Page 152 - A Study on the Role of UGC Platforms in Copyright Law：An Intermediary-oriented Approach

A Study on the Role of UGC Platforms in Copyright Law: Chapter 5 Formulating a Non-commercial UGC Creation Levy Scheme
An Intermediary-oriented Approach

trend, but also an indispensable step in developing UGC into a significant copyright industry.
Excluding UGC creators who gain or who intend to gain economic benefits from the UGCs
would make the levy scheme too narrow to fulfil its original purpose of giving freedom to a
large number of UGC creators. What matters under the normal exploitation requirement is
not whether the UGC creator gains revenues or intends to gain revenues from the UGC, but
the significance of the revenues and the way the UGC creator gains the revenues.
First, the revenues should be significant enough to affect the copyright owners’ economic
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incentive. The threshold for the significant revenue that excludes a UGC from the proposed
levy scheme could be decided by a third-party authority, such as the copyright royalty judges
discussed in Section 5.5, based on statistical data on the size of the market for different
categories of UGCs. To add a second layer to protect copyright owners from UGC creators’
substantial exploitation of works, the third-party authority could also set an upper limit on
the traffic a UGC could attract. A UGC that attracts traffic exceeding the limit should not
be governed by the levy scheme because it has the potential to compete with the copyright
owner for the opportunity to exploit the copyrighted work. The traffic threshold represents
the public dimension of a UGC, which corresponds to the restriction of existing levy
schemes on private reproduction. Even though a publicly distributed UGC might constitute
fair use and be permitted, the popular appeal of the UGC can grant its creator sufficient
bargaining power to negotiate with the copyright owner, and hence there is no need for it to
be covered by the levy scheme.
Second, if the UGC attracts significant revenues or popularity, such significance should
be directly and immediately coming from the use of the copyrighted work, rather than from
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a commercial activity indirectly related to the use of the work. For example, in American
Geophysical Union v. Texaco, the Second Circuit Court of Appeals labelled Texaco’s
photocopying of the plaintiff’s copyrighted works ‘intermediate use’ rather than ‘commercial
use’, because Texaco’s photocopying directly served to facilitate research that could lead
to technological advancements that could improve Texaco’s commercial performance
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later on. In contrast, in Basic Books v. Kinko’s Graphics, the defendant’s unauthorized
reproduction was considered a commercial use, because the defendant gained revenues
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directly from selling the unauthorised photocopies.
As it is a blanket exemption covering a large number of UGC creators, the criteria for the
leviable use should be clear and simple. The question of how directly a UGC gains profits
from the use of a copyrighted work, could be transformed into a question on how extensively
the UGC uses the copyrighted work. The more extensively the UGC uses the copyrighted

144 Cariou v. Prince, 714 F.3d 694, 708 (2d Cir. 2013); Cambridge Univ. Press v. Patton, 769 F.3d 1232, 1266 (11th Cir. 2014);
Authors Guild v. Google, Inc., 804 F.3d 202, 219 (2d Cir. 2015).
145 Am. Geophysical Union v. Texaco Inc., 60 F.3d 913, 921 (2d Cir. 1994).
146 Ibid 921.
147 Basic Books, Inc. v. Kinko's Graphics Corp., 758 F. Supp. 1522, 1531 (S.D.N.Y. 1991).

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