Compare Maisel's original photograph (left) with Baio's version (right)
The basic issue is whether Baio's use qualifies as a fair use of the original rather than a derivative work for which advance permission would be necessary. While I find the decision to go after Baio slightly offensive to the spirit of the music that helped propel Mr. Maisel’s career and see a stronger case in favor of fair use (others have derisively labeled the decision a cash grab, while the Bloop image with text "All Art is Theft" has been posted on the NYC building where Maisel lives), there are just as many arguments (legal or otherwise) in support of his position as against. Both sides are clearly aware of this, and Baio's post was reviewed by both parties' counsel.
A quickie fair use analysis suggests that whether the new work is transformative cuts both ways (factor 1 as interpreted by courts), the entire work was used (factor 3) and it’s clearly not a substitute for the original (factor 4 as interpreted). The second factor, the "nature of the copyrighted work," is typically used to question whether the original work is factual (making a finding of fair use more likely) or creative (making fair use less likely). I feel like there's always been some doctrinal tension with respect to whether photographs of live events should qualify for protection, and even the early case of Burrow-Giles v. Sarony recognized this by querying whether a merely mechanical process that records reality is a creative enough process to confer copyright protection, though the Court did not decide the question. Of course, the cropping, development, filtering, framing, zooming and other elements of creativity qualify the photograph here for protection as explained in Burrow-Giles and later articulated as the low standard of a presence of a "modicum" of creativity to pass the constitution's originality threshold required for protection.
At the same time, compare Bridgeman v. Corel, which held that "slavish copies" of public domain works of art would not meet the low barrier to protection established by Feist. So is or should perception of reality be considered in the public domain too? Compare other countries' thresholds for copyright protection using tests like "labor, skill and judgment" of the author with the US, where it's the "modicum of creativity" discussed in Feist. Other laws protect users of information that is generally available to the public, either as public data (e.g. the Wiretap Act, press freedom laws), a true depiction of prior events (truth as a defense to defamation) and many others. Leaving aside the private nature of a concert and ticket or venue restrictions on recording, shouldn't a slavish reproduction of reality also require more than just hitting "record" to warrant protection, even if the author fortuitously captures a Kodak moment that later becomes iconic? One could snap hundreds of photos, but is selection and publication of only one really creative, rather than merely subjective? Regardless of whether a bare photograph or broadcast of a live event should qualify for protection without any further creative addition, having our default rule in favor of protection saves the nasty business of having a court make a (subjective) determination of creativity. And as stated above, we know it's the expression that's receiving protection and it doesn't take much to make that expression protectable.
In any event, the fair use analysis cuts either way. The end of Baio's post challenges the reader to decide where to draw the line by showing the original compared to a series of gradually more pixelated images, illustrating the difficulty of line drawing (no pun intended) with respect to whether a use is fair. Further, it might not be such a bad idea to require enforcement of a copyright in order to maintain protection, although proving that the copyright owner was aware of a potential infringement would be similar to a defense of laches (and potentially estoppel by a later, separate defendant) and legislation would probably be necessary to establish a bright line test. There have been many proposals to reinstate some degree of copyright formality in order to obtain or maintain protection, though obligations with respect to non-US authors under Berne are not permissible. While copyright owners shouldn't have to police their works like trademarks owners do their marks, since the subject of and policy reasons for protection are fundamentally different (unless one begins to consider certain moral rights), imposing an obligation on copyright owners seems to further the "primary object" of copyright. ("The sole interest of the United States and the primary object in conferring the [copyright] monopoly lie in the general benefits derived by the public from the labors of authors." ) For further digression into whether IP rights should be analogous to real property rights, there's plenty of literature out there. For more about copyright formalities and effects on the public domain, check out the amicus briefs in Golan v. Holder. Getting back to Baio (which would also be a great title for a different Baio in a sequel to Charles in Charge), certainly a photographer of Maisel's stature would have met whatever formalities the law required, especially for such a well known image.
Though the parties settled and Mr. Baio can no longer use the image as part of the Kind of Bloop project, I began to wonder how Maisel would prevent the image from getting re-posted all over the net. Use of the Bloop version in places discussing the case (commentary, news articles, etc.) is clearly fair use. What about others? We’ll never see the settlement but I wonder if it included a transfer of copyright to Maisel just in case (probably followed by a statement that the transfer is not admission that the work qualifies as fair use and is not a derivative work) so that he could use DMCA takedown notices to better control distribution of the image.
Under Section 512(c)(3), the sender of a takedown notice must include, among other requirements, "A statement that the information in the notification is accurate, and under penalty of perjury, that the complaining party is authorized to act on behalf of the owner of an exclusive right that is allegedly infringed." If the use were fair, then Maisel would not be the owner of an exclusive right in the Bloop cover. If the parties or a court agreed that the work was a derivative, ownership would or could then be shared by Baio to the extent of his original contributions as agreed by the parties. Without a transfer of ownership to Maisel, who owns any copyright that might exist in the Bloop image? Interestingly, the text of the DMCA says the notice must be sent by or on behalf of "the owner of an exclusive right." Given the obligation to account for any profits from licensing or litigation to a co-owner (See generally Section B.1 and accompanying notes here), it seems likely a court would allow a co-owner to unilaterally enforce the copyright via DMCA takedown notice without the other co-owner's permission since he would be presumably authorized to act for the other co-owners. I haven't seen a case where one co-owner objected to another co-owner's issuance of a DMCA takedown notice, so please let me know if it exists.
DMCA considerations also bring up Lenz v. Universal, where the Northern District of California held that a copyright owner must consider whether a use of his or her work is a fair use before issuing a DMCA takedown notice. However, the Bloop version is not an entire or partial reproduction of Maisel's actual image, or use of all or part of the image in another context like the music clip in the dancing baby video in Lenz. Still, the recipient could simply issue a counter-takedown and if further challenged, argue Baio's original position that the Bloop version itself is a fair use, and further that its use of that image in a new context is a fair use. So, whether agreeing one way or the other, Maisel would be in the best position by getting a grant of whatever copyright might exist. For now, plenty of examples are just a Google search away (though Google's display of thumbnails of the image would be a likely fair use under cases like Perfect 10 v. Google), or this YouTube video of a song from Kind of Bloop along with Baio's version of the image. Here, Baio could use the DMCA since it's his sound recording posted. Yet there and elsewhere, the image remains. I also recently noticed a tweet asking whether someone has or will create a Tumblr with pixelated versions of all of Maisel's photos. Now there's an interesting fair use question...