Category Archives: Legal

Appealing fair use

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It looks like we are headed toward more clarity on the fair use front:  Righthaven is appealing one of its fair use losses to the 9th Circuit Court of Appeals:

[U.S. District Judge] Hicks found the online posting by [defendant Michael] Nelson of the first eight sentences of a 30-sentence [Las Vegas] Review-Journal story didn’t amount to copyright infringement as it was protected by the “fair use” doctrine .

This ruling caused Righthaven to alter its litigation strategy to limit its lawsuits to entire stories, photos and graphics — rather than partial stories — that were reproduced without authorization.

This could get interesting.  The 9th Circuit is extremely pro-content industry, perhaps unsurprising given that Hollywood is located within its jurisdiction.  At least a ruling will provide additional clarity going forward.

Oh Canada

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I’ve made the point here before that the music industry inexplicably declines perfectly good revenue sources simply because they are “less” than what they are expecting.  At the risk of Monday-morning-quarterbacking their business model, here’s more proof from north of the border, courtesy of Michael Geist:

Pandora, the popular U.S. online music service filed for an initial public offering last week, provided new insight into hugely popular company that spends millions of dollars in copyright royalties. Pandora users listened to a billion hours of music in the last three months of 2010. Given U.S. laws, the Pandora prospectus notes that it paid for the privilege of having its users do so, with the company spending just over half of its revenue on copyright fees – $45 million in the first nine months of 2010.

The numbers are striking since it points to a growing source of revenue that is largely being missed in Canada. Millions of dollars are now generated from online streaming royalties in the U.S., yet many companies are avoiding the Canadian market. The reason, as Pandora explained last year, are the royalty demands of the major record labels. As Tim Westergren stated last fall, “as long as rights societies take this approach, they will prevent Pandora from launching to Canadian users.” While CRIA tried to claim that the decision to avoid the market was a function of Canadian copyright law, Pandora indicated that it is the fee demands, not the laws that are the stumbling block. With millions now being paid for streaming music in the U.S., it is notable that Canadian interests would seemingly prefer to receive nothing rather than the millions that could potentially be on the table.

A $4000 mistake

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Talk about turning lemons into lemonade.  A Canadian-based copywriting firm is attempting to parlay a very expensive mistake into favorable publicity:

“Like many other creative types in the web industry, our copywriters were not clear on image copyright laws, and we were taught an expensive lesson,” said Rick Sloboda, Senior Web Copywriter at Webcopyplus, which provides designers and businesses optimized web content. “We’re sharing our story, so others can learn from our experience and avoid the same mistake.”

In May, 2010, with the assumption Web images without copyright notices were “public domain” and free to use, a Webcopyplus copywriter used Google images to find an unmarked 400 x 300 pixel scenic photo to complement an article for a tourism client’s blog.

Webcopyplus has posted additional details on their blog, as well as some resources for obtaining stock photography in a way that won’t get one sued (including Creative Commons photos available via Flickr).

The silent Supreme Court judge

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The New York Times examines the five year silence of Supreme Court Justice Clarence Thomas in cases that have argued before the court. While there are a number of possible reasons given for this silence, I want to know two things:

1.  Does this silence improve his standing in front of others (in the legal community, the general public) or does people dislike him because of this?

2. How does this silence affect the workings or camaraderie among the Supreme Court justices? Do they lose something in their court proceedings when Thomas is silent?

The smell of a bad net neutrality argument

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NOTE:  There are follow-up posts available here and here.

Forget the obvious jokes about broadcast content being an open sewer:  Alan J. Roth over at the Congress Blog actually, literally thinks that Washington, D.C. sewage treatment has a lot to teach Netflix:

I have two jobs. One of them – the full-time job that pays the bills – involves directing government affairs for a trade association of internet service providers (ISPs) and telecom companies. The other – a volunteer position – is my service on the Board of Directors of the District of Columbia Water and Sewer Authority (WASA).

And what is this connection that Mr. Roth has seen betwixt his two modes of employ?

I read Netflix CEO Reed Hastings’ January 26th letter to his shareholders [link here] offering his views on who should bear the costs of transporting and delivering his company’s high- volume, bandwidth-hogging Internet video service to its customers. A light bulb went on in my head: There’s a lesson that Hastings and his customers could take from how the Washington area pays for sewage disposal.

At this point, I’m dubious but curious.  Roth goes on to explain that the District owns a major sewage treatment plant in Blue Plains that serves suburbs beyond D.C.:

The suburbs’ sewage gets to Blue Plains via the same kind of “regional front doors” that Hastings described in his shareholder letter. A series of interconnection points link the suburbs’ sewer lines with the “last mile” that WASA operates through DC on the way to final treatment.

So there’s the analogy:  Roth thinks that sewage line’s “last mile” can be compared with with broadband’s last mile.  What’s his point?

Unlike Netflix’s self-serving suggestion that it should pay only to transport its bits to a regional gateway, after which the costs of delivery to the end point would fall on others, [the regional sewer services in D.C.] approached the costs of last-mile delivery differently. Each wholesale customer – that is, each suburban authority sending sewage to DC – pays a pro-rata share of the capital costs for Blue Plains and related transmission facilities, based on an agreed-upon allocation of the plant’s capacity. Operating and maintenance costs are shared based on each suburban customer’s actual flow of sewage to the plant.

By contrast, the “Netflix model” proposes to spread the costs created by Netflix customers to other consumers who derive no benefit from Netflix’s video bits. If WASA operated this way, suburban retail ratepayers would be billed by their own wastewater authorities for the relatively smaller costs of transporting their sewage to the interconnection points at the DC line. After that, DC retail ratepayers would have to pay all the costs of not only transporting suburban sewage to its ultimate destination at Blue Plains, but also for all the costs of processing and treating the suburbs’ waste there.

If I understand Roth’s analogy correctly, he has completely misapplied it.  Consider:

1.  Netflix is the analogue to the Blue Plains treatment plan.  Netflix provides the value (clean water/streamed video) that the consumer ultimately wants.  Local ISP’s are, in contrast, merely the D.C. suburbs with in-home connections but without adequate sewage treatment facilities.

2.  Netflix has built (or rented) its own sewer/data lines right to the point where the suburb/ISP takes over.

3.  Why shouldn’t the ISP only be paid for “the relatively smaller costs of transporting their sewage to the interconnection points”?

Am I missing something here?  Or is this argument really as self-defeating as it seems?

Copyright squared

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There’s a new trend afoot to take the “notice” out of the Digital Millennium Copyright Act’s (DMCA’s) “notice and takedown” procedures:

The company is claiming that the DMCA takedown notice itself is copyrighted and that passing it along will constitute infringement. Of course, this raises some questions.

It does indeed.  For those of you unfamiliar with the DMCA’s notice and takedown procedures, they are a safe harbor that Congress wrote into the DMCA to shield service providers from certain types of copyright infringement suits.  ChillingEffects has this helpful explanation in their FAQ’s:

In order to have an allegedly infringing web site removed from a service provider’s network, or to have access to an allegedly infringing website disabled, the copyright owner must provide notice to the service provider with the following information:

  • The name, address, and electronic signature of the complaining party [512(c)(3)(A)(i)]
  • The infringing materials and their Internet location [512(c)(3)(A)(ii-iii)], or if the service provider is an “information location tool” such as a search engine, the reference or link to the infringing materials [512(d)(3)].
  • Sufficient information to identify the copyrighted works [512(c)(3)(A)(iv)].
  • A statement by the owner that it has a good faith belief that there is no legal basis for the use of the materials complained of [512(c)(3)(A)(v)].
  • A statement of the accuracy of the notice and, under penalty of perjury, that the complaining party is authorized to act on the behalf of the owner [512(c)(3)(A)(vi)].

Once notice is given to the service provider, or in circumstances where the service provider discovers the infringing material itself, it is required to expeditiously remove, or disable access to, the material. The safe harbor provisions do not require the service provider to notify the individual responsible for the allegedly infringing material before it has been removed, but they do require notification after the material is removed.

In his analysis, Mike Masnick notes a few of the problems with claiming copyright protection in DMCA takedown notices, particularly issues of authorship (“who owns the copyright”) and registration (“did whoever write this letter actually register it with the Copyright Office?”).  Of course, there are other problems to consider:

  1. First Amendment.  Do we really live in a world in which individuals can be subjected to legal process but cannot talk about what is happening to them?
  2. Fair use.  Among other things, isn’t the posting of DMCA notices transformative?  Is there any market effect that the law cares about?  Or is this like the proverbial “scathing theater review” that Justice Souter said “kills demand for the original” but “does not produce a harm cognizable under the Copyright Act”?  Campbell v. Acuff-Rose Music, Inc., 510 US 569, 591-92 (1994).

It seems to me that if (1) you’re a copyright owner and (2) you think someone is infringing your rights and (3) you want it to stop but (4) you also want to keep it your little secret and not let anyone else in the world know other than the alleged infringer, then you should maybe reconsider (2), because the fact that you are insisting on (4) may indicate that (2) isn’t actually true.

Just a thought.

WSJ: more regulations for law schools?

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When the Wall Street Journal starts countenancing additional regulations for law schools, you know that the world really has changed:

Regulation? all you free-marketeers are asking. Really? Won’t regulation further drive up the cost of education, which is already stunningly high?

However, rather than dismissing the suggestion of greater regulation out of hand, WSJ blogger Ashby Jones finds Tung Yin’s argument for Sarbanes-Oxley-like regulation over at PrawfsBlawg “compelling”.  As Yin puts it:

If anything, it seems to me there’s arguably a stronger call for enforcing these sorts of disclosure and accuracy provisions on law schools (and universities in general) than on corporations. After all, the cost of corporate malfeasance with regard to balance sheets and the like is diffused across a huge number of investors, who are presumably not taking out huge loans with which to invest in said corporate stock.  (I guess there are margin traders, but really, they seem a less sympathetic group for concern than poor students with huge education debt.)  The cost of law school malfeasance in terms of misleading or false employment data is visited upon a (relatively) small number of students who are saddled with $50,000 or more in student debt.  Shouldn’t they be entitled to at least the same level of informational protection that stock investors now get?

I disagree with Yin’s analysis somewhat.  While it is true that there are “a (relatively) small number of students” with extreme educational debt, malfeasance by academic institutions has the same sorts of diffuse, wide-ranging implications that malfeasance by corporations has.  The federal government subsidizes or provides outright the bulk of law student loans.  Were it not for this subsidy, it is highly doubtful that law schools would attain their currently high enrollment numbers since no rational (i.e., unsubsidized) lender would loan six figures each to tens-of-thousands of 22-year-olds (at least, not on terms that would result in tens-of-thousands of new law students each year).

Like it or not, the U.S. government is heavily subsidizing legal education by providing students with access to virtually unlimited capital.  One can argue whether or not this represents a prudent investment in the nation’s future or an impending boondoggle on the scale of Fannie Mae and Freddie Mac, but it seems clear to me that somebody should be requiring law schools to reveal the cold, hard facts on the value they are providing to their graduates.

The tired free-market-vs.-regulation arguments don’t really work here.  Law schools are not a free market; they’re a heavily subsidized one.  Unless and until that changes, I for one think the government is perfectly (and prudently) within its rights as the subsidizer to require fair, full, and accurate employment disclosure from law schools.

Seizing the spotlight

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One of the items highlighted in Monday’s Intellectual Property Enforcement Coordinator (IPEC) report (92 page PDF–see here for my previous post) was government seizures of various domain names allegedly associated with infringing comment.  Bruce Lidi over at ZeroPaid makes a compelling argument that the publicity associated with such tactics is counter-productive at best:

As nearly every analysis of the recent ICE action has noted, by seizing the US registered domain names of foreign-owned and operated sites, the authorities have propelled the sites to set up on domains not under US control, and to do so within days, if not hours, of the seizures….It would appear that aside from a very momentary interruption, the practical effect of the seizures will be negligible, except to make any future actions by rights holders that much more difficult, since the targeted sites will be farther from US jurisdiction.

Additionally, and even more importantly, the recent ICE domain seizures that focused on sports streaming sites has had, and will continue to have, the effect of generating more publicity for this kind of infringing.  Consistent with the concept of the “Streisand Effect,” attempts to suppress troublesome information online result invariably in that information becoming even more widely distributed.  While impossible to quantify with any certainty, the seizures by ICE surely increased awareness of the existence of rojadirecta and atdhe, and even more, of the ease in which viewers can access live streaming of sporting events online.  As we so often see in articles about “cord-cutting,” or dropping cable in favor of purely internet video delivery, many people are stymied by the lack of live sports online, yet now, because of the actions of ICE, millions more viewers have just been instructed that it is actually quite simple to get live footage of every soccer match or football game.

Lidi’s analysis reminded me of countless debates I’ve read about U.S. military policy.  Some people favor a “shock and awe” approach while others think that “winning over hearts and minds” is the way to go.  Unfortunately for the content industry, I’m not sure that they’re ever going to win people over completely to their way of thinking.  Anyone who claims that, as a practical matter, people don’t have the right to rip their owned CD into Mp3’s (article from 2008 but still true–see the RIAA’s current website) has completely lost touch with reality.

U.S. intellectual property enforcement actions: the report

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CNET News alerted me to yesterday’s release of the 2010 U.S. Intellectual Property Enforcement Coordinator Annual Report on Intellectual Property Enforcement (92 page PDF):

The 92-page report…reads a lot like a report that could have been prepared by lobbyists for the recording or movie industry: it boasts the combined number of FBI and Homeland Security infringement investigations jumped by a remarkable 40 percent from 2009 to 2010.

Nowhere does the right to make fair use of copyrighted material appear to be mentioned, although in an aside on one page Espinel mentions that the administration wants to protect “legitimate uses of the Internet and… principles of free speech and fair process.”

This is the first annual report released by the Office of the United States Intellectual Property Enforcement Representative (official website) since its creation in late 2008 and the Senate confirmation of the first Intellectual Property Enforcement Coordinator (“copyright czar”) in late 2009.  Although it covers a wide range of intellectual property issues, I will mostly limit this post to copyright-related items.

Here are some “highlights” from the report:

1.  Policy statement regarding Internet enforcement actions (pp. 5-6):

The debate over the proper role of government in the online environment extends to the issue of intellectual property enforcement: that is, reducing the distribution of pirated or counterfeit goods online or via the Internet, including digital products distributed directly over the Internet or physical products advertised or ordered via the Internet. The choices made in the area of intellectual property enforcement can have spillover effects for government action, regulation or intervention in other areas. Therefore, this office has given considerable thought to the best approach towards enforcement in the online environment. As outlined below, we believe the right approach is one that combines forceful criminal law enforcement with voluntary and cooperative action by the private sector consistent with principles of transparency and fair process. [emphasis added]

Almost as an after-thought, the report later notes (p. 7) that,

without mandating business models, we believe it is important to encourage the development of alternatives for consumers that meet their legitimate needs and preferences. We note some activity in the marketplace to develop new and more flexible methods of distribution and will look for opportunities to support those efforts.

2.  Summary of the current state of the proposed Anti-Counterfeiting Trade Agreement (ACTA) (Wikipedia backgrounder) (pp. 22-23):

ACTA requires, among other things, that signatories establish effective intellectual property enforcement legal frameworks, including obligations to:

  • establish criminal procedures and penalties for willful trademark counterfeiting or copyright piracy, or importation or use, on a commercial scale, and aiding and abetting criminal conduct, and authorizes criminalizing camcording;
  • establish laws that impose imprisonment and destruction as penalties for criminal violations of enforcement laws;
  • establish civil enforcement laws that enhance the tools available to rightholders to crack down on counterfeiting and piracy, including by providing for meaningful damages for rightholders, the destruction of counterfeit goods and also including appropriate safeguards against abuse and to protect privacy as appropriate;
  • ensure that civil and criminal enforcement laws are equally applicable to copyright infringement occurring online; and
  • establish anti-circumvention laws to protect the use of technological protection measures (digital locks).

3.  Summary of successful efforts to recruit private-sector actors into IP enforcement (pp. 27-28)

We believe that most companies share the view that providing services to infringing sites is inconsistent with good corporate business practice and we are beginning to see several companies take the lead in pursuing voluntary cooperative action.

For example, earlier this year, MasterCard withdrew services from Limewire, a well-known file-sharing site. In addition, MasterCard has done an internal assessment of its processes to address infringing sites and has begun a number of cooperative discussions with rightholders….On December 2, 2010, Google announced a number of steps it will take to make its response time to complaints more rapid, to limit the ability of websites used to sell infringing goods to obtain ad revenue and to increase access to legitimate sites….We need to eliminate financial gain derived from infringement. While some products are sold directly, other sites obtain revenue from advertising. The IPEC is in the process of gathering information about the online advertising business to see if there are means to limit illegal sites from using ad revenue as a business model.

4.  Statistical summary of (generally) increased investigations/enforcement/arrests/convictions/seizures (pp. 31-32):

  • In FY 2010, ICE HSI intellectual property investigations increased by more than 41% and ICE HSI arrests increased by more than 37% from FY 2009.
  • In FY 2010, FBI intellectual property investigations increased by more than 44% from FY 2009….
  • In FY 2010, courts sentenced 207 intellectual property defendants. More than half—121—received no prison term, 38 received sentences of 1-12 months in prison, 27 received sentences of 13-24 months in prison, 10 received sentences of 25-36 months in prison, 7 received sentences of 37-60 months in prison and 4 received sentences of more than 60 months in prison….
  • CBP and ICE HSI had 19,959 intellectual property seizures in FY 2010. The domestic value of the seized goods—i.e., the value of the infringing goods, not the  manufacturer’s suggested retail price (MSRP) for legitimate product—was $188.1 million. The estimated MSRP of the seized goods—i.e., the value the infringing goods would have had if they had been genuine—was $1.4 billion.

***

A final note:  the report trumpets success–a lot.  Examples abound, but perhaps the most amusing is a case involving counterfeit Cisco equipment sold to the Marines for use in battlefield-critical networks in Iraq.  I’m certainly glad that the government caught this, but do they really have to mention it three separate times (on pages 5, 41, and 50) in the report?

Roundup of additional commentary:

Potential expansion for domain suffixes

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Even amidst discussions that the Internet has run out of addresses, there is talk about expanding the list of available domain suffixes beyond the current 21 options. It sounds like these proposals would allow for all sorts of suffixes and this, inevitably, leads to questions about who would get to control certain domains:

This massive expansion to the Internet’s domain name system will either make the Web more intuitive or create more cluttered, maddening experiences. No one knows yet. But with an infinite number of naming possibilities, an industry of Web wildcatters is racing to grab these potentially lucrative territories with addresses that are bound to provoke.

Who gets to run .abortion Web sites – people who support abortion rights or those who don’t? Which individual or mosque can run the .islam or .muhammad sites? Can the Ku Klux Klan own .nazi on free speech grounds, or will a Jewish organization run the domain and permit only educational Web sites – say, remember.nazi or antidefamation.nazi? And who’s going to get .amazon – the Internet retailer or Brazil?

The decisions will come down to a little-known nonprofit based in Marina del Rey, Calif., whose international board of directors approved the expansion in 2008 but has been stuck debating how best to run the program before launching it. Now, the Internet Corporation for Assigned Names and Numbers, or ICANN, is on the cusp of completing those talks in March or April and will soon solicit applications from companies and governments that want to propose and operate the new addresses.

Sounds like we could have some battles on our hands for particular suffixes. Perhaps the companies or organizations with the most money will win.

But many of the options in this article are set up as “good” options versus “bad” options. If given a choice, how many people would want the .nazi domain to be controlled by the Ku Klux Klan? And some of the other options presented in the story, such as whether someone who wants musicians and agents to be able to get .music addresses while the music industry wants to control this for their larger purposes, are less clear. ICANN, the organization who controls the domains, says they have considered this: “For people who might propose controversial domains – such as .nazi, which ICANN officials have worried about – approval will be based on the applicant’s identity and intentions, and on the grounds of “morality and public order.” How in the world will they be able to do this in a way that is satisfying to multiple parties? Is there a way to decide this before the domains are sold or are we simply in for long rounds of litigation?