Righthaven loses in Colorado

Last week, Righthaven was flirting with bankruptcy due to legal fees associated with a Nevada case.  This week, the fees keep piling up, this time in Colorado:

Righthaven’s only interest in the Work is “the right to proceeds in association with a Recovery.”  The Copyright Assignment Agreement defines “Recovery” as “any and all sums . . .arising from an Infringement Action.”  Thus, when read together, the Assignment and the Copyright Assignment Agreement reveal that MediaNews Group has assigned to Righthaven the bare right to sue for infringement – no more, no less.  Although the assignment of the  bare right to sue is permissible, it is ineffectual….Accordingly, Righthaven is neither a “legal owner” or a “beneficial owner” for purposes of § 501(b), and it lacks standing to institute an action for copyright infringement….I convert Mr. Wolf’s Rule 12(b)(1) motion to a Rule 56 motion and GRANT him SUMMARY JUDGMENT.  Furthermore, in light of the need to discourage the abuse of the statutory remedies for copyright infringement, I exercise my discretion under Section 505 of the Copyright Act and ORDER that Righthaven shall reimburse Mr. Wolf’s full costs in defending this action, including reasonable attorney fees. [emphasis added]

More coverage from Ars Technica, Techdirt, and the EFF (h/t).

The Freakonomics of fair use

The NYTimes’ Freakonomics blog uses the subject of poetry criticism to tackle fair use:

In a recent article, the poetry critic of the New York Times complained that to do poetry criticism right, it’s often necessary to quote extensively from a poem. Indeed, in the case of a short poem, it might be helpful to readers to copy the whole thing. But, the critic said, this can’t be done because it might run afoul of copyright law.

It is true that copyright law prohibits the unauthorized copying of any substantial part of someone’s poem, song, or other work.…Is this a good policy?  From an economic perspective, no.

The reason this is bad policy, however widely discussed, bears repeating:

Use of a small bit of someone else’s creative work to build a new creative work rarely harms the economic interests of the first copyright owner, because most “derivative” works do not directly compete with the original.

Every creator builds on what came before, and such building usually doesn’t “compete” with that earlier work in any economic sense.  Creating legal fear and uncertainty about building on the past, however, is quite effective in limiting the creation of new works in the present.

Righthaven “nearing bankruptcy”

I was suspicious several days ago when I heard that Righthaven might be going under, but apparently it’s true:

The Las Vegas copyright-trolling firm Righthaven told a Nevada federal judge Friday it might file for bankruptcy protection, or cease operations altogether.

To prevent that, Righthaven is asking U.S. District Judge Philip Pro to stay his decision requiring Righthaven pay $34,000 in legal fees to an online commenter it wrongly sued for infringement.

Wired has posted Righthaven’s Motion to Stay here (pdf).  They are exceptionally candid about the economics of copyright troll litigation:

In Colorado, 35 Righthaven copyright infringement cases have been stayed since May 19, 2011 pending a ruling on whether the company has standing to maintain these actions. Likewise, ten infringement actions, most of which involve an amended version of the SAA that addresses the concerns expressed by this Court in its subject matter decision, have been stayed in this District until a standing determination is made. Thus, Righthaven has been precluded from actively litigating and resolving the stayed cases. Moreover, Righthaven has delayed filing new copyright enforcement actions until a standing determination is made based upon the terms of the currently operative version of the SAA. Throughout this period, and despite a lack of incoming revenue given that numerous pending action are stayed, Righthaven has continued to incur operating expenses.

Clearly, Righthaven is a cash-poor outlet these days.  And here’s where things get really interesting:  based on its motion, Righthaven seems deathly afraid that they might have to sell some of their assets to satisfy a $34,000 judgment.  As they explain to the court:

Righthaven also has significant proprietary rights in its copyright infringement search engine software (the “Software”), which plays an integral role in the company’s operations. If a stay is not granted pending appeal, this valuable Software may be seized and liquidated in an attempt to satisfy the Judgment. Liquidation may result in the Software being sold to a competing organization or entity.

Talk about woeful undercapitalization.  A $34,000 judgment is going to force them into selling off their core business assets?  Really?

Righthaven always presented defendants in its copyright litigation with an unfair dilemma:

(1) pay out a few thousand in “go away” money now, or
(2) mount an actual legal defense (at an initial, minimum cost of a few thousand, with no guarantees that things would work out well).

It seems that Righthaven now faces a dilemma of its own:

(1) raise enough capital to pay off this $34,000 pending appeal, or
(2) go bankrupt.

The difference, of course, is that the dilemma Righthaven faces is fair.  They put defendants to the expense of hiring lawyers.  Some of those defendants won.  The law says that those winning defendants should have their legal expenses paid by Righthaven.  Sounds about right to me.  If Righthaven can’t afford to pay without selling assets, perhaps they never should have been filing lawsuits in the first place.

Righthaven losing that rocky mountain high

I noted yesterday that copyright troll Righthaven hasn’t filed any new lawsuits in the past two months, but I was suspicious that it was all over.  After reading Wired’s coverage today, however, I think Righthaven’s end is near:

The new chief executive of MediaNews Group, publisher of the Denver Post and 50 other newspapers, said it was “a dumb idea” for the nation’s second-largest newspaper chain to sign up with copyright troll Righthaven.…

“The issues about copyright are real,” [John] Paton told Wired.com in a telephone interview. “But the idea that you would hire someone on an — essentially — success fee to run around and sue people at will who may or may not have infringed as a way of protecting yourself … does not reflect how news is created and disseminated in the modern world.”

I stand corrected.  Barring a court-ordered miracle, it seems only a matter of time before Righthaven closes up shop.

The morality of termination rights

Raustiala and Sprigman over at the New York Times Freakonomics blog take on the morality of copyright termination rights, “an obscure provision of U.S. copyright law…[that] allows songwriters and musicians to…take back from the record labels many thousands of songs they licensed 35 years ago”:

In general, if you decide to sell or perpetually license a piece of property, you can’t later take it back, no matter how much you might want to. So If I sell my house and two years later the city decides to build a lovely public park in my neighborhood, the value of my former house may rise substantially. But no one contends that I can take the house back, or that I’m due a bonus payment from the lucky buyer.  A deal is a deal.

So why the exception for copyright owners?

I have to start somewhere, so it might as well be here:  it’s disingenuous to invoke a home-sy (literally) analogy, show that it fails, and use that failure to “prove” your point.  Raustiala and Sprigman note that “in general,” residential homes are sold outright.  So what?  Equally “in general,” commercial property leases for retail outlets (e.g., stores in shopping center developments) explicitly vary rent payments based on sales (i.e., higher store sales this month/year = higher rent).  Both systems are unobjectionable, assuming one simple fact:  the parties know what kind of deal they are making at the time they make it.

Thus, Raustiala and Sprigman’s analysis falls apart right off the bat.  Termination rights are not a recent phenomenon that nobody knew anything about until a year ago.  Unlike, say, Congress’ decision to re-copyright works that had already fallen into the public domain, termination rights have clearly been a part of U.S. copyright law since 1976.  They may have been “an obscure provision” to the general public reading the Freakonomics blog, but they certainly weren’t obscure to artists and labels.  Raustiala and Sprigman’s characterization is like calling the infield fly rule “obscure”–and then implying that a bunch of MLB players should be out because they didn’t know it existed or how it worked.

They go on:

Think for a moment about the economic effect of the termination provision on the behavior of parties to copyright transactions. Because buyers can expect, on average, to make lower profits when the law contains the termination provision, they will offer less in the initial transaction. Thus, sellers will be more willing to accept less, because they know that if a work later proves valuable, they can terminate and demand some additional payment. So the most likely effect of the termination provision is to force deal prices down across the board….Put differently, the termination provision is a regressive tax.  And in that light, the “fairness” justification for the termination provision is less than overwhelming.

Even assuming this is true, the record labels’ supposed “offer [of] less in the initial transaction” has already happened–35 years ago.  Changing the rules at this point to favor the labels over artists would also seem to invoke its own set of fairness issues.  To put it mildly.

Reversing Righthaven

The court system issued another stunning rebuke of Righthaven and its business model, as an Electronic Frontier Foundation press release reports:

In a decision with likely wide-ranging impact, a judge in Las Vegas today dismissed as a sham an infringement case filed by copyright troll Righthaven LLC. The judge ruled that Righthaven did not have the legal authorization to bring a copyright lawsuit against the political forum Democratic Underground, because it had never owned the copyright in the first place. [emphasis added]

This is a big win for bloggers, and the news gets even worse for Righthaven:

As part of his ruling today, the judge ordered Righthaven to show why it should not be sanctioned for misrepresentations to the court.

More coverage at Techdirt.

I guess we’re starting to get that copyright law clarity I was hoping for

Can you hear the people sing?

Brian pointed me to an article at the Chronicle of Higher Education about Lawrence Golan’s Supreme Court fight against copyright expansion:

The dispute that led to Golan v. Holder dates to 1994, when Congress passed a law that moved vast amounts of material from the public domain back behind the firewall of copyright protection. For conductors like Mr. Golan, that step limited access to canonical 20th-century Russian pieces that had been freely played for years.

Re-copyrighting works isn’t a technical or minor matter.  It has a huge effect of performing musicians like Golan:

When a work is in the public domain—that Puccini opera, say—an orchestra can buy the sheet music. Symphonies typically cost about $150. And the orchestra can keep those pages forever, preserving the instructions that librarians laboriously pencil into scores. But works under copyright are typically available only for rent. And the cost is significantly higher: about $600 for one performance. With the flip of a switch, the new law restored copyright to thousands of pieces.

For big-city orchestras like the New York Philharmonic, that change is like a "mosquito bite," Mr. Golan says. But Mr. Golan’s [University of Denver] ensemble gets only about $4,000 to rent and buy music each year. That means it can perform some copyrighted works but must rely on the public domain for about 80 percent of its repertoire. And $4,000 is relatively generous. Other colleges might have only $500 to spend on music. When the Conductors Guild surveyed its 1,600 members, 70 percent of respondents said they were now priced out of performing pieces previously in the public domain.

As Brian asked in his email pointing me to the article,

it sounds like US courts have always been willing to extend copyright protections…will there ever really be a "public domain" in the future for works published/created after World War I?

Unfortunately, the jury’s still very much out.

Lobbynomics v. empirical data

Ars Technica points to a UK report asserting that “lobbynomics” rather than empirical data drives much of the intellectual property policy debate:

There are three main practical obstacles to using evidence on the economic impacts of IP…[3] Much of the data needed to develop empirical evidence on copyright and designs is privately held. It enters the public domain chiefly in the form of “evidence” supporting the arguments of lobbyists (“lobbynomics”) rather than as independently verified research conclusions.

My own experience in dissecting IP developments supports this view.  It is surprisingly difficult to find “hard data” about copyright piracy, leaving any “debate” to a shouting match between proponents of bald assertions.

We need better data, and we all need to be more circumspect (and humble) before drawing sweeping conclusions from the little that is available.

Righthaven class action?

Ars Technica is reporting that one Righthaven defendant is “launching a class-action counterclaim against Righthaven”:

BuzzFeed…quickly moves from a defense of its own conduct to an attack on the conduct of Righthaven, and it asks the judge to put every Colorado defendant into a class which can pursue Righthaven for extortion-style behavior.

I’m not sure that Righthaven’s behavior should be turned into some sort of perverse-reverse legal payday for defendants, but I suppose this was an inevitable development.