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<xTITLE>Mediation in Copyright Disputes: From Compromise Created Incentives to Incentive Created Compromises</xTITLE>

Mediation in Copyright Disputes: From Compromise Created Incentives to Incentive Created Compromises

by Stephen Anway
October 2002

Winning Essay in the Law Student Category
2002 James Boskey ADR Writing Competition. The competition is Sponsored by the ABA Section of Dispute Resolution and the Association for Conflict Resolution.

TABLE OF CONTENTS

I. INTRODUCTION

II. BACKGROUND: THE LAW OF COPYRIGHT

A. Copyright Law: Protection of Fixed and Original Expression
1. Fundamentals of Copyright Law
2. The Fair Use Doctrine

III. ADVANTAGES TO MEDIATING COPYRIGHT DISPUTES

A. Expedient and Inexpensive Resolution
B. The Ability to “Share” Copyrighted Works
1. Copyrighted Works as “Public Goods”
2. Illustration of Copyright “Sharing”
C. Mediation as a Means of Circumventing Ambiguous and Adverse Copyright Issues
1. Mediating Ambiguous Issues in Copyright Law
2. Mediating Copyright Disputes to Overcome Adverse Issues
D. Mediation as a Means of Preserving Business Relationships and Reputations
E. The Use of Evaluative Mediators in Copyright Disputes

IV. THE INFREQUENT USE OF MEDIATION IN COPYRIGHT DISPUTES

A. Reasons for the Infrequent Use of Mediation in Copyright Disputes
1. The Myth That Parties Want Their “Day in Court”
2. The Myth That Parties Must Disclose Confidential Information
3. The Myth That Clients Benefit from Adversarial Representation
B. Normative Arguments Against Copyright Mediation
1. The Argument that Mediation Would Stifle the Development of Copyright Law
2. The Argument That Copyright Plaintiffs are Deprived of “Justice” Through Mediation
3. The Argument That Mediation Precludes Copyright Adjudication of “Bet the Company”
Situations or Disputes of Great Social Importance

V. AN APPROACH FOR DETERMINING THE CIRCUMSTANCES UNDER WHICH MEDIATION IS APPROPRIATE FOR RESOLVING COPYRIGHT DISPUTES

A. Factors to Consider When Selecting Copyright Cases for Mediation
B. Considering Mediation Before Copyright Disputes Arise

VI. CONCLUSION

I. INTRODUCTION

The notion that ordinary people want black-robed judges[,] well-dressed lawyers[,] and fine courtrooms as settings to resolve their disputes is not correct. People with problems, like people with pains, want relief, and they want it as quickly and inexpensively as possible.1

The history of American copyright law is largely a story of a constitutional compromise— a balance between the need to provide incentive for the creative process and the need for public access to the products thereof.2 This compromise, shaped in part by the antecedent “copyright” law of eighteenthcentury England, has its American foundation in Article I, section 8 of the Constitution.3 That section affords Congress authority to strike the balance by granting authors “the exclusive Right” to their creative works while granting public access to those works upon the expiration of “limited Times.”4

Embracing these notions of compromise and incentive, mediation has emerged in recent years as a means of resolving disputes short of adjudication.5 Notwithstanding its growing popularity, however, mediation remains generally overlooked as an alternative to litigating copyright disputes.6 This fact is unfortunate given the numerous advantages associated with copyright mediation, including the ability to preserve financial resources, the opportunity to formulate creative business solutions, and the occasion to avoid the uncertainties of copyright litigation. Indeed, these incentives illuminate an inverse, yet symmetrical relationship between mediation and the law of copyright— that is, whereas the law of copyright is founded on a compromise that promotes creative incentive, mediation is driven by incentives that promote creative compromise.

This article posits that copyright disputes are not only well-suited for mediation, but that such disputes are more “mediation-friendly” than non-intellectual property cases. Presupposing the reader’s familiarity with the mediation process, Part II provides the necessary background for a sound comprehension of the advantages associated with copyright mediation. Part III details such advantages and, in so doing, argues that mediation is a superior alternative to both copyright litigation and other forms of alternative dispute resolution. Part IV addresses the arguments offered by opponents to copyright mediation and accounts for its infrequent use in the law of copyright. Finally, Part V suggests an approach for determining the circumstances under which mediation is appropriate for resolving copyright disputes.

II. BACKGROUND: THE LAW OF COPYRIGHT

A. Copyright Law: Protection of Fixed and Original Expression

The law of intellectual property typically includes the three areas of copyrights, patents, and trademarks. Aside from the highly amorphous concept of “property,” however, these areas have relatively little in common.7 Whereas Congress’ authority to enact copyright and patent legislation arises directly from the Constitution, for example, Congress’ authority to enact trademark legislation derives from its general power to regulate interstate commerce. Moreover, the subject matter of copyright law— the protection of original expression in a fixed tangible medium— differs substantially from patent law, which protects novelty of invention, and trademark law, which protects marks indicating the source or origin of goods. Given the marked disparities between these fields, therefore, the advantages of mediating intellectual property disputes are, to some extent, dependent on the specific area of intellectual property at issue.

1. Fundamentals of Copyright Law

The most recent exercise of congressional authority to secure copyright protection was the 1976 Copyright Act, in which Congress expanded both the scope of copyright protection and the period for which copyright protection endures.8 This period, beginning at the moment an author records a work in a fixed tangible medium, endures for the life of the author and the seventy years thereafter.9 Although registration of a copyrighted work with the United States Copyright Office provides the author with numerous advantages at trial, only the fixation of an original work is required to secure copyright protection.

Upon the attachment of copyright protection, the Copyright Act grants the author a bundle of exclusive and independent rights, including the right to reproduce the work, to prepare derivative works, and to perform the work.10 As these rights are both exclusive and independent, the copyright owner maintains the power to exclude others from exercising the rights, but may assign or license any one right independently of the others. The unlawful exercise of any such right permits the copyright owner to sue for injunctive relief, damages (including treble damages for willful infringement), and attorneys’ fees.11

A copyright owner exercising the right to sue for infringement bears the burden of proving (1) ownership of a valid copyright in the work and (2) an unauthorized exercise of an exclusive right.12 Registration of a copyrighted work with the United States Copyright Office provides a rebuttable presumption of valid copyright ownership, thereby satisfying the first requirement in most cases.13 Absent this presumption, the plaintiff must prove such ownership by establishing the work as “original,” “fixed” in a tangible medium of expression, and a work of that “author.” Even if the plaintiff is able to establish ownership of a valid copyright, however, the plaintiff often has difficulty in proving an unauthorized exercise of an exclusive right due to the “fair use” defense.

2. The Fair Use Doctrine

Balancing the exclusive rights that the Copyright Act affords copyright authors, the Act concomitantly reserves to the public the right to use copyrighted material for “fair use” purposes.14 The doctrine of fair use, dubbed “the most troublesome in the law of copyright,”15 is an intrinsically nebulous and ad hoc principle that eschews “rigid application of the copyright statute when, on occasion, it would stifle the very creativity which the law is designed to foster.”16 As a judge made concept, the fair use doctrine was historically a means of validating otherwise infringing activity in the areas of news reporting, literary comment and criticism, education, and parody. The 1976 Copyright Act, codifying this judicial construct, bifurcates the fair use provision into a preamble and an enumeration of four factors that “flush out” its general purpose.

Despite this seemingly coherent and straightforward codification, courts have oft-confounded the relationship between the preamble and the factors, leading to an inconsistent and frequently illogical application of the fair use doctrine. Indeed, even the Supreme Court justices have approached the fair use provision from fundamentally different perspectives,17 to say nothing for the confusion existing in the lower courts. At bottom, this inconsistency has left the boundaries of fair use largely undefined, resulting in uncertainty and risk for would-be litigants. It is within the fair use context (and the context of several other ambiguous copyright issues) that mediation provides one of the primary benefits to copyright disputants.

III. ADVANTAGES TO MEDIATING COPYRIGHT DISPUTES

The principles discussed in Part II converge to make copyright disputes more appropriate for mediation than the “average” dispute. Copyright disputes are suitable for mediation because mediation enables parties to (1) circumvent the unusually high cost of copyright litigation; (2) “share” copyrighted works; (3) avoid litigating ambiguous or adverse copyright issues; (4) preserve the business relationships and reputations of copyright disputants; and (5) select copyright experts as evaluative mediators.

A. Expedient and Inexpensive Resolution

Perhaps the most obvious incentive for mediating copyright disputes is the opportunity to curb the unusually high cost of copyright litigation. According to a recent study, the median cost of a copyright infringement suit is $100,000 through discovery and $200,000 through trial.18 Further, “the cost of copyright infringement suits is rising with the increased necessity to use expert witnesses and the increased complexity of the issues being litigated.”19 The average cost of mediation, by contrast, is $50,000— less than both copyright litigation and other forms of alternative dispute resolution.20

The high cost of copyright litigation is also exacerbated by the unusually long and timeconsuming disposition of copyright cases. Intellectual property lawyers frequently “do not have the opportunity to take contingency fee cases because of the . . . cost[ ] and time-consuming nature of [intellectual property] litigation.”21 As one scholar has noted, mediation reduces “expensive and extensive discovery . . . because the issues to discover are narrowed early in the process.”22 Moreover, the prospect of mediation may encourage a lawyer or law firm to justify taking a copyright case, as “the likelihood of a quicker resolution . . . may allow more lawyers or firms to accommodate individual plaintiffs with contingency fee[s]” and other payment plans.23

B. The Ability to “Share” Copyrighted Works

1. Copyrighted Works as “Public Goods”

An additional benefit of copyright mediation is the unique ability of parties to “share” copyrighted works.24 This notion is perhaps best illustrated by classifying the various types of property that may be the subject of mediation into two categories- “private goods” and “public goods.” According to contemporary economic theory, a commodity is a “private good” when (1) its owner can exclude a non-owner from consuming the commodity— a concept known as “excludability”; and (2) consumption of the good necessarily prevents its consumption by another party— a concept known as “rivalry.”25 If both conditions are perfectly satisfied, such commodities are designated “pure private goods.”

Pure public goods, by contrast, are perfectly non-excludable and non-rival commodities, such that the owner of the commodity cannot prevent a non-owner from consuming the existing good and consumption of the good does not prevent its consumption by another. Thus, “public goods are commodities for which the cost of extending the service to an additional person is zero and for which it is impossible to exclude individuals from enjoying.”26 The classic example of a perfectly nonexcludable and non-rival public good is a lighthouse; ships entering a harbor cannot be excluded from consumption of the light, and consumption of the light by one ship will not preclude consumption by another ship.

Although most commodities are pure private goods, intellectual property rights, such as copyrights and patents, generally fall within the ambit of “public goods.”27 Thus, an owner of an otherwise copyrightable work cannot— absent legal protection— exclude a non-owner from consuming the artistic expression (assuming the market availability of the work) and consumption of the artistic expression does not prevent its consumption by another.

The import in classifying works of intellectual property as “public goods” is to observe that, although the government can alter the non-excludable nature of a work by affording it copyright protection, the government is incapable of altering the non-rival nature of such works. Hence, consumption of a copyrighted work by one party— even notwithstanding the Copyright Act— does not prevent consumption of the work by another. Precisely because of this non-rival nature, copyrighted works provide a unique advantage to mediating copyright disputes— namely, the ability of parties to license or otherwise “share” copyrighted works without diminishing the extent to which the other party may consume such works. As a result, “resolution of intellectual property disputes does not require an ‘either/or’ result in which one party walks away with all the rights at issue.”28

In the case of an undisputed copyright owner, the incentive to “share” protected works is realized through agreements in which the owner enjoys a pecuniary gain— typically in the form of a licensing agreement or a joint venture. Given the litigation costs averted by such an agreement, the copyright owner may also be willing to confer such a license at a reduced cost. This reduced cost, coupled with the risk and expense of litigation, thus provides incentive for the non-owner to assent to such an agreement as well. To be sure, each party will— and, indeed, should— engage in such a costbenefit analysis in determining the propriety of a proposed agreement. The key is that the cost and risk of litigation are factors to be considered within that analysis.

2. Illustration of Copyright “Sharing”

The ability to “share” copyrighted works is perhaps no better illustrated then in the complex array of licensing agreements spawn in the aftermath of the Napster litigation. Napster, which closed its Internet music service after unsuccessful defenses to allegations of contributory and vicarious copyright infringement, recently entered into licensing agreements with numerous independent labels, such as Vitaminic, Matador, and Beggars Banquet.29 Moreover, Zomba, a top-selling independent music label, agreed to license its music to subscription-music venture MusicNet, which is backed by RealNetworks Inc., AOL Time Warner, EMI Group PLC, and Bertlesmann.30 Indeed, some scholars have speculated that such companies, in an attempt to make Internet music services more palatable, will offer downloadable packages that include exclusive music, videos, and photographs available only through the recording studios and artists— an endeavor undoubtedly requiring the additional “sharing” of copyrighted material.31

C. Mediation as a Means of Circumventing Ambiguous and Adverse Copyright Issues

1. Mediating Ambiguous Issues in Copyright Law

As the development of law remains one step behind advancements in technology, “multimedia distributors and others disseminating content over the Internet are often sailing on uncharted waters when it comes to assessing their liability exposures.”32 Further, given “the enormous financial stakes in the resolution of such rights[,] . . . copyright disputes are increasingly finding their way into the courtroom.”33 Thus, the dual problem of uncertainty in copyright law and the influx in copyright technology cases raises concerns for both copyright disputants and accommodating courts. Napster’s recent “fair use” defense to allegations of contributory and vicarious copyright infringement is illustrative of the ambiguity in copyright technology cases. Ultimately rejecting the defense in A&M Records v. Napster, Inc.,34 the Ninth Circuit Court of Appeals affirmed an injunction ordering Napster to remove all infringing files from its file-sharing system. As a result, the post-litigation landscape is one in which Napster has little leveraging power, a diminishing trade name, and little choice but to negotiate for such licenses in on-going settlement discussions.

Moreover, MP3.com, a Napster-esque Internet music service, recently filed a 175 million-dollar malpractice claim against its attorneys for defective fair use advice after losing a lawsuit over its music sharing service.35 According to the lawsuit, Silicon Valley-based law firm Cooley Godward advised MP3.com that its service, “My.MP3.com,” qualified as a copyright “fair use.” This argument was rejected in UMG Recordings, Inc. v. MP3.com, Inc.,36 in which a New York district court characterized the fair use defense “as a ‘sham’ that did ‘not meet a single one of the legal tests for ‘fair use.’”37

The MP3.com litigation yet again exemplifies the degree of risk and financial burden that copyright parties incur at trial and on appeal, as well as illustrating the threat that lawyers may encounter in such disputes— indeed, not only for malpractice, but also in losing clientele due to adverse litigation outcomes. Mediation provides a means of evading such perils, and circumvents a wide range of other copyright issues in which parties and attorneys incur similar risks and financial burdens.

2. Mediating Copyright Disputes to Overcome Adverse Issues

Parties to copyright disputes also frequently assume the unenviable charge of litigating cases in which the chance for success is unpromising or the potential for recovery minimal. Such situations often arise when the procedural or substantive copyright law is unfavorable to the underlying facts of a party’s case. One means of overcoming such adversity is by mediating the dispute before the adverse facts are exposed to a judge or jury (or the opposing party).

An example of an issue that may adversely effect a plaintiff’s recovery potential is whether (and when) a work is registered with the United States Copyright Office. Although registration of a work is not required to secure copyright protection, section 412 of the Copyright Act requires that copyrighted works be registered prior to the commencement of litigation as a jurisdictional prerequisite. Section 412 also prohibits the copyright owner from receiving either statutory damages ($500 to $20,000 per act of infringement) or attorneys fees if the works were not properly registered within the relevant time period.

Given the foregoing, assume that a copyright dispute arises between a manufacturer of business apparel and a local distributor. The local distributor, despite its single-store operation, has expanded its service to the Internet, where it advertises and sells apparel using the manufacturer’s copyrighted pictures and logos. The manufacturer, capable of selling its own apparel on the Internet, seeks to enjoin such activity and, after registering the works, files suit against the local distributor for copyright infringement. Unknown to the local distributor, however, the manufacturer failed to register the works within the relevant time period. As a result, the damages to which the manufacturer is entitled is only the distributor’s profits; it is barred from recovering statutory damages or attorneys fees. Further, the on-line profits from the apparel are negligible and no doubt insufficient to cover the manufacturer’s legal fees. The copyright owner is thus left in the quandary of incurring substantial litigation costs with the potential for only minimal recovery or permitting the distributor to engage in infringing activity (in which other distributors are likely to engage if the manufacturer takes no action).

Mediation, as a forum in which such works may be “shared,” is thus a valuable option for the manufacturer— particularly if the distributor is unaware of the defective registration or its legal effect. Provided the distributor is so uninformed, the manufacturer is not limited by the distributor’s profits in mediation as he or she would be at trial. Moreover, absent a good faith argument that the distribution agreement licensed the distributor the right to use the copyrighted works on-line, the distributor has little chance of prevailing at trial. As a result, the distributor also has incentive to resolve the dispute through mediation.

D. Mediation as a Means of Preserving Business Relationships and Reputations

Although a common benefit to mediating disputes of all types, the preservation of business relationships and reputations is more often advantageous to disputants in intellectual property cases because of the business associations that often exist among the parties. This preservation stems from the “opportunity to use a mechanism that is much less formal and less aggressive than litigation” and the fact that “[a]t the conclusion of mediation, the parties can both claim ownership of the resolution.”38 Mediation also affords businesses the advantage of resolving disputes in a swift manner, thereby avoiding interference with day-to-day business operations and profit-making capabilities.

By way of example, assume that the business relationship between the manufacturer and distributor was profitable in the past. The onset of litigation will likely mean the end of the relationship and may substantially harm the reputation of each company. For the distributor, the dilemma is aggravated because the manufacturer is a renowned brand name that comprises a significant portion of the store’s sales. For the manufacturer, the situation is escalated by the distributor’s irreplaceable reputation in the market and location within the community.

As a means of avoiding even short-term impairment of this relationship, mediation affords the parties a process by which to amicably resolve the dispute. The desire of copyright disputants to preserve their business relationships may also arise in a variety of other situations, such as in the context of an existing franchise covenant or a valued license agreement unrelated to the dispute. Whatever the circumstances, mediation offers copyright parties the ability to preserve and often strengthen their business relationships and reputations.

E. The Use of Evaluative Mediators in Copyright Disputes

In the classic, non-directive form of mediation, the mediator assumes a merely facilitative role, refraining from interjecting his or her views, values, or solutions into the negotiation process. Nevertheless, the increasing role of lawyers and former judges as mediators has recently caused a proliferation in a more evaluative process.39 Such evaluative techniques are particularly apt for intellectual property cases, as they “often challenge the legal system with their complicated, technical nature.”40 Although “the parties may need to spend a significant amount of time, effort, and money ‘teaching’ the relevant technology to a lay judge or jury, the selected [neutral third party] usually will not require nearly as much education.”41

In the case of evaluative mediation, parties may benefit from a copyright mediator’s ability to estimate the worth of a party’s case or evaluate the likelihood of a party’s success at trial. Parties to copyright disputes may also select evaluative mediators with corporate backgrounds to suggest creative business solutions that might otherwise be overlooked. In this manner, mediation affords parties the opportunity to select a neutral third party based on experience, education, and mediation style- an option not available to parties at trial.

IV. THE INFREQUENT USE OF MEDIATION IN COPYRIGHT DISPUTES

In light of the array of advantages associated with mediating copyright disputes, mediation remains a curiously underutilized means of resolving copyright cases. This section accounts for the infrequent use of mediation through a traditional “descriptive-normative” dichotomy. As a descriptive matter, that is, one may speculate why mediation is less frequently used as an alternative to copyright litigation than other types of disputes. As a normative matter, on the other hand, one may speculate why mediation should or should not be used as an alternative to copyright adjudication. This section explores each side of the dichotomy in turn, and offers critical analysis of the arguments for the non-use of mediation in copyright disputes.

A. Reasons for the Infrequent Use of Mediation in Copyright Disputes

Accounting for the absence of a policy or procedure in a given field is, to some extent, always conjecture. Nevertheless, the infrequent use of mediation in copyright disputes can be explained, at least in part, by three myths: (1) the myth that parties want their “day in court”; (2) the myth that parties must disclose confidential information during mediation; and (3) the myth that clients benefit from adversarial representation.

1. The Myth That Parties Want Their “Day in Court”

One explanation for the infrequent use of mediation in copyright disputes is the belief that copyright disputants want their “day in court.”42 As a result, lawyers frequently presume that clients will be dissatisfied with the mediation process and, consequently, abstain from recommending mediation as an alternative to litigation. Contrary to this belief, parties have historically expressed a greater desire to resolve their disputes in an expeditious and inexpensive manner. Many disputants also perceive such an appearance as a “devastating and embarrassing day,” the fear of which “turns many [prospective litigants] away from pursuing their civil remedies.”43 Finally, mediation is frequently considered a “cathartic equivalent” to a “day in court,” as it “offer[s] parties the first opportunity to express their point of view in the presence of others and be heard by the other party . . . .”44

2. The Myth That Parties Must Disclose Confidential Information

An additional myth of copyright mediation is that parties must disclose confidential information during the negotiation process. As a consequence, copyright disputants may be reluctant to mediate for fear that adverse parties may use the process to obtain discovery. Such parties may believe (and properly so) that although communications in mediation are generally confidential, a party may disclose information that an adversary, once aware of its existence, may thereafter obtain by another legal avenue. Nevertheless, the voluntary nature of mediation affords lawyers a means of safeguarding against such activity by simply refusing disclosure.45 Indeed, the very ability of parties to prevent the disclosure of such information provides parties with one of the principle advantages to mediation— that is, the ability to prevent disclosure of confidential information that might otherwise be exposed at trial.

3. The Myth That Clients Benefit from Adversarial Representation

The final reason for the infrequent use of mediation in copyright disputes is the general aversion of intellectual property lawyers to the mediation process. This aversion may derive from the false perception that resolving disputes through mediation reflects poorly on the ability of an attorney to “win” a given case or is otherwise contrary to his or her general practice of adversarial representation. Given a lawyer’s primary responsibility in securing the client’s objectives, however, such representation often leaves clients in an inferior position than if mediation had been given due consideration.46

B. Normative Arguments Against Copyright Mediation

The normative arguments against copyright mediation are, to a large extent, merely restatements of arguments against mediation in general. These arguments generally suggest that: (1) widespread copyright mediation would stifle the development of copyright law; (2) copyright plaintiffs are deprived of “justice” through the mediation process; and (3) mediation precludes copyright adjudication of “bet the company” situations or disputes of great social importance.47

1. The Argument that Mediation Would Stifle the Development of Copyright Law

The seemingly natural consequence of mediating copyright disputes is a reduction in the number of copyright decisions issued by federal courts. If sufficiently widespread, this phenomenon may become problematic for legal areas, such as copyright law, where the legal boundaries are often illdefined. As a result, some scholars have concluded that mediation “should be treated as a highly problematic technique for streamlining dockets,”48 thereby allowing federal courts to clarify and further develop the law.

The foregoing argument is unpersuasive on two grounds. First, copyright practitioners assume an ethical obligation to prioritize their client’s legal objectives over securing general developments in the law. Thus, a copyright practitioner representing a low-budget client in an ambiguous “fair use” dispute should suggest mediation in lieu of attempting to clarify the bounds of the “fair use” issue at trial. Second, the widespread use of mediation in copyright disputes would not reduce the number of decisions historically issued by federal courts because of the recent increase in copyright case filings. Accordingly, the argument that widespread mediation of copyright disputes would stifle the development of copyright law is unconvincing, both from the litigant’s perspective and as a matter of policy.

2. The Argument That Copyright Plaintiffs are Deprived of “Justice” Through Mediation

Perhaps the most common argument voiced by skeptics to mediation is “that justice cannot and should not be reduced to a negotiation process.”49 Proponents of such an argument opine that “[a]lthough the parties are prepared to live under the terms they bargained for, and although such peaceful coexistence may be a necessary precondition of justice, and itself a state of affairs to be valued, it is not justice itself.”50 Such injustice, it is argued, frequently results from an imbalance in bargaining power, such as when an employee seeks damages from a large corporation for work-related injuries. In such a case, “the distribution of financial resources or the ability of one party to pass along the costs, will invariably infect the bargaining process, and the settlement will be at odds with a conception of justice that seeks to make the wealth of the parties irrelevant.”51

Despite the force of this argument, its reasoning is problematic in three respects. First, the alleged “drawbacks” of mediation should not be critiqued in a vacuum, but rather in relation to the alternative. So viewed, the same power imbalance that skeptics allege thwarts the legitimacy of mediation also plagues the litigation process. Second, even presuming a greater power imbalance in mediation than in litigation, the imbalance is less problematic in copyright disputes where parties are often sophisticated commercial businesses. Finally, such arguments fail to address the reality that mediation is driven by self-interest, measured by cost-benefit analysis, and frequently a means of obtaining superior, more workable remedies than litigation. Indeed, as one scholar has noted, “our very conception of what constitutes justice may change as we observe the kind of law that emerges from uncoerced individual choice.”52

3. The Argument That Mediation Precludes Copyright Adjudication of “Bet the Company” Situations or Disputes of Great Social Importance

The final argument against mediation is that “bet the company” situations or cases of great social importance should not be submitted to the negotiation process. As critic Owen Fiss observed, “[t]he settlement of a school suit might secure the peace, but not racial equality. . . . I am willing to assume that no other country . . . has a case like Brown v. Board of Education in which the judicial power is used to eradicate the caste structure . . . [and] this should be a source of pride rather than shame.”53 Such proponents may also argue that copyright cases of great social and cultural importance are more suitable for adjudication than settlement through the mediation process.

This argument is compelling as a matter of policy. Copyright cases such as Feist Publications, Inc. v. Rural Telephone Service Company, Inc.,54 in which the Supreme Court demarcated the originality requirement for copyright protection, and Sony Corporation of America v. Universal City Studios,55 in which the Court provided its first real attempt to delineate the “fair use” defense, are decisions for which mediation would have indeed proven unfortunate. Notwithstanding a case’s social value, however, this argument ignores that the social importance of a copyright case is frequently ascertainable only in hindsight and that mediation may still provide a superior means of resolution from the litigants’ perspective. Nevertheless, the use of mediation in “bet the company” situations, in which “principles . . . go beyond the immediate dispute to affect a company’s market position,” is often an inadequate long-term means of resolution.56 At bottom, therefore, the circumstances under which copyright disputes are appropriate for mediation remain, thus far, unclear.

V. AN APPROACH FOR DETERMINING THE CIRCUMSTANCES UNDER WHICH MEDIATION IS APPROPRIATE FOR RESOLVING COPYRIGHT DISPUTES

A. Factors to Consider When Selecting Copyright Cases for Mediation

The factors parties should consider when selecting copyright cases for mediation are merely a coalescence of the arguments espoused throughout this article. Parties to copyright disputes should consider mediation when
(1) the costs of litigation would be unmanageably high;
(2) there is a potential for copyright “sharing”;
(3) the litigation outcome is especially difficult to predict;
(4) the legal precedent is adverse to the underlying facts of a party’s case;
(5) litigation may harm the business relationships or reputations of the parties;
(6) the dispute may require a specialized understanding of copyright law; and
(7) the circumstances do not give rise to a “bet the company” situation. These factors must be evaluated in the context of how each bears on the ultimate question of whether mediation is in a party’s interest.

Noticeably absent from these factors are two characteristics, which, if present, may indicate the impropriety of mediation. First, if a copyright dispute has already been adjudicated and is pending appeal, the prevailing party may no longer have an incentive to participate in mediation. Even so, mediation may be valuable for adjudicated cases in which the cost of the appeal is unduly burdensome or the trial court’s remedy inadequate. Second, judges and lawyers involved in copyright disputes should avoid referring copyright cases to mediation when one party lacks settlement authority (or has such limited authority that the mediation would prove futile), as the referral of such cases would frustrate the very expedience that mediation is designed to foster.

Finally, “bet the company” situations are disputes that, as a general rule, should be diverted from mediation, particularly when the client’s long-term objectives cannot be satisfied through settlement. In contrast to “bet the company” situations, however, the social and cultural significance of a copyright dispute should be of no consequence to lawyers when selecting cases for mediation (although it may be to judges) because the obligation of copyright practitioners to secure their clients’ objectives supercedes any ethical duty to foster developments in the law. Finally, copyright litigation, unlike other areas of law, seldom renders profound decisions of great social importance; rather, its scope is typically limited to commercial matters that are well-suited for the mediation process.

B. Considering Mediation Before Copyright Disputes Arise

Despite the advantages associated with the foregoing factors, parties are frequently unwilling to agree to mediation in the midst of a dispute.57 To combat such unwillingness, businesses frequently incorporate mandatory mediation clauses into contracts before such disputes arise- when the parties are more willing to agree to mediation. Under such agreements, parties incur a legal obligation to attend mediation in accordance with the terms of the contract.

Parties drafting mediation clauses should pay close attention to defining what constitutes compliance with the mediation requirement. Drafters concerned with future disputes over interpretation, for example, may wish to use objective language, such as specifying the duration of the mediation and the information to be exchanged. Other drafters may, at the risk of “open[ing] the door to litigation on compliance issues,” opt for a “good faith” participation requirement.58 Parties should also stipulate the name of the mediator (or a mechanism for naming one), the issues to be covered in the mediation, who will bear the cost of the mediation, and a prohibition against the filing of post-decree motions until the mediation has been completed.59

Drafted in this manner, mediation clauses afford parties an effective means of circumventing the aversion to mediation often found in the post-dispute climate. Moreover, such clauses are generally enforceable under contract law (or a more specific statutory directive), and may provide a “basis to dismiss litigation filed by recalcitrant parties or to provide specific enforcement.”60 Finally, empirical studies indicate that the success of mediation is not correlated with voluntary attendance; rather, “disputants . . . compelled to participate in mediation, either by court order or by prior agreement, . . . are as likely to settle as those who agreed to mediate in the midst of a dispute.”61

VI. CONCLUSION

This article ends as it began, with a discussion of the two themes shared by mediation and the law of copyright- those of incentive and compromise. Given the various incentives to compromise copyright disputes through mediation, mediation is revealed as an underutilized means of resolving such disputes. Consistent with this notion, the grand compromise of copyright law, in which Congress fashions incentive for the creative process by securing copyright to authors while reserving rights of access to the public, provides for the unique ability to “share” copyrighted works through creative compromise. Whatever the incentives, such compromise provides for an invaluable means of bypassing the wide-range of costs associated with copyright litigation and, in the end, encourages the very creative process that the law of copyright attempts to foster.

End Notes

1 Dina R. Janerson, Representing Your Clients Successfully in Meditation: Guidelines for Litigators, N.Y. LITIGATOR, Nov. 1995, at 15 (quoting Chief Justice Burger, Address at the Chief Justice Earl Warren Conference on Advocacy: Dispute Resolution Devices in a Democratic Society (1985)).

2 Neil Weinstock Netanel, Copyright and a Democratic Society, 106 YALE L.J. 283, 285 (1996).

3 U.S. CONST. art. I, § 8, cl. 8.

4 Id. The 1998 Amendment to the Copyright Act expanded “limited Times” to the life of the author plus seventy years.

5 See, e.g., Bernard v. Galen Group, 901 F. Supp. 778, 779 (S.D.N.Y. 1995).

6 See Scott H. Blackmand & Rebecca M. McNeill, Alternative Dispute Resolution in Commercial Intellectual Property Disputes, 47 AM. U. L. REV. 1709, 1710 (1998).

7 SHELDON W. HALPERN, COPYRIGHT LAW: PROTECTION OF ORIGINAL EXPRESSION 1 (2002).

8 17 U.S.C. §101 et seq.

9Id. § 302(a).

10 Id. § 106(1), (2), (4).

11Id. § 502 et seq.

12 Feist Publications v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991).

13 17 U.S.C. § 410(c); see, e.g., Ets-Hokin v. Skyy Spirits, Inc., 225 F.3d 1068, 1075 (9th Cir. 2000).

14 17 U.S.C. § 107.

15 Dellar v. Samuel Goldwyn, Inc., 104 F.2d 661, 662 (2d Cir. 1939).

16 Stewart v. Abend, 495 U.S. 207, 236 (1990) (quoting Iowa State University Research Foundation, Inc. v. American Broadcasting Cos., 621 F. 2d 57, 60 (2d Cir. 1980)).

17 Compare Campbell, 510 U.S. at 578–94 (Souter J.), and Sony, 464 U.S. at 464–500 (1984) (Blackmun J., dissenting), with Harper & Row Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 545–569 (1994) (O’Connor J.), and Sony, 464 U.S. at 429– 456 (Stevens, J.).

18 Judith A. Szepesi, Maximizing Protection for Computer Software, 12 COMPUTER & HIGH TECH. L.J. 173, 199–200 (Feb. 1996) (footnotes omitted) (citing AM. INTELL. PROP. L. ASSOC. COMMITTEE ON ECON. OF LEGAL PRAC., REP. OF ECON. SUR. 1995, at 63).

19 Id. at 200.

20 Id. (“Estimated median costs for alternative dispute resolution are: $50,000 for mediation; $78,000 for med/arb; $100,000 for mini-trial; $150,000 for summary jury trial; $151,000 for binding arbitration.”).

21 P.L. Skip Singleton, Jr., Justice for All: Innovative Techniques for Intellectual Property Litigation, 37 IDEA 605, 608 (1997).

22 Blackmand & McNeill, supra note 6, at n.138.

23 Id. at 1723.

24 The “sharable” nature of copyrighted works is posited in Blackmand and McNeill, supra note 6, at 1716.

25 See PAUL A. SAMUELSON & WILLIAM D. NORDHAUS, ECONOMICS 372 (17th ed. 2001).

26 Id. at 37.

27 Id. at 579.

28 Blackmand & McNeill, supra note 6, at 1716.

29 See Jefferson Graham, A Slimmed-Down Napster Gets Back Online; Trial Run Is Heavy on Little-Known Artists, USA TODAY, January 10, 2002, at D1.

30 Past Executive of Bertelsmann Is Napster’s CEO, THE WALL ST. J., July 25, 2001, at B4.

31 Interview by Roger McCoy of WBNS-10TV with Sheldon W. Halpern, Professor, The Michael E. Moritz College of Law at The Ohio State University, in Columbus, Ohio (January 24, 2002).

32 2002 Law Topics, available at http://www.2001law.com/topic_52.htm (as of March 28, 2002).

33 Id.

34 239 F.3d 1004 (2001).

35 The American Bar Association, available at http://www.abanet.org/ journal/ereport/f1mp3.html (as of March 13, 2002).

36 No. 00 Civ. 472 JSR, 2000 U.S. Dist. LEXIS 13293, at *19 (S.D.N.Y. Sept. 6, 2000).

37 2002 Law Topics, available at http://www.2001law.com/topic_52.htm (as of March 28, 2002) (quoting MP3.com, 2000 U.S. Dist. LEXIS 13293, at *10–11).

38 Blackmand & McNeill, supra note 6, at 1714 (citing INSTITUTE FOR DISPUTE RESOLUTION, CENTER FOR PUBLIC RESOURCES, INC., CPR MODEL ADR PROCEDURES AND PRACTICES: MEDIATION I-1, I-4 (1995)).

39 JOHN S. MURRAY ET AL, PROCESSES OF DISPUTE RESOLUTION: THE ROLE OF LAWYERS 362 (1996).

40 Blackmand & McNeill, supra note 6, at 1716.

41 Id. at 1717 (discussing the use of arbitrators in technology disputes).

42 Joe Robertson, Mediation Still Not Popular Among Some Lawyers, TULSA WORLD, Aug. 30, 1998, at A-1 (stating that mediation “goes too far and encroaches on the rights of people who are entitled to their day in court”).

43 Omar J. Arcia, Objections, Administrative Difficulties and Alternatives to Mandatory Pro Bono Legal Services in Florida, 22 FLA. ST. U. L. REV. 771, 793 (1995).

44 Thomas J. Stipanowich, The Quiet Revolution Comes to Kentucky: A Case Study in Community Mediation, 81 KY. L.J. 855,871 (1993).

45 See Blackmand & Rebecca M. McNeill, supra note 6, at 1720.

46 See MODEL CODE OF PROF’L CONDUCT R. 1.2(a) (1999).

47 Campbell Killefer, Negotiating ADR Provisions in Corporate Transactions, AM. LAW. CORP. COUNS. MAG., Apr. 1995, 61A. 48 Owen Fiss, Against Settlement, 93 YALE L.J. 1073, 1075 (1984).

49 Fiss, supra note 48, at 1085.

50 Id. at 1085–86.

51 Id. at 1076.

52 David Post, Governing Cyberspace, 43 Wayne L. Rev. 155, 167 (1997)); see E. ALLAN LIND & TOM R. TYLER, THE SOCIAL PSYCHOLOGY OF PROCEDURAL JUSTICE 29 (1988).

53 Fiss, supra note 48, at 1089.

54 499 U.S. 340, 345 (1991).

55 464 U.S. 417 (1984).

56 See Killefer, supra note 47, at 61A. Steven J. Elleman, Problems in Patent Litigation: Mandatory Mediation May Provide Settlement Solutions, 12 OHIO ST. J. ON DISP. RESOL. 759, 773 (1997).

57 STEPHEN B. GOLDBERG ET AL., DISPUTE RESOLUTION: NEGOTIATION, MEDIATION, AND OTHER PROCESSES 478 (3d ed. 1999).

58 Id.

59 Id.

60 Id.

61 Id.; see also John W. Welch, Practical Guide to Forming a Partnership in Utah, 12 BYU J. PUB. L. 111, 134 (1997).

Biography


Stephen Anway is a partner in the New York office of Squire Sanders (US) LLP. He acts as counsel to sovereign nations and multinational corporations in investment-treaty and international commercial disputes. Stephen’s investment-treaty experience includes acting as lead counsel for the Czech Republic in Phoenix Action, Ltd. v. Czech Republic, ICSID Case No. ARB/06/5, which is the seminal investment-treaty case on the principle of good faith and abuse of rights under public international law. With regard to international commercial disputes, Stephen was counsel for the winning party in two of the top 12 arbitral awards in the world from 2004 to 2009, as ranked by the American Lawyer’s Focus Europe. Both were multi-billion dollar awards in favor of his clients. Most recently, he was part of arbitration teams that successfully defended the Czech Republic in another investment-treaty case, InterTrade Holding BmgH v. Czech Republic, UNCITRAL, Final Award, May 29, 2012, and that won a €450 million ICC award dated August 30, 2012.



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