Freelancer class action settlement update

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BY BILL POWELL

Author’s note: This is a requested distillation for OWAA members describing the status of a large class action lawsuit affecting tens of thousands of freelancers. The best resource for information about the lawsuit is the website www.copyrightsettlement.com. Of particular value is the “full notice” posted there. This article should be considered commentary only.
In 2001, the U.S. Supreme Court, in the “Tasini” case, declared publishers who made their publications available via online databases and included freelancer work, as well as the database publishers, had infringed the freelancers’ copyrights unless they had explicit permission to republish freelancer works in that way. In the absence of a written agreement granting such rights, this was copyright infringement, according to the Supreme Court. The Court suggested that some system be developed for compensation of freelancers whose works had been infringed in this way similar to the way recording artists are compensated for their recordings being replayed in public settings.
The settlement that recently became final in the federal court in New York City covers two classes of freelancers, those who registered their affected copyrights with the U.S. Copyright Office before Dec. 31, 2002, and those who did not. The first of these classes is divided as to how compensation under the settlement will be distributed into what are called “Category A” and “Category B.” Nearly all of those covered by the settlement have unregistered copyrights and are in the second class, called “Category C” under the compensation formulae. Under the settlement, freelancers who did not opt out of being included when an opportunity to do so existed in 2005 or when another opportunity was offered for a time ending May 9, 2014, will have no right to complain about the infringements of copyrights that are covered in the settlement. The copyright infringements covered occurred during the period of Aug. 14, 1997, through May 31, 2005, and were committed by any of the publishers who were defendants or who choose to participate in the settlement by paying into the $18 million-plus fund that will be distributed to freelancers. Approximately 50 publishers are known to be participating, and they include many of the most well-known publishers of newspapers and magazines.
No compensation will be paid to any members of the settlement classes of freelancers unless they filed a claim in this long-running litigation prior to Sept. 30, 2005. Thus those tens of thousands of freelancers defined as members of the plaintiff classes who did not either file a claim or opt out of the settlement will have publication of their works legitimized as to past and future use by the participating publishers without any compensation.
Payments to those who filed claims when they could do so nine years ago are expected to commence in early 2015. The formulae for compensation differs for the three categories of freelancers. Category A claimants are most highly compensated for the infringements. They are those who registered their copyrights before any infringement occurred or within three months of first publication, and thus they qualify for statutory damages under the Copyright Act. Category B claimants, who get much less compensation per infringement, are those who registered their copyrights before Dec. 31, 2002, but after infringement and more than three months after
first publication. Category C claimants, the bulk of those covered, who get the smallest amount of compensation per infringement, are those owning unregistered copyrights or copyrights registered after Dec. 31, 2002.
The rationale for unregistered copyright owners getting much less is that there remains some doubt under the Copyright Act whether they could get anything at all via the legal system for any infringement of their copyrights. A prior settlement of this same litigation was set aside by an appellate court on the theory that no such compensation could be approved for those holding unregistered copyrights, but the U.S. Supreme Court ruled that in a class action settlement this was permissible. The revised settlement now approved gives the Category C claimants (those with unregistered copyrights) 14 percent more than the meager amounts allowed them in the first settlement years ago, and also contemplates that perhaps some more will be added to the pool of dollars allocated among them.
This complex litigation ran over some 14 years through multiple federal trial courts, the federal Second Circuit Court of Appeals and the U.S. Supreme Court. The services of well-known mediator Kenneth Feinberg were employed throughout much of that time period, both for the earlier settlement and also for the settlement that is now finally approved. The Authors Guild, the National Writers Union, and the American Society of Journalists and Authors all have endorsed the settlement.
Under the math employed by the knowledgeable people who negotiated this agreement, oversimplifying considerably, it may be inferred that fair compensation for infringement of one’s copyright goes something like this: if the copyright is unregistered, it’s worth $X; if it’s registered, but not promptly, it’s worth 5.5 times $X; if it’s registered promptly, it’s worth 22 times $X. In the settlement being discussed here X equals $68.40.
The notion that an author or creator owns the copyright to his or her creation from the moment it’s created remains viable, but this settlement suggests that failing to register the copyright promptly with the Copyright Office drains nearly all of the value from your copyrights. Another thing that may be inferred from this settlement and other recent cases is that freelancers should almost always have written agreements about what rights are being granted. Some other cases (although none in the Supreme Court) suggest that unless you deny such rights in writing, those purchasing just one-time rights also are getting at least some online publication rights. ♦
–Bill Powell has been OWAA’s Legal Counsel since the 1990s, and has been involved in OWAA’s legal affairs since his cum laude graduation from the University of Missouri School of Law in 1981, where he was an editor of the Missouri Law Review. In 1994, he was granted Life Member status for his service to OWAA, and in 2005 he was awarded the Ham Brown Award, OWAA’s highest award “for devoted past service to the organization over a period of continuous years.
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