectly tailored costumes. Some of these costumes are used at costume balls and during Halloween, but the majority of Drake’s clientele are individuals who wish to cosplay while attending comic book conventions. 320 One client, an unusually tall woman named Ivy Fantastic, saw Drake’s winning Harley Quinn costume last year at San Diego Comic-Con and was inspired to cosplay as Harley Quinn during this year’s convention. Lacking any sewing talent herself, and unable to fit into the generic costumes that DC Comics licensed because of her height, Fantastic sends her measurements to Batcostumes. Drake creates the costume 318 See Gordon, Fair Use as Market Failure, supra note 14, at 1619. Gordon, Market Failure and Intellectual Property, supra note 296, at 1032. 320 Cosplaying is a portmanteau for “costume play” and refers to the practice of dressing up in costume. Generally cosplaying occurs at fan conventions. Cosplay, FANLORE, (Jan. 22, 2013, 3:14 PM), http://fanlore.org/wiki/Cosplay. 319 to Fantastic’s measurements and charges $400. Under a theory of market failure, these costumes should be considered a fair use, even though they would constitute an infringement on the DC Comic’s derivative work right for the character Harley Quinn. 321 The demand for wellmade and realistic costumes for cosplaying 322 and the industry’s inability to either license or produce custom costumes that satisfy consumer needs suggests market failure has occurred. In such an instance, “consensual bargain[ing] has broken down in some way.” 323 Particularly where fan producers exist who have the time, resources, and ability to provide the desired good are prevented from doing so due to copyright restrictions, the market is less efficient. Furthermore, permitting use in cases such as this would be socially desirable. First, it would result in a more efficient market place, because transactions that would not occur due to the copyright monopoly can now occur. Second, permitting such uses would benefit both the copyright owner and the fan. The fan would derive utility from the use itself, resulting in increased loyalty to the copyrighted material, which in turn would augment author incentives. 324 The most important reason why such use would be socially desirable, however, relates to the third fair use factor: permitting such uses would not injure the incentives of the plaintiff copyright owner. Because Drake can fulfill a consumer demand that DC Comics cannot, the transaction would not harm DC Comics and would only deny a consumer demand that could otherwise be fulfilled. For copyright owners, the only sensible distribution method for costumes is mass production, which may not satisfy consumer desires to have high-quality, tailored, realistic costumes for cosplaying. 325 Fans who have the skill, resources, and time to create customized costumes are better able to satisfy this demand than are the copyright owners. In order to ensure a more efficient market, fans should be permitted to engage in these uses. Such uses do not significantly injure the copyright owner. Arguably, such uses create markets that the copyright owner would not have developed in the first place. As a result, Drake’s use in the hypothetical responds to a gap left in the market. Because the consumer is one who would not have been able to purchase the officially licensed good anyway (because she is too tall), Drake’s service ultimately bridges market failure created by the copyright owner. As a result, this use should be considered a 321 See Entm’t Research Grp. v. Genesis Creative Grp., 122 F.3d 1211, 1218 (9th Cir. 1997) (finding that costumes based on copyrighted characters are considered derivative works of those characters). 322 Sarah White, Cosplay Costumes, http://costumes.lovetoknow.com/ Cosplay_Costumes. 323 Gordon, Fair Use as Market Failure, supra note 14, at 1615. 324 See id. 325 See id. fair use. VI. CONCLUSION Current fair use doctrine does not seem to embrace fan merchandise as permissible uses of copyrighted works. Instead, fan-created derivative works are likely per se infringements of the canon works that inspire them. In attempting to achieve the goal of promoting Progress, we should neither ignore the rights of authors by granting derivative work rights to fan-authors nor should we lock up creative works by granting absolute copyrights to authors. Although the current copyright system employs doctrinal tools to ensure authors do not exercise absolute rights over their works, such as durational limits, the idea/expression distinction, and fair use, these tools alone are currently insufficient to promote the creation of new works in the context of fan merchandise. In particular, the commercial nature and strong protection for elements of canon works such as characters indicate that fan works sold for profit would not be considered fair uses. In order to better serve copyright’s goal of promoting Progress, courts should broaden the scope of the fair use doctrine. In particular, courts should take into consideration whether a use is substitutionary or complementary and whether a use responds to market failure in considering the fourth fair use factor. Without expanding fair use doctrine to a point that reduces author incentives to create work, finding fair use in cases where the use was complementary or where the use responds to a failure in the market would promote Progress. Furthermore, because complementary goods do not compete with the canon, and because derivative works in the context of market failure only provide a good that authors are themselves unwilling or unable to supply, finding fair use in such cases would not negatively affect author incentives. Instead, it would promote the creation of new works in the interest of Progress, while still preserving author incentives. Ultimately, this approach strikes the appropriate balance between the interests of fan creators and the original work authors and resolves the tension between protecting economic incentives while providing accessibility to necessary building blocks for new creation. While still providing enough protection to original works to ensure that author incentives are protected enough that authors will continue to make new works, this approach permits users to interact with copyrighted works in a way that encourages new creation. As an alteration to the fair use exception, this approach would not alter authors’ initial rights in their works, as the prima facie infringement analysis would remain the same. Instead, it would only permit exceptions in instances where the promotion of Progress is best served.